Presentation to Laurentian Bank CEO and Desautels Capital Management

Financials Holdings Updates

Andy Macdonald

Zeeshan Maqsood

Nicholas Di Giorgio‎

October 2nd,2012

Laurentian Bank (LB-T)

Laurentian Bank Company Profile

2

Company Description

Laurentian Bank is the 8th largest publicly traded bank in

Canada my market capitalization, focusing on

1. Consumer and small and medium enterprise banking

2. Commercial real estate and commercial lending

3. Sales of products through independent financial advisors

4. Full-service brokerage solutions serving institutional and

retail investors

It is the third largest banking institution in the province

behind Group Desjardins and National Bank. About 64%

of its loans portfolio is located in Quebec.

Laurentian Bank’s operations are broken down into five

business segments. (Retail and SME Banking, B2B

Trust, Laurentian Bank Securities & Other)

Recent News

Sept. 11 2012 – B2B Bank launches B2B bank dealer

services

Aug. 31 2012 – Q3/2012 Earnings $1.27 adjusted EPS,

beating consensus by 2 cents. It’s quarterly dividend was

unchanged at $0.47.

June 6th 2012 – Laurentian Bank announces the

acquisition of AGF Trust by B2B Trust ($242M share

purchase transaction)

Sectorial distribution of loans

Management and Board

Réjean Robitaille–President and CEO (employed since

1988)

Michel C. Lauzon– Executive VP and CFO (employed

since 1988)

20%

32%

48%

Commercial mortgages,commercial loans andBAs

Residential mortgages

Personal loans

Stock Trading Analysis Five-Year Performance

3

LB announces

acquisition of AGF

Trust

0.3

0.5

0.7

0.9

1.1

1.3

1.5

2007 2008 2010 2011 2012

Laurentian Bank Ishares Financial Index National Bank

MRS Acquisition

LB outperformed the TSX Financials Index by ~40% over a 5-year period

4

Investment Thesis, 2010 & 2011

Initial Thesis - 2010

Pros:

Low risk profile due to strong retail focus, loan

underwriting discipline, limited capital markets

exposure, decreased exposure to economic

conditions in US

Good growth prospects

Improving ROE and efficiency ratios

Possible Acquisition target

Cons:

Lack of operating scale and product portfolio to

compete nationally

Vulnerable to Quebec downturn

Updated Thesis - 2011

Highly leveraged to Consumer Loan Growth in Quebec:

Negative outlook moving forward

Canadian financials are high valued compared to U.S

financials

Pair of transactions will boost income capability

We had a year-end 2012 price target of $48 applying a 10x multiple

5

Investment Thesis, 2012

Updated Thesis - 2012

Pros:

Safe bank with low PCLs and NPL

B2B Bank growth opportunity not recognized by the

market (only 15% penetrated)

We like their strategy of focusing on growing their fee-

based income segment

Focus on retail network going forward (I.e. those with a

bank with LB, only mid 30s have a credit card)

Focus on margin (commercial over residential)

Working towards cost controls

Demographics of target customers (young workers,

blue collar workers) allow Laurentian to have a greater

chance of keeping customers

Cons:

Commercial loans are highly competitive

Average deposit cost is 2.2% or 100bps higher than

the Big-6 average due to brokered deposits (i.e. GICs)

comprising a large part of the funding cost

Low diversification of interest rate sensitive products

compared to fee based income (64% vs. 49% Big 6)

Laurentian Bank has not increased switching cost of

its users by cross-selling

Moderate economic growth for Canada and Quebec

will lag behind other provinces

Political changes in Quebec may have negative

consequences

Our new price target is $50, 9.1x 2013 EPS

6

Canadian Banking Outlook

Industry Drivers and Outlook

Low interest rate environment has compressed NIM for Canadian

banks

Interest rates not expected to increase gradually until 2014, loan

growth should continue for the banks

Early signs of a cooling housing market is positive

Modest GDP growth of around 2% for 2012 and 2.4% for 2013.

Unemployment is expected to remain slightly above 7% and housing

starts to remain stable.

Household debt levels in Canada and other developed nations are at

highs

300000

320000

340000

360000

380000

2007 2008 2009 2010 2011 2012 YTD

Avera

ge P

rice

CAN. Average Home Prices

Average Price

Quebec Macro Outlook

7

Real GDP growth lags behind the Canadian average

Unemployment has improved but is still higher than the

average

Employment in the public sector, financial services, and

service industry have shown signs of softening in 2012

Housing starts improved over the summer but still remain in

line with the Canadian average

4th Quarter non-residential building construction in Quebec

increased 4.6%

Although there has been improvements, real

GDP growth continues to lag behind the rest

of Canada. We expect this gap to continue

to widen through 2013.

Q1 -2011 Q2-2011 Q3-2011 Q4-2011 Q1-2012

Real GDP Increase 0.8 0 0.2 0.2 0.2

Apr-12 May-12 Jun-12 Jul-12 Aug-12

QC. Unemployment 8.0% 7.8% 7.7% 7.6% 7.6%

CAN. Unemployment 7.3% 7.3% 7.2% 7.3% 7.3%

QC. CPI 2.4% 1.9% 2.0% 1.9% 2.0%

CAN. CPI 2.0% 1.2% 1.5% 1.3% 1.2%

Quebec Economic Indicators

Source: Institut de la Statistique du Quebec

Quebec Macro Outlook

8

Personal combined top marginal income tax rates could

spike as high as 55.22% (from 48.22%) in 2013.

Quebec individual taxpayers earning over $130,000 per

year would see their provincial tax rate rise to 28% (from

24%)

Laurentian focus on niche customers will insulate them

from negative impact of increased personal income tax

rates.

Increased capital gains inclusion rate from 50% to 75%

The impact of increased capital gains inclusion rate

causes an increase in the effective tax rate for a

corporation to 20.18%

Dividend tax rate increase will have a serious adverse

effect individuals and the concept of tax integration for the

income earned from private companies

Provincial intervention on foreign take-overs of Quebec

companies

More stringent language laws

Effect of Political Changes in Quebec

“Even as a minority government….

Quebeckers can count on me to produce

results.”- Pauline Marois

Lower Rate Higher Rate

Quebec 8% 20%

Newfoundland and Labrador 4% 14%

Nova Scotia 4% 16%

Prince Edward Island 1% 16%

New Brunswick 5% 10%

Ontario 5% 12%

Manitoba nil 12%

Saskatchewan 2% 12%

British Columbia 3% 10%

Yukon 4% 15%

Northwest Territories 4% 12%

Nunavut 4% 12%

(From 13.45%)

Provincial Corporate Tax Rates (Source: KPMG)

Quebec Banking Overview

9

Main QC Banks (~75% market share) Other QC Banks (~25% market share)

Highly competitive

banking industry

Safe banks

Historically low rates

Flat yield curve

Market Environment YoY Net Income Growth 2013E (Bloomberg Est.)

3.07%

4.68% 5.63% 5.94%

7.53%

8.76%

10.19%

CIBC NationalBank

TD RBC Scotia CWB Laurentian

Segment- Retail and SME Quebec

10

3rd largest Retail Branch network in Quebec 158 Branches

22 Commercial banking centers

427 automated banking machines

Expanded offering of McKenzie mutual funds will

contribute to growth

SME-Quebec loans grew by 8% and residential

mortgages by 9%

Commercial lending to SME reaches milestone of

approx. $1 billion

Improved cross over sales could be a major driver of

growth for the segment

0

5

10

15

20

25

106

107

108

109

110

111

112

113

114

115

116

117

Q1 2011 Q3 2011 Q1 2012 Q3 2012

Net

Incom

e a

nd O

pera

ting I

ncom

e

(Mill

ions)

Revenues (

Mill

ions)

Retail and SME Financial Results

Revenue Net Income Operating Income

Key Facts

740

750

760

770

780

790

800

810

820

0

500

1,000

1,500

2,000

2,500

3,000

2007 2008 2009 2010 2011 2012YTD

Units S

old

Avera

ge H

om

e P

rices

Quebec Average Home Prices and Units Sold (In thousands)

Average Price Home Sale UnitsSource: CMHC

35%

54%

11%

Distribution of Loans

Personal

Residential Mortgage

Commercial Mortgage

Real Estate Financing and Commercial Loans

11

Geographic distribution of

real estate loans Construction loans for various real estate projects: Office and

commercial buildings, condominiums and residential complexes

Geographically diversified across Canada with offices in BC,

Alberta and QC

17% 3-yr CAGR, reaching $2.4B in assets at year end 2011

Real estate loans make up around 70% of assets and

profitability of the segment

0

5

10

15

20

25

28.5

29

29.5

30

30.5

31

31.5

32

32.5

33

Q1 2011 Q3 2011 Q1 2012 Q3 2012

Net

Incom

e a

nd O

pera

ting I

ncom

e

(In m

illio

ns)

Revenue (

In m

illio

ns)

Real Estate and Commercial Financial Results

Revenue Operating Income Net Income

Real Estate Financing

Commercial Loans

Target clientele: Mid-sized companies

Pursuing the development of commercial financing by

developing new markets across Canada

The commercial unit is further diversifying its risk and asset

base by participating infrastructure financings

12

B2B Bank - 29% of Net Income & 17% of Revenue

They are 100% broker focused & committed to success.

They are here to help you build your business, not

compete for it.

Main products: High interest savings account, mortgages,

line of credits, credit cards

As a mutual fund carrying dealer, B2B Bank Financial

Services Inc. provides Canada’s licensed mutual fund

advisors with a full-suite of financial services for their

clients.

17% of Rev, but 29% of NI (before 2 acquisitions)

MRS Companies Acquisition (Nov, 2011)

The MRS Companies, previously part of the Mackenzie

Financial Corporation, provide trust and administrative

services to dealers, advisors and investors in Canada.

Cash cost of $165m ($50m premium), ~3% EPS

accretion in 2013 or $0.17/share

Helps grow wealth-related revenue by selling clients

Mackenzie mutual funds

Goal of selling more products through the financial

advisor channel

Expected Integration 12-18 months

B2B Bank Highlights

Market opportunity is only 15% penetrated

Total customers

under B2Bs independent

financial advisors, 5,400,000

Customers who bank with

Laurentian, 700,000

Source; CIBC 11th Annual Eastern Institutional Investor Conference

YoY Sales Growth

-2.39%

4.64% 6.00%

7.11%

12.03% 12.35%

14.45%

NationalBank

CIBC Scotia RBC CWB TD Laurentian

13

AGF Trust Acquisition

AGF Trust offers GICs, term deposits, investment loans

and real estate secured loans through financial advisors,

mortgage brokers and deposit brokers.

Cash deal, but issuing $100mm and $20mm to Caisse

and FTQ of subscription receipts to maintain capital

ratios

AGF Trust’s loan and deposit portfolios each totalled

about $3-billion. B2B Trust’s loan and deposit portfolios

stand at $6-billion and $10-billion, respectively. With the

acquisition, B2B Trust’s loan portfolio will increase by

about 50 per cent, and deposits by 30 per cent.

Strategic Rationale

Diversifies revenue outside of Quebec (86% of the

acquired portfolio is outside of Quebec), and adds scale

to what is a scale business.

AGF Trust – 7-10% EPS accretive ($0.40 per share) or

$28-$30m NI per year starting in 2014 (With synergies)

$20-25m NI per year (w/o synergies)

Led to creation of B2B Bank Dealer Services.

AGF Trust Acquisition (July 2012) - $242m transaction Room to distribute more products to financial advisors

Source; CIBC 11th Annual Eastern Institutional Investor Conference

Financial Advisors With LB Products ,

15000

Financial Advisors With

AGF Trust, 12000

Financial Advisors in

Canada, 75000

27k

Pro-forma impact on B2B Bank

B2B Bank AGF Trust Combined

Pro-forma

Increase

Investment Loans $ 3.30 $ 1.80 $ 5.10 55%

Mortgages $ 2.50 $ 1.10 $ 3.60 44%

Personal Loans $ 0.20 $ 0.20 $ 0.40 100%

Total loans and Bas $ 6.00 $ 3.10 $ 9.10 52%

Deposits $ 10.10 $ 2.90 $ 13.00 29%

Assets under Administration 24B 24B 0%

Number of end-clients 600,000 150,000 750,000 25%

14

Financial Profile

Loan Growth (2005-2012YTD)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2006 2007 2008 2009 2010 2011 2012YTD

Residential Mortgage Commercial-other Commercial Mortgage Personal Loans

15

Financial Profile

Sell-Side ROE 2013E

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

CIBC National Bank TD RBC Scotia CWB Laurentian

Headwinds

16

NIX Ratio is Well Above the Big-6 Average for Canadian Banking Segments

Lowest Revenue Generation on a per-Employee Basis

Source: Credit Suisse Estimates

17

Comp Table

Price Market Cap EPS P/E P/TBVS P/B ROE Yield

2011 2012 2013 2012 2013 LTM 2012 2012

Canadian Large Cap Banks

BANK OF MONTREAL $58.40 37,969,235,968 5.28 5.62 5.89 10.40x 9.92x 1.87x 1.44x 14.5% 4.92%

BANK OF NOVA SCOTIA $53.99 63,681,036,288 4.62 4.77 5.10 11.31x 10.58x 3.05x 1.82x 17.9% 4.22%

NATIONAL BANK OF CANADA $74.52 12,063,953,920 6.93 7.78 8.14 9.58x 9.15x 2.51x 1.76x 20.3% 4.22%

ROYAL BANK OF CANADA $56.85 82,114,068,480 3.21 4.93 5.23 11.53x 10.86x 2.91x 2.08x 19.3% 4.21%

TORONTO-DOMINION BANK $81.80 74,766,729,216 6.45 7.35 7.82 11.14x 10.46x 2.62x 1.68x 15.7% 3.76%

Average 10.79x 10.20x 2.59x 1.76x 17.5% 4.3%

Canadian Small Cap Banks

CANADIAN WESTERN BANK $29.78 2,332,597,760 2.26 2.30 2.52 12.93x 11.83x 2.05x 1.74x 14.8% 2.14%

LAURENTIAN BANK OF CANADA $46.01 1,293,687,168 4.81 5.06 5.50 9.08x 8.36x 1.32x 1.07x 12.0% 4.08%

Average 11.01x 10.10x 1.68x 1.40x 13.4% 3.1%

US Large Cap Banks

BANK OF AMERICA CORP $8.81 94,918,615,040 0.01 0.59 0.90 14.83x 9.74x 0.70x 0.45x 3.1% 0.44%

CITIGROUP INC $32.20 94,396,514,304 3.69 3.83 4.46 8.41x 7.22x 0.64x 0.51x 6.4% 0.12%

JPMORGAN CHASE & CO $40.28 153,202,819,072 4.45 4.64 5.12 8.68x 7.87x 1.18x 0.83x 9.9% 2.90%

US BANCORP $33.51 63,503,581,184 2.44 2.80 2.99 11.98x 11.19x 2.73x 1.85x 16.8% 2.27%

WELLS FARGO & CO $34.11 179,992,576,000 2.82 3.26 3.61 10.45x 9.45x 1.79x 1.28x 13.7% 2.52%

Average 10.87x 9.09x 1.41x 0.98x 10.0% 1.6%

US Regional Banks

BB&T CORP $32.40 22,627,805,184 1.83 2.74 2.99 11.83x 10.83x 2.07x 1.21x 10.8% 2.41%

COMERICA INC $30.51 5,908,442,624 2.09 2.64 2.63 11.58x 11.60x 0.95x 0.86x 7.4% 1.92%

M & T BANK CORP $94.03 11,898,228,736 6.30 6.85 7.67 13.72x 12.27x 2.39x 1.33x 9.8% 2.91%

PNC FINANCIAL SERVICES

GROUP $61.70 32,674,220,032 5.64 5.96 6.68 10.36x 9.24x 1.45x 0.92x 9.3% 2.52%

SUNTRUST BANKS INC $28.00 15,033,537,536 0.93 1.84 2.76 15.24x 10.15x 1.19x 0.74x 7.2% 0.70%

Average 12.55x 10.82x 1.61x 1.01x 8.9% 2.1%

European/UK Banks

BANCO BILBAO VIZCAYA

ARGENTA $7.71 42,092,597,248 0.85 0.48 0.96 15.93x 8.01x 1.04x 0.82x 5.2% 2.53%

HSBC HOLDINGS PLC $9.32 170,456,678,400 0.91 0.88 0.98 10.55x 9.48x 1.26x 1.03x 10.3% 4.45%

LLOYDS BANKING GROUP PLC $0.63 44,599,947,264 - 0.07 0.04 0.07 17.10x 9.43x 0.69x 0.60x 1.4% 0.00%

Average 14.53x 8.97x 0.99x 0.82x 5.6% 2.3%

18

Valuation

Canadian banks are all fairly valued (ex-NA)

5.0%

7.0%

9.0%

11.0%

13.0%

15.0%

17.0%

19.0%

21.0%

23.0%

0.00x 0.50x 1.00x 1.50x 2.00x 2.50x

ROE

Price to Book

NA

LB

BMO

RBC BNS

TD

CWB

19

Valuation

Global banks are all fairly valued

5.0%

7.0%

9.0%

11.0%

13.0%

15.0%

17.0%

19.0%

21.0%

0.00x 0.50x 1.00x 1.50x 2.00x 2.50x

ROE

Price to Book

JPM HSBC

RBC

USB

TD

WFC

LB

20

Recommendation

Buy upon weakness

Laurentian Bank is Fairly Valued – Based on ROE &

Price to Book & PE Analysis

Pros:

Prior to the announcement of the AGF Trust

acquisition, the stock was trading at ~$41. We would

be buyers at this level which is a 7.5x PE 2013.

We would become more bullish upon:

Cost reductions in the retail segment of their business,

increased cross-selling, and more geographical

diversification of their loan portfolio

If B2B Bank will successfully grow its current business

with MRS & AGF, increasing ROE and Net Income

Targeting niche clients in retail, commercial &

securities business

Cons:

Commercial loans are highly competitive (All Ontario

based)

Macro outlook for Quebec will lag behind other

provinces

Average deposit cost is 2.2% or 100bps higher than

the Big-6 average due to brokered deposits (i.e. GICs)

comprising a large part of the funding cost

Low diversification of interest rate sensitive products

compared to fee based income (64% vs. 49% Big 6)

Our new price target is $52, as we like the growth play of B2B Bank

Appendix- Management

21

Rejean Robitaille

He has been with the company for 25 years

Produced compelling financial results during the biggest financial ( Increasing EPS since 2003) for the past crisis since the

last depression- CEO since 2006

He previously worked for Commercial and Retail services as well as the Trust unit

Michel Lauzon

Extensive financial experience in asset management with TAL Global Asset Management.

Was with LB from 1988-1998 in charge of product management, money markets and foreign exchange

22

Appendix - Financial Profile

Revenue profile (2000-LTM)

Asset profile (2000-LTM)

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 LTM

Total Revenue ($M) Growth Over Prior Year

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

0

5,000.0

10,000.0

15,000.0

20,000.0

25,000.0

30,000.0

35,000.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 LTM

Total Assets ($M) Growth Over Prior Year

23

Appendix - Key Metrics

CIBC Financial Model (Robert Sedran)

Appendix- Provision for Loan Loss vs. Non-Performing Assets

24

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

Mar/2006 Mar/2007 Mar/2008 Mar/2009 Mar/2010 Mar/2011 Mar/2012

Pro

v.

For

Loan L

oss to T

ot. L

oan

Non P

erf

. A

sset

to T

ot. L

oan

Non Perf. Asset to Tot. Loans Prov. For Loan Loss to Tot. Loans

25

Appendix - Financial Profile

Loan Growth (1999-2011 Y/Y Growth Rates)

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Commercial Loans Commercial Mortgage Loans Residential Mortgage Loans Consumer Loans