Source: The Canadian Press

Laurentian Bank hopes to increasingly share its improving financial fortunes by more frequently raising its quarterly dividend.

Canada’s seventh-largest bank boosted its dividend for the second consecutive year on Wednesday after reporting record profits in 2010 and expressing confidence about the coming year.

It increased the dividend by three cents per share to 39 cents as uncertainties about international capital requirement rules wane.

“If the Basel III rules stay the same, we expect further dividend increases in the future,” president and CEO Rejean Robitaille said during a conference call after the bank reported record profits in 2010.

Last year, it was the only Canadian bank to increase its payout, when it raised the dividend by two cents. But in the past week, three two other Canadian banks — National (TSX:NA) and Canadian Western (TSX:CWB) –also announced dividend hikes.

Montreal-based Laurentian (TSX:LB) earned $32.5 million, or $1.24 per share, for the period ended Oct. 31. That compared with a profit of $38.2 million or $1.47 per share a year ago.

Revenues increased 6.4% to $190.1 million.

Analysts polled by Thomson Reuters forecast fourth-quarter profits would be $1.15 per share on $187 million in revenues.

Sumit Malhotra of Macquarie Securities said the earnings would have come in close to the consensus estimates had it not benefited from a lower-than-expected tax rate in the quarter.

For its full financial year, Laurentian Bank earned $122.9 million, up 9% from $113.3 million in 2009, as revenue grew 11% to $737.4 million. Diluted earnings per share were $4.63 compared with $4.23 last year.

Laurentian said it saw strong growth in mortgage and commercial loans, as well as a solid contribution from across its businesses.

“We have much to show for 2010. What’s more we have momentum and we are confident that this momentum will be carried into 2011,” Robitaille told analysts.

Despite the uncertainties of the North American economy and unprecedented low interest rate environment, he said the bank is committed to pursue profitable growth.

“We have delivered now six years of consecutively increasing earnings per share and we will continue to make the calls and take the actions that are required to product sustainable core growth and double digit returns.”

The bank’s 2011 objectives include revenue growth or more than 5%, return on common shareholders’ equity of 11 to 13%, and diluted earnings per share of $4.80 to $5.40.

Over the next three to five years, he said the bank is targeting return on equity of 13 to 15%, up from 11.5% achieved in 2010.

Malhotra said Laurentian shares are undervalued given the bank’s consistently solid operating performance.

“A boost in return on equity as targeted and more frequent dividend increases (clearly achievable) will serve to narrow that differential,” he wrote in a report.

The bank’s provisions for loan losses was unchanged at $16 million in the fourth quarter as lower losses on retail portfolios was offset by increases in commercial loans.

Laurentian’s retail and small and medium-size business segment’s net profits from continuing operations fell in the fourth quarter to $9.7 million from $10 million a year ago. For the full year, the income grew 19% to $47 million from $39.6 million due to solid loan and deposit growth, favourable market conditions and higher prepayment penalties on mortgage loans.

Real estate and commercial profit was up 62 cents to $12.3 million during the quarter.

B2B Trust profits grew 63% to $12.2 billion in the quarter on$32.4 million of revenues.

Laurentian Bank Securities and Capital Markets generated $3.5 million of profits on $17.4 million of revenues during the quarter, compared to $2.7 million on $18.5 million a year earlier.

Laurentian Bank is the third-largest financial institution in Quebec after the Desjardins Group and the National Bank of Canada. Its 3,500 employees operate some 157 branches, 32 commercial banking centres and 15 brokerage offices.

On the Toronto Stock Exchange, Laurentian Bank’s shares closed up 20 cents at $45.60 on Wednesday.