Laurentian Bank Restructures, Partners with Fairstone and National Bank

Laurentian Bank is undergoing a significant restructuring, selling its commercial operations to Fairstone Bank of Canada for $1.9 billion, while National Bank will take over its retail and small business segments at nearly book value.

This strategic move follows years of difficulties faced by the bank, established over 175 years ago, in finding a solution that meets shareholder expectations.

As part of the agreement, the Laurentian brand will persist under Fairstone, which will keep its commercial headquarters in Montreal and retain CEO Éric Provost. However, the bank’s 57 retail branches in Quebec will not transition to National Bank, necessitating that employees reapply for positions at the acquiring banks.

The deal will affect a significant portion of Laurentian’s approximately 2,715 employees, though some may remain with Fairstone’s commercial side. Provost noted that this arrangement advances Laurentian’s commitment to its commercial operations, which include real estate lending and capital markets activities.

Customers should experience enhanced services and technology through National Bank, which seeks to overcome challenges previously faced by Laurentian, including its slow digital uptake, with its first mobile app launched only in recent years.

Fairstone will acquire Laurentian shares at a cash price of $40.50 each, while National Bank’s expenses will be contingent upon closing balances. Approval from a two-thirds majority of Laurentian shareholders is required for the Fairstone agreement.

The Caisse de dépôt et placement du Québec, holding around eight percent of Laurentian shares, endorses the deal, recognizing the competitive landscape of the banking sector.

For Fairstone, this acquisition signifies a pivotal expansion following its merger with Home Trust last year, growing its customer reach to approximately two million across 255 branches. National Bank will inherit $10.9 billion in retail loans and deposits, along with $1.4 billion in loans and deposits from small- to medium-sized enterprises.

John Aiken, analyst at Jefferies, characterized the transaction as a beneficial outcome for Laurentian shareholders and a strategic enhancement for National Bank, as it sidesteps legacy branch predicaments while acquiring valuable assets at book value.