The leadership change at Laurentian Bank of Canada was so abrupt that the new chief executive officer, Eric Provost, only found out over the weekend that he would be taking over. By Monday morning, even the chairman who made that phone call was gone.
Laurentian announced Monday that Provost is replacing Rania Llewellyn immediately, a rare sudden leadership switch by a Canadian bank. Less than three weeks ago, Provost had been given an expanded role leading personal and commercial banking. The promotion to CEO came as a complete surprise, he said.
Canada’s ninth-largest publicly traded bank has just emerged from a monthslong strategic review without finding a buyer, then suffered a major technology failure last week that left customers unable to make deposits or use bill payments and other services. The Montreal-based bank said the IT outage was the catalyst for Provost’s appointment.
“What I was asked to do is actually make sure that we solve this crisis,” he said in an interview. “It might not be the ideal walk into the job, if I can say it that way.”
Provost, 49, has been with the bank for 11 years, joining it from General Electric Co.’s financial unit in 2012. He said he heard about the succession plan through a call on Saturday from Michael Mueller, who subsequently quit as chair and director. Michael Boychuk, who previously led the bank’s audit committee, was named the new chair of the board.
“For me, I strongly believe in this bank,” Provost said, adding: “I think we can be successful if we have the right focus.”
He wouldn’t comment on the strategic review itself or say what role it may have played in the departure of Llewellyn, the first woman to lead a major Canadian bank. Laurentian hasn’t closed the door on anything, including asset sales, Provost added, but he didn’t give a new date for when Laurentian will share an updated strategy with investors.
Read More: Laurentian Bank Ends Review Without a Sale, Will Go It Alone
Shares of Laurentian fell nearly 6% to C$28.48 in Toronto, the lowest closing price since November 2020. They’ve fallen more than 20% since the Sept. 14 announcement that the strategy review had ended without a deal.
Llewellyn and Mueller couldn’t be reached for comment.
‘Out of Nowhere’
Several financial analysts and commentators questioned whether the leadership change was truly triggered by the IT problems.
“Given how sudden this is — it’s completely out of nowhere — I would imagine there was probably maybe some disagreements around the strategic review and what the bank was willing to do,” KBW analyst Mike Rizvanovic said in an interview. “It would be extremely surprising to me if that was only predicated on IT issues.”
It’s rare for a Canadian bank to change CEOs without a well-orchestrated succession plan. One possible parallel occurred in the late 1990s, when Royal Bank of Canada and Bank of Montreal announced a plan to merge, said John Turley-Ewart, a Canadian financial historian and risk-management consultant.
The proposal was blocked by the Canadian government and soon after, Bank of Montreal head Matthew Barrett announced he would leave. But in that case, he stayed for months as chairman during the transition.
Putting Laurentian up for sale was “basically an admission of ‘Hey, this is not something I can fix,’” Turley-Ewart said.
Laurentian has been bogged down by poor profitability and high expenses. In recent quarters it has improved its net interest margin — the difference between what it makes from lending and what it pays on deposits — but as the economy slows, it may also face lower growth in its US commercial lending business. At Monday’s closing price, the bank has a market capitalization of C$1.24 billion ($907 million) — less than half of book value.
Tech Investments
The technology fiasco was the result of a routine system update “that didn’t go as planned,” Provost said, creating a backlog in transactions. “There’s some investment we need to make to stay updated in our technology stack,” he acknowledged. Until 2021, the bank didn’t even have a mobile app.
The bank said on its website Monday it continues to face “intermittent issues across our networks” and some services are still unavailable or slower than usual. Provost will implement a three-part plan to fully resolve any remaining problems, improve communication with customers and launch a review of the technical issues, the bank said.
When asked about the impact the technology failure would have on the bank’s customer base, he said: “I hope it doesn’t erode that much.” The bank is offering a credit on fees for the month of September and opened dozens of branches on Monday in Quebec, even though it is a bank holiday.
The new CEO is a French speaker who hails from Quebec, a factor that could play well in the bank’s home province.
Llewellyn, a former Bank of Nova Scotia executive from Toronto, was CEO for almost three years and made a focus on diversity and inclusion at the bank a key point in her tenure.
(Updates with additional information beginning in the fifth paragraph)
