Laurentian Bank of Canada reported lower second quarter earnings as low interest rates trimmed profits, but a strong boost in loans and deposits has put the bank on track for record growth in 2009, Laurentian executives said Wednesday.

Net income for the second quarter ended April 30 was $21.2 million, down from $25.1 million a year ago.

Earnings per share slipped to 76¢ during the quarter, down from 93¢ a share in the year-earlier period.

Return on equity, a key measure of profitability, was 8.5%, down from 11.2% a year ago.

The Montreal-based bank said the drop in profit was attributed to a decline in interest income as Laurentian’s overall net interest margin bottomed out at 1.9%, but this was largely offset by other revenue growth.

“The difficult economic conditions and unprecedented low interest rate environment have hampered profitability during the last quarter,” said CEO Rejean Robitaille, in a release.

But in a conference call on Wednesday, Robitaille said that given the challenging economic and market environment, he was pleased with the company’s results for the quarter.

“We are satisfied with the underlying strengths of this quarter’s results,” he said.

In particular, he noted that Laurentian posted its best-ever loan and deposit growth during the second quarter ended April 30. Total deposits soared 20%, including a hefty 29% jump in average deposits at B2B Trust, Laurentian’s financial products and services distribution network of more than 14,000 advisors. The sharp growth was primarily thanks to the High Interest Investment Account, which B2B Trust launched in October.

“We continue to see growth in this product,” said François Desjardins, executive vice-president of the bank and president and CEO of B2B Trust. “This new product really serves our community, the financial advisor community.”

Lending increased by $307 million during the quarter, with 65% of this growth coming in residential mortgages. Average loans in the company’s retail division and real estate and commercial division grew 9%, while average loans in B2B Trust rose a sharp 11%.

Robitaille said the company is on track for 2009 to be another record year of growth in loans and deposits.

Meanwhile, provisions for loan losses amounted to $12 million during the quarter, compared to $10 million a year ago and unchanged compared to the first quarter of 2009. Loan losses were down slightly to $8.1 million in the company’s retail division, while they edged higher to $0.7 million in B2B Trust. The company’s real estate and commercial division saw loan losses surge to $3.2 million in the quarter, from $1 million last year.

Laurentian Bank’s overall revenue for the quarter was $154.8 million compared with $155.5 million a year ago.

“Measures aimed at restoring revenue growth have started to generate results,” Robitaille said.

Revenue was particularly strong at Laurentian Bank Securities, increasing by $3.5 million, or 45%, thanks to strength in the institutional fixed income division and improved performance among retail brokers.

Going forward, Robitaille said the bank would continue to pursue growth.

“Our strong capital base, high liquidity level, conservative risk management approach and rigorous execution which should allow us to take advantage of market opportunities and deliver prudent and profitable growth,” he said in the conference call.

IE