Laurentian Bank (LB-T)

It has a good presence in Quebec. They are interested in selling but he doesn't see who would buy them.

Not very attractive as a bank, otherwise it would have been snapped up. Hasn't invested in IT, not efficient, no scale. Not sure of a sale. Very interesting asset in the US, an inventory finance company. It's possible someone in the US will buy that part, while someone in Canada buys the banking part. 

Does not own shares.
Not a good deposit rate.
Cost of funding higher than competitors in sector.
Strategic review not generating prospects.
Not a good investment.
Holding as potential M&A target not a good strategy. 

Better banks to own with better assets, balance sheets, and management. Price popped, then dropped when 2 of the big banks took a pass on buying. If there are no buyers, you're left with a lower quality bank. Going with the biggest and best will provide defensiveness plus capital to grow.

Not able to predict whether company will sell.
Not investing enough in tech.
Weak company at the moment.
Not expecting a major premium if company sells. 

He's inclined to sit tight. Media negativity could have ulterior motives. Easy to slam without repercussions, as it's not a big investment banker. It only needs one buyer, and all assets have a price. Would be attractive for expanding scale or into Quebec.

The chart broke out. Though shares are higher, people bought at $45, and that is resistance. It's a gamble that it will merge with another bank.

A short-term, event-driven pick. For sale, a unique opportunity in Canada for competitors to increase market share, especially in Quebec. Book value is $60 per share. Sees takeout price at $54-60, so 25-40% upside from today's price. Yield is 4.36%.

They might sell LB and there's a good market for Canadian banks now, but regulatory issues could block it. If you're sitting on a 30% profit, yes, you can take profits. Yields more than 4%.

Thinks all big 6 Canadian banks would be interested in buying it. A purchase will be accretive and lower LB's cost of capital.

That is a good trade. At only 9X earnings (even after the pop) LB could still go for a higher price. There are very few bank assets for sale in Canada so it has scarcity value. BNS and TD might be very motivated buyers. We might take a little quick profit off the table but we think some can still be held to see what happens. 
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Quality defensive. Huge upside potential. Trading at a valuation that's tied for its all-time low. New CEO dedicated to improving profitability. If you don't buy it at these lows, when are you going to? Partially re-hiked dividend after previous cut. Yield is 5.75%.

They don't have enough focus in their strategy. EQ or GoEasy are better in this challenger-bank space or even the bigger banks. He wouldn't buy any bank now, though. Credit is the issue--if we enter a recession, consumers and businesses will spend less, be less activity. Banks need to take more credit-loss provisions before you buy them. We're getting there; big bank shares have declined 20% YOY.

Pretty competent new management. Hold, and give them a chance. Implementing 3-year plan to turn fortunes around. Real opportunity. Regionally bound in the past. Tiny by Canadian standards, at $1.5B market cap. Yield over 5.5%.

Upside potential is better than all the big banks, due in part to valuation, size and growth opportunities in a recovery.
But we would see the risk as also significantly higher. 
A smaller bank simply has less ability to withstand losses, and has few revenue drivers and funding options.  
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