LÉVIS, QC,
Nov. 16
/CNW Telbec/ -
Financial highlights
- Surplus earnings before member dividends of $378 million for the third
quarter of 2009, compared to $149 million for the same period of 2008.
- Surplus earnings before member dividends of $833 million for the first
nine months of 2009, up 50.4% compared to the same period one year
earlier.
- Strong balance sheet with $10.7 billion in capitalization and a quality
loan portfolio.
- Tier 1 capital ratio still among the best in the industry.
- Assets grew 8.6% to $163.2 billion.
- Good growth in financing activities, which expanded over 6%.
Key financial data:
-------------------------------------------------------------------------
For the three months For the nine months
ended September 30 ended September 30
-------------------------------------------------------------------------
2009 2008 Change 2009 2008 Change
-------------------------------------------------------------------------
Surplus
earnings
before
member
dividends $378 $149 153.7% $833 $554 50.4%
million million million million
-------------------------------------------------------------------------
Return on
equity 14.4% 6.2% - 10.9% 7.8% -
-------------------------------------------------------------------------
--------------------------------------------
Assets $163.2 $150.3 8.6%
billion billion
--------------------------------------------
Equity $10.7 $9.7 10.4%
billion billion
--------------------------------------------
Tier 1
capital
ratio* 14.94% 14.15% -
--------------------------------------------
Growth in
total loans 6.1% 8.9% -
--------------------------------------------
Growth in
total
deposits 5.1% 7.0% -
--------------------------------------------
* The 2009 ratio is calculated according to the new rules of the
Basel II Capital Accord, while the 2008 ratio was assessed under the
former regulatory framework or Basel I.
2009 third quarter results
For the third quarter of 2009, Desjardins Group, the largest cooperative financial group in
Canada
, posted higher profitability, with surplus earnings before member dividends of
$378 million
, compared to
$149 million
one year earlier. Return on equity was 14.4%, compared to 6.2% on a year-over-year basis.
Financial performance for the third quarter benefitted from strong growth in trading income, despite lower interest rates, which restrained net interest income at the caisses and, at the same time, limited their profitability. The quarter also provided good results in insurance activities, particularly in the life and health insurance subsidiary, and in securities activities, as well as growth in business volumes.
In terms of income, Desjardins Group's total income reached
$3,070 million
at the end of the third quarter of 2009, for an increase of
$1,060 million
or 52.7% compared to the same quarter of 2008.
Net interest income stood at
$958 million
in the third quarter of 2009, up
$76 million
or 8.6% as compared to the same quarter last year, in particular due to asset-liability management activities, which successfully foresaw market changes during the quarter. At
$1,102 million
, net premiums were stable compared to the third quarter of 2008.
Other income stood at
$1,010 million
, as compared to
$17 million
in the same quarter of 2008. This significant growth was due to a
$943 million
increase in trading income and a
$146 million
increase in income from available-for-sale securities as a result of improved markets. Of the trading income, an amount of
$726 million
came from the life and health insurance subsidiary and was offset by a
$669 million
increase in expenses related to claims, benefits, annuities and changes in this subsidiary's insurance provisions. It is worth noting that the higher income from available-for-sale securities came primarily from the Personal and Commercial segment.
The quality of Desjardins' loan portfolio remains excellent, with a ratio of gross impaired loans to gross loans of 0.46%. Provisions for credit losses for the third quarter of 2009 stood at
$80 million
, compared to
$65 million
a year earlier.
Expenses related to claims, benefits, annuities and changes in insurance provisions totalled
$1,216 million
, up
$637 million
or 110.0% compared to the third quarter of 2008. A large part of this growth is explained by an equivalent increase in investment income at the life and health insurance subsidiary, as mentioned above.
Non-interest expenses stood at
$1,220 million
, a
$75 million
or 6.6% increase over the same quarter of 2008. Much of this increase was due to increased salaries and fringe benefits related to the annual indexation of salaries. The cumulative results for the third quarter of 2009 also include a
$37 million
expense for severance benefits, professional fees, assets impairment and others, presented as part of reorganization expenses.
Funding and capital supply
During the third quarter of 2009, Desjardins Group successfully completed a
$500 million
offering of medium term deposit notes maturing in 2011 and 2012 - through the Caisse centrale Desjardins (CCD). This was CCD's first issuance of notes under a simplified base shelf prospectus dated
March 14, 2008
that allows to issue up to
$5 billion
in notes.
Results for the first nine months of 2009
For the nine-month period ended
September 30, 2009
, Desjardins Group announced surplus earnings before member dividends of
$833 million
, as compared to
$554 million
for the same period of 2008. This represents an increase of 50.4%. Return on equity was 10.9%, compared to 7.8% one year earlier.
Profitability for the first nine months of 2009 benefitted from improved market conditions, which had a positive impact on trading income and income from available-for-sale securities, as well as a write-down of the portfolio of restructured ABCP notes that was smaller than the write-down recorded in the same period of 2008. An amount of
$68 million
was recorded in the first nine months of 2009 as a decline in the fair value of all the portfolios of restructured ABCP notes and the write-off of an ABCP security excluded from the moratorium of the
Montreal
Accord. This compares to a write-off of
$292 million
recorded for the same period of 2008. It is also worth noting that financial performance improved in insurance and securities activities. As for the caisse network, it posted a 33.9% drop in surplus earnings, from
$570 million
for the first nine months of 2008 to
$377 million
for the same period of 2009, primarily due to lower interest rates, which had a negative impact on net interest income.
"Desjardins Group is seeing solid growth in all its main segments," said Monique F. Leroux, Chair of the Board, President and CEO of Desjardins Group. "We are beginning to reap the benefits of major efforts made over the last year, since Desjardins has posted stronger financial results and one of the highest capitalization rates in the industry across the country," she stated. "But we must continue to manage our cooperative financial group prudently in an economic environment that still harbours uncertainties, while actively working to raise productivity levels and always maintaining our capitalization at such a high level."
Every quarter, Desjardins Group must establish the most accurate estimate possible of the amount that will be recorded for payment of member dividends at the end of the fiscal year. The estimate is based on potential surplus earnings in the caisse network. The Group therefore recorded a
$239 million
provision for member dividends for the first nine months of 2009, compared to
$304 million
a year earlier. The provision for 2009 includes a
$29 million
positive adjustment compared to 2008 dividends.
Desjardins remains one of the best capitalized financial institutions in
Canada
; its Tier 1 capital ratio, assessed under the new regulatory framework (the
Basel
II Accord), reached 14.94% as at
September 30, 2009
, compared to 14.15% as assessed under the former regulatory framework (
Basel
I Accord) one year earlier. The Tier 1 ratio therefore exceeds the Group's capitalization target and is one of the best in the industry. In addition, the total capital ratio, assessed under the
Basel
II Accord, stood at 14.94%, compared to 13.45% as assessed under the
Basel
I Accord as at
September 30, 2008
.
Desjardins Group's total income stood at
$8,087 million
at the end of the first nine months of 2009, an increase of
$1,443 million
or 21.7% compared to the same period one year earlier.
Net interest income stood at
$2,581 million
, a
$43 million
or 1.7% increase from the same period of 2008. Net premiums grew
$61 million
or 2.0% as a result of good growth in insurance premiums, particularly in life and health insurance. Other income was up
$1,339 million
due to a
$1,167 million
increase in trading income and a
$289 million
increase in income from available-for-sale securities as a result of improved market conditions. Of the trading income, an amount of
$868 million
, came from the life and health insurance subsidiary and was offset by a
$795 million
increase in expenses related to claims, benefits, annuities and changes in this subsidiary's insurance provisions. Other income benefitted from a write-down of the portfolio of restructured ABCP notes that was
$224 million
less than the write-down recorded in the same period of 2008. This item was also enhanced by a
$23 million
or 7.6% increase in lending fees and credit card service revenues. Income from brokerage, investment fund and trust services fell
$66 million
or 13.7%, primarily due to uncertainty in the markets.
The quality of Desjardins' loan portfolio remains excellent, even though provisions for credit losses grew to a total of
$185 million
, as compared to
$155 million
one year earlier.
Expenses related to claims, benefits, annuities and changes in insurance provisions reached
$2,985 million
at the end of the first nine months of 2009, up
$806 million
or 37.0% compared to one year earlier. A large part of this growth is explained by an equivalent increase in investment income at the life and health insurance subsidiary, as mentioned above.
At
$3,716 million
, non-interest expenses increased
$173 million
or 4.9% compared to the first nine months of 2008. Over 46% of this increase resulted from increased salaries and fringe benefits, in particular as a result of the annual indexation of salaries. The cumulative results for the first nine months of 2009 include a
$65 million
expense for severance benefits, professional fees, assets impairment and others. It is also worth noting that the non-interest expenses reported in 2008 included a
$25 million
write-off of deferred expenses related to technological developments.
The productivity ratio is calculated as Desjardins Group's non-interest expense to total income, net of expenses related to claims and insurance benefits. The ratio was 72.8% at the end of the first nine months of 2009, an improvement over the 79.4% ratio posted for the same period of 2008. It should be recalled that various initiatives were taken to improve productivity, such as implementing a new organizational structure for Desjardins Group, announced in
May 2009
.
Desjardins Group had
$163.2 billion
in total assets as at
September 30, 2009
, compared to
$150.3 billion
one year earlier. This represents growth of
$12.9 billion
or 8.6%.
Results by business segment
Personal and Commercial
This segment primarily encompasses the caisse network, the Fédération des
caisses Desjardins du Québec, Caisse centrale Desjardins, the Fonds de
sécurité Desjardins, Capital Desjardins Inc., Desjardins Trust and the
Ontario Federation and caisses. It should be noted that, since the first
quarter of 2009, the companies created specifically to hold the ABCPs
repurchased by Desjardins Group and previously included in the Personal
and Commercial segment are now presented in the "Other" segment. The
information of past quarters has been reclassified to conform to the new
presentation.
At the end of the third quarter of 2009, surplus earnings before member dividends in the Personal and Commercial segment stood at
$260 million
, up
$63 million
or 32.0% compared to the third quarter of 2008.
For the nine months ended
September 30, 2009
, surplus earnings before member dividends for this segment totalled
$617 million
, a decline of
$19 million
or 3.0% from the same period one year earlier, due in part to lower financial results in the caisse network. Caisse centrale Desjardins nevertheless reported improved profitability.
For the nine months of 2009, total income for the Personal and Commercial segment stood at
$3,905 million
, up
$122 million
or 3.2% compared to the same period a year earlier. Net interest income was
$2,613 million
, up
$25 million
or 1.0%.
Other income reached
$1,292 million
for the first nine months of 2009, an increase of
$97 million
or 8.1% from the same period one year earlier. As mentioned above, other income was enhanced by a
$150 million
increase in trading income and
$84 million
increase in income from available-for-sale securities as a result of improved markets. This item also benefitted from a
$23 million
or 7.5% increase in income related to credit card activities. However, the growth of other income was tempered by a
$29 million
or 11.0% drop in income from brokerage, investment fund and trust services, among other things.
Provisions for credit losses for the first nine months of 2009 totalled
$184 million
, compared to
$155 million
for the same period one year earlier.
Non-interest expense totalled
$2,877 million
, an increase of
$137 million
or 5.0% compared to the first nine months of 2008. Much of this increase stemmed from an increase in salaries and fringe benefits expense, due in part to the annual indexation of salaries. It should be recalled that
$25 million
in deferred expenses related to technological developments were written off during the first nine months of 2008.
In addition, net income of Caisse centrale Desjardins (CCD) stood at
$33.3 million
for the third quarter of 2009. This brought cumulative net income for the first nine months of 2009 to
$116.5 million
, an increase of
$107.7 million
over the same period of 2008. It should be recalled that the results for the third quarter of 2008 were affected by the financial crisis that was ravaging world markets. CCD therefore was obliged to record an other-than-temporary decline in value of
$78.3 million
on financial asset-backed bonds. Had it not been for this one-time item, net income would have risen
$46.9 million
from the same period one year earlier. This excellent performance was due to the results posted by all of CCD's segments, particularly the Group Treasury segment, which reported
$122.1 million
more income for the first nine months of 2009 as compared to the same period of 2008. This was primarily due to trading activities, as well as asset-liability management and its management of cash resources. CCD's contribution to the Personal and Commercial segment was
$111 million
, compared to
$8 million
in 2008.
In the Personal and Commercial segment's financing activities, loans outstanding net of the allowance for credit losses grew 7.0% or
$7.0 billion
on a year-over-year basis, to
$107.2 billion
as at
September 30, 2009
. These excellent results were due to personal finance activities, including residential mortgages and consumer, credit card and other personal loans, which were responsible for close to 83.3% of total portfolio growth for the period.
More specifically, residential loans outstanding grew 6.0%, or
$3.4 billion
, over the year to a total of
$61.1 billion
as at
September 30, 2009
. Consumer, credit card and other personal loans increased 14.0%, or
$2.4 billion
, to
$19.6 billion
on the same date. Loans to businesses and governments increased 4.6% or
$1.2 billion
on a year-over-year basis to a total of
$27.3 billion
as at
September 30, 2009
.
As at
September 30, 2009
, deposit liabilities outstanding in the Personal and Commercial segment stood at
$106.6 billion
, up 5.4% or
$5.4 billion
from one year earlier. Deposits by individuals, which represented 69.7% of deposit liabilities on this date, grew 7.2% or
$5.0 billion
over the same period, to
$74.3 billion
at the end of the third quarter. Deposits by businesses and governments grew 5.1% or
$1.1 billion
, to
$23.7 billion
as at
September 30, 2009
. The other sources of financing available to the Personal and Commercial segment, consisting primarily of deposits related to securities issued on capital markets, fell 7.6% or
$711 million
on a year-over-year basis, to
$8.6 billion
.
Lastly, Canadian stock markets continued to rally in the third quarter of 2009. For example, the S&P/TSX index of the
Toronto
Stock Exchange grew 9.8% for the quarter, even making an impressive 50.6% jump since the bottom of the trough on
March 9, 2009
. The Personal and Commercial segment is very active in the sale of so-called off-balance sheet savings products such as investment funds and securities brokerage, posting excellent results as at
September 30, 2009
. For example, assets under administration or under management consisting of investment funds and securities grew 6.5% or
$1.6 billion
on a year-over-year basis, to
$26.6 billion
.
Life and Health Insurance
For the third quarter of 2009, the contribution of Desjardins Financial Security (DFS) to the Group's combined results was
$65 million
, compared to
$20 million
in 2008. Net income for the quarter was
$67.6 million
, compared to
$16.4 million
for the same quarter of 2008. Insurance premium income stood at
$682.4 million
, and insurance sales totalled
$43.6 million
, compared to
$31.3 million
posted for the same quarter in 2008.
At the end of the first nine months of 2009, DFS recorded
$150.9 million
in net income and a return on shareholders' equity of 26.3%, one of the best in the financial services industry. Its contribution to Desjardins Group's combined results stood at
$146.5 million
, compared to
$109.8 million
in 2008. Insurance premium income for this period was
$2,027.3 million
, up 2.0%, while insurance sales totalled
$159.9 million
. Sales also grew in retirement savings, attaining
$1,260.3 million
as compared to
$844.8 million
for the same period of 2008. It is worth noting that DFS continues to have excellent financial strength and a superb capitalization.
In group insurance, the volume of gross premiums from groups and companies and those related to the plans provided through financial institutions, including Desjardins caisses, stood at
$1,650.5 million
, up
$26.6 million
from the results for the same period of 2008. Sales totalled
$126.7 million
.
In personal insurance, the volume of gross premiums was
$376.8 million
. Sales totalled
$33.2 million
.
In savings, aggregate sales stood at
$1,260.3 million
. In personal savings, sales totalled
$725.4 million
, or three times the amount recorded for the same period of 2008, while sales of group retirement savings were
$309.4 million
. Sales of mutual funds totalled
$225.5 million
.
Lastly, assets under management and under administration were
$21.9 billion
.
General Insurance
Desjardins General Insurance Group (DGIG) contributed
$32 million
to the Group's results for the third quarter of 2009 compared to
$25 million
for the same period of 2008.
The loss experience in automobile insurance was comparable to the same quarter of 2008, but all subsidiaries reported more home insurance claims as a result of bad weather conditions in July.
Premium income grew at all the DGIG brands. The 3.3% increase in gross premiums written, from
$362.2 million
in the third quarter of 2008 to
$374.2 million
for the same period of 2009, was primarily due to growth in home insurance premiums. Investment income stood at
$26.4 million
for the quarter, compared to
$6.6 million
for the third quarter of 2008.
The combined contribution to the Group's results at the end of the first nine months of 2009 was
$67 million
, as compared to
$38 million
for the same period of 2008. DGIG's return on equity was 17.1%, compared to 11.7% on the same date one year earlier. This performance was primarily due to a favourable claims experience in automobile insurance and improved results in home insurance. Favourable climatic conditions in the first six months of 2009 and less frequent automobile claims in Québec continued to have a positive impact on claims ratios.
The improved return was also explained by greater investment income. Investment income since the start of 2009 stood at
$68.9 million
, compared to
$43.0 million
for 2008. This year, lower interest rates and narrower credit spreads resulted in higher bond values, and the portfolio reorganization conducted in the first quarter led to gains on bond dispositions.
The operating expense ratio was slightly higher than last year but continues to compare favourably with the industry as a whole.
DGIG's capitalization exceeds regulatory requirements by a wide margin, since the profits realized in 2009 and the significant increase in the value of equity investments have expanded equity.
Securities Brokerage, Asset Management and Venture Capital
The Securities Brokerage, Asset Management and Venture Capital segment
primarily encompasses the operations of Desjardins Securities, Desjardins
Asset Management and Desjardins Venture Capital.
This segment posted net earnings of
$13 million
in the third quarter of 2009 compared to a net loss of
$7 million
in the same quarter of 2008, bringing cumulative net income to
$23 million
for the first nine months of 2009 compared to a net loss of
$10 million
one year earlier. This improved financial performance was fostered by a gradual recovery in the markets, which had a favourable impact on securities and venture capital activities. It is nevertheless worth noting that the financial results for asset management activities declined, since in 2008 the damage produced by the financial crisis provoked a disinvestment program in the underlying investments for structured products. The full impact of this program was felt in 2009.
Other
Since the first quarter of 2009, the "Other" segment has included the
results of companies that were specifically created to hold the ABCPs
repurchased by Desjardins Group and previously included in the Personal
and Commercial segment. It should also be recalled that since the second
quarter of 2009, all ABCP securities held by Desjardins Group are
reported by this segment following their sale into newly created
entities.
This segment posted
$8 million
in net income for the third quarter of 2009 compared to an
$86 million
net loss for the same quarter of 2008. This increase was due in part to a positive change in the fair value of the portfolio of restructured ABCP notes.
The Other segment posted a net loss of
$21 million
for the first nine months of 2009 compared to a net loss of
$220 million
for the same period one year earlier. These results were, above all, the result of a change in the fair value of the ABCP restructured notes portfolio and the write-off of an ABCP security excluded from the moratorium of the
Montreal
Accord.
In addition, the combined results of Desjardins Group take into account various consolidation adjustments not reflected in the results of the business segments, including the adjustment related to the Group's employee future benefits expense, which rose
$3 million
after taxes compared to the first nine months of 2008. This adjustment resulted primarily from the updating of certain actuarial assumptions.
Relying on the strength of its cooperative difference, its network of subsidiaries and its financial equilibrium, Desjardins Group seeks to become the leading financial institution in terms of meeting the needs of members and clients and fostering business development through an accessible, effective and comprehensive service offering. Desjardins Group's mission is to contribute to the economic and social well-being of both individuals and communities. Please visit Desjardins Group's Web site at: www.desjardins.com.
For further information: (for journalists only): André Chapleau, Director, Media Relations, Desjardins Group, (514) 281-7229, 1-866-866-7000, ext. 7229, [email protected]; Raymond Laurin, Senior Vice-President, Finance, Treasury and Chief Financial Officer, Desjardins Group
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