Financials Holdings Updates

Andy Macdonald Zeeshan Maqsood Nicholas Di Giorgio October 2nd,2012

Laurentian Bank (LB-T)

Laurentian Bank Company Profile

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 Banks 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. Its 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

20%

Commercial mortgages, commercial loans and BAs Residential mortgages

Management and Board Rjean RobitaillePresident and CEO (employed since 1988) Michel C. Lauzon Executive VP and CFO (employed since 1988)
2

48%

32%

Personal loans

Stock Trading Analysis

Five-Year Performance
Ishares Financial Index National Bank

Laurentian Bank
1.5

1.3

1.1
MRS Acquisition
LB announces acquisition of AGF Trust

0.9

0.7

0.5

0.3

2007

2008

2010

2011

2012

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

3

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 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

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

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

4

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) 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

We like their strategy of focusing on growing their feebased 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

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

5

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

CAN. Average Home Prices

380000 360000 Average Price 340000 320000 300000 2007
6

2008

2009

2010

2011

2012 YTD

Average Price

Quebec Macro Outlook

Quebec Economic Indicators

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%

Real GDP Increase QC. Unemployment CAN. Unemployment QC. CPI CAN. CPI

Q1 -2011 Q2-2011 Q3-2011 Q4-2011 Q1-2012 0.8 0 0.2 0.2 0.2 Apr-12 8.0% 7.3% 2.4% 2.0% May-12 7.8% 7.3% 1.9% 1.2% Jun-12 7.7% 7.2% 2.0% 1.5% Jul-12 7.6% 7.3% 1.9% 1.3% Aug-12 7.6% 7.3% 2.0% 1.2%

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.

Source: Institut de la Statistique du Quebec

7

Quebec Macro Outlook

Effect of Political Changes in Quebec 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.

Provincial Corporate Tax Rates (Source: KPMG)

Quebec Lower Rate 8% Higher Rate 20%
(From 13.45%)

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

Newfoundland and Labrador Nova Scotia Prince Edward Island New Brunswick Ontario Manitoba Saskatchewan British Columbia Yukon Northwest Territories Nunavut

4% 4% 1% 5% 5% nil 2% 3% 4% 4% 4%

14% 16% 16% 10% 12% 12% 12% 10% 15% 12% 12%

Even as a minority government. Quebeckers can count on me to produce results.- Pauline Marois

Quebec Banking Overview

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

Market Environment

YoY Net Income Growth 2013E (Bloomberg Est.)

10.19% 8.76%

Highly competitive banking industry

Safe banks
5.63% 4.68% 3.07% 5.94%

7.53%

Historically low rates

Flat yield curve

CIBC

National Bank

TD

RBC

Scotia

CWB

Laurentian

Segment- Retail and SME Quebec

Key Facts

Retail and SME Financial Results

3rd largest Retail Branch network in Quebec
Revenues (Millions) 158 Branches 22 Commercial banking centers 427 automated banking machines Net Income and Operating Income (Millions) 820 810 800 790 780 770 760 750 740 2007 2008 2009 2010 2011 2012 YTD Units Sold 117 116 115 114 113 112 111 110 109 108 107 106 Q1 2011 Revenue Q3 2011 Q1 2012 Q3 2012 Operating Income Net Income 25 20 15 10 5 0

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

Distribution of Loans
Average Home Prices 3,000 2,500 2,000 1,500 1,000 500

Quebec Average Home Prices and Units Sold (In thousands) 11%

Personal Residential Mortgage Commercial Mortgage

35%

54%

Source: CMHC
10

Average Price

Home Sale Units

Real Estate Financing and Commercial Loans

Real Estate Financing
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

Geographic distribution of real estate loans

Commercial Loans Target clientele: Mid-sized companies

Revenue (In millions)

Real Estate and Commercial Financial Results

20
15 10 5 0 Q1 2011 Revenue Q3 2011 Q1 2012 Q3 2012 Net Income Operating Income Net Income and Operating Income (In millions) 33 32.5 32 31.5 31 30.5 30 29.5 29 28.5 25

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

11

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

B2B Bank Highlights 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 Canadas licensed mutual fund advisors with a full-suite of financial services for their clients. Market opportunity is only 15% penetrated
Customers who bank with Laurentian, 700,000

Total customers under B2Bs independent financial advisors, 5,400,000

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
12

YoY Sales Growth

14.45% 12.03% 7.11% 12.35%

4.64%

6.00%

-2.39% National Bank

CIBC

Scotia

RBC

CWB

TD

Laurentian

Source; CIBC 11th Annual Eastern Institutional Investor Conference

AGF Trust Acquisition

AGF Trust Acquisition (July 2012) - $242m transaction 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 Trusts loan and deposit portfolios each totalled about $3-billion. B2B Trusts loan and deposit portfolios stand at $6-billion and $10-billion, respectively. With the acquisition, B2B Trusts 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.
Financial Advisors in Canada, 75000

Room to distribute more products to financial advisors

Financial Advisors With LB Products , 15000

Financial Advisors With AGF Trust, 12000

27k

Pro-forma impact on B2B Bank

Pro-forma Increase 55% 44% 100% 52% 29% 0% 25%

B2B Bank Investment Loans $ 3.30 Mortgages $ 2.50 Personal Loans $ 0.20 Total loans and Bas $ 6.00 Deposits $ 10.10 Assets under Administration 24B Number of end-clients 600,000

AGF Trust $ 1.80 $ 1.10 $ 0.20 $ 3.10 $ 2.90

Combined $ 5.10 $ 3.60 $ 0.40 $ 9.10 $ 13.00 24B 150,000 750,000

13

Source; CIBC 11th Annual Eastern Institutional Investor Conference

Financial Profile
Loan Growth (2005-2012YTD)

Residential Mortgage 100%

Commercial-other

Commercial Mortgage

Personal Loans

90%
80% 70% 60% 50% 40% 30%

20%
10% 0%

2005
14

2006

2007

2008

2009

2010

2011

2012YTD

Financial Profile
Sell-Side ROE 2013E
25.00%

20.00%

15.00%

10.00%

5.00%

0.00% CIBC
15

National Bank

TD

RBC

Scotia

CWB

Laurentian

Headwinds
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 16

Comp Table
Price Canadian Large Cap Banks BANK OF MONTREAL BANK OF NOVA SCOTIA NATIONAL BANK OF CANADA ROYAL BANK OF CANADA TORONTO-DOMINION BANK Average Canadian Small Cap Banks CANADIAN WESTERN BANK LAURENTIAN BANK OF CANADA Average US Large Cap Banks BANK OF AMERICA CORP CITIGROUP INC JPMORGAN CHASE & CO US BANCORP WELLS FARGO & CO Average US Regional Banks BB&T CORP COMERICA INC M & T BANK CORP PNC FINANCIAL SERVICES GROUP SUNTRUST BANKS INC Average European/UK Banks BANCO BILBAO VIZCAYA ARGENTA HSBC HOLDINGS PLC LLOYDS BANKING GROUP PLC 17 Average Market Cap

2011
$58.40 $53.99 $74.52 $56.85 $81.80 37,969,235,968 63,681,036,288 12,063,953,920 82,114,068,480 74,766,729,216 5.28 4.62 6.93 3.21 6.45

EPS 2012 5.62 4.77 7.78 4.93 7.35

P/E

2013
5.89 5.10 8.14 5.23 7.82

2012
10.40x 11.31x 9.58x 11.53x 11.14x 10.79x

2013
9.92x 10.58x 9.15x 10.86x 10.46x 10.20x

P/TBVS LTM 1.87x 3.05x 2.51x 2.91x 2.62x 2.59x

P/B 2012 1.44x 1.82x 1.76x 2.08x 1.68x 1.76x

ROE 2012 14.5% 17.9% 20.3% 19.3% 15.7% 17.5%

Yield

4.92% 4.22% 4.22% 4.21% 3.76% 4.3%

$29.78 $46.01

2,332,597,760 1,293,687,168

2.26 4.81

2.30 5.06

2.52 5.50

12.93x 9.08x 11.01x

11.83x 8.36x 10.10x

2.05x 1.32x 1.68x

1.74x 1.07x 1.40x

14.8% 12.0% 13.4%

2.14% 4.08% 3.1%

$8.81 $32.20 $40.28 $33.51 $34.11

94,918,615,040 94,396,514,304 153,202,819,072 63,503,581,184 179,992,576,000

0.01 3.69 4.45 2.44 2.82

0.59 3.83 4.64 2.80 3.26

0.90 4.46 5.12 2.99 3.61

14.83x 8.41x 8.68x 11.98x 10.45x 10.87x

9.74x 7.22x 7.87x 11.19x 9.45x 9.09x

0.70x 0.64x 1.18x 2.73x 1.79x 1.41x

0.45x 0.51x 0.83x 1.85x 1.28x 0.98x

3.1% 6.4% 9.9% 16.8% 13.7% 10.0%

0.44% 0.12% 2.90% 2.27% 2.52% 1.6%

$32.40 22,627,805,184 $30.51 5,908,442,624 $94.03 11,898,228,736 $61.70 32,674,220,032 $28.00 15,033,537,536

1.83 2.09 6.30 5.64 0.93

2.74 2.64 6.85 5.96 1.84

2.99 2.63 7.67 6.68 2.76

11.83x 11.58x 13.72x 10.36x 15.24x 12.55x

10.83x 11.60x 12.27x 9.24x 10.15x 10.82x

2.07x 0.95x 2.39x 1.45x 1.19x 1.61x

1.21x 0.86x 1.33x 0.92x 0.74x 1.01x

10.8% 7.4% 9.8% 9.3% 7.2% 8.9%

2.41% 1.92% 2.91% 2.52% 0.70% 2.1%

$7.71 42,092,597,248 $9.32 170,456,678,400 $0.63 44,599,947,264 -

0.85 0.91 0.07

0.48 0.88 0.04

0.96 0.98 0.07

15.93x 10.55x 17.10x 14.53x

8.01x 9.48x 9.43x 8.97x

1.04x 1.26x 0.69x 0.99x

0.82x 1.03x 0.60x 0.82x

5.2% 10.3% 1.4% 5.6%

2.53% 4.45% 0.00% 2.3%

Valuation
Canadian banks are all fairly valued (ex-NA)

23.0% 21.0% 19.0%

BNS NA

RBC

17.0%
TD

15.0%

BMO CWB LB

ROE
13.0% 11.0% 9.0% 7.0% 5.0% 0.00x

0.50x

1.00x

1.50x

2.00x

2.50x

Price to Book

18

Valuation
Global banks are all fairly valued

21.0% 19.0%
RBC

17.0%
TD

USB

15.0%

ROE
13.0% 11.0% 9.0% 7.0% 5.0% 0.00x
LB JPM

WFC

HSBC

0.50x

1.00x

1.50x

2.00x

2.50x

Price to Book
19

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 securities business in retail, commercial &

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
20

Appendix- Management
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

21

Appendix - Financial Profile

Asset profile (2000-LTM)
Total Assets ($M) 35,000.0 30,000.0 Growth Over Prior Year 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% -5.00% -10.00% -15.00% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 LTM

25,000.0
20,000.0 15,000.0 10,000.0 5,000.0 0

Revenue profile (2000-LTM)

Total Revenue ($M) 800.0 700.0 600.0 500.0 400.0 300.0 200.0 100.0 0 2000
22

Growth Over Prior Year 30.00% 20.00% 10.00% 0.00% -10.00% -20.00% -30.00%

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

LTM

Appendix - Key Metrics

CIBC Financial Model (Robert Sedran)

23

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

1.2 0.16

1.1 0.14 1 0.12 Prov. For Loan Loss to Tot. Loan

0.9 Non Perf. Asset to Tot. Loan

0.8 0.1 0.7 0.08 0.6

0.5

0.06

0.4 0.04 0.3

0.2 Mar/2006

Mar/2007

Mar/2008

Mar/2009

Mar/2010

Mar/2011

0.02 Mar/2012

Non Perf. Asset to Tot. Loans

Prov. For Loan Loss to Tot. Loans

24

Appendix - Financial Profile

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

Commercial Loans 40.00%

Commercial Mortgage Loans

Residential Mortgage Loans

Consumer Loans

30.00%

20.00%

10.00%

0.00%

-10.00%

-20.00%

-30.00%

1999
25

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011