DBRS Ltd. has confirmed its ratings on Laurentian Bank of Canada (TSX:LB), noting that the bank’s geographic limitations have actually proved to be a strength over the past couple of years.

The rating agency Tuesday confirmed Laurentian’s ratings on Deposits & Senior Debt at BBB (high) and the Short-Term Instruments at R-1 (low). All trends remain stable.

DBRS says that Laurentian’s overall business risk profile is conservative relative to the larger banks in Canada, with a focus on retail lending funded by retail deposits and an absence of significant involvement in higher-risk trading or international strategies. “Although under cyclical pressure, Laurentian’s underlying asset-quality profile has improved; the loan mix has shifted to a greater proportion of secured lending over the past two years,” it adds.

“Regional concentration in Quebec, while still a potential rating challenge, was actually beneficial through the downturn as the economic performance of the province was resilient,” the rating agency says.

DBRS notes that Laurentian’s profits for the first nine months of 2010 are up 21% from the same period last year. “The improvement was largely driven by higher net interest income and most areas of non-interest income, offset by lower securitization revenues, higher non-interest expenses and higher loan loss provisions,” it says.

Loan loss provisions for the first nine months of 2010 increased by 30% compared with the same period in 2009, and in Q3 2010 experienced a large charge related to a single credit. DBRS says it views this charge as unique and not indicative of further deterioration in the overall loan book.

The limitations to the bank’s ratings include a modest (albeit improved) level of internal capital generation, and a high cost structure, DBRS adds.

IE