Laurentian Bank of Canada (TSX:LB) (LB-T) is facing potential credit rating downgrades due to escalating operational and leadership issues, according to Gabriel Dechaine from National Bank of Canada (OTC:NTIOF). Dechaine recently downgraded his rating for the bank to underperform for the second time in just over a month, following an unsuccessful strategic review that did not find a buyer for the bank. The bank's recent challenges include an IT outage and the abrupt departure of its CEO.
Credit rating agencies S&P Global (NYSE:SPGI) Ratings and DBRS Morningstar are closely monitoring the situation at Laurentian Bank. S&P has already revised the bank's outlook from stable to negative, while DBRS is currently reviewing Laurentian's rating. These developments have led to rising wholesale funding costs for the bank.
Despite these setbacks, a spokesperson for Laurentian Bank has assured stakeholders of the bank's robust capital and liquidity levels. However, this did not prevent the bank's stock from falling 3.6% on Tuesday, making it the worst performer on the S&P/TSX Composite Index.
In response to these challenges, Dechaine reduced his price target for Laurentian from C$32 to C$27, mirroring similar actions by Canadian Imperial Bank of Commerce and Royal Bank of Canada (TSX:RY) after the September review.
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