Desjardins Group in 2014 - Solid growth, committed cooperative Français

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Desjardins Group

Feb 25, 2015, 08:31 ET

Highlights for the year

  • Surplus earnings of $1,593 million, up 4.1 %
  • Operating income up 5.9%
  • Total assets of $229.4 billion, an increase of $17.4 billion
  • Tier 1a capital ratio of 15.7%
  • Outstanding residential mortgages increased by $6.1 billion
  • Member deposits up 7.0% to $146.3 billion
  • Assets under management and under administration up $36.5 billion, to $370.8 billion
  • New capital shares issuance by the Federation totals $986 million
  • Closing on January 1, 2015 of the acquisition of State Farm's Canadian activities

Desjardins, a cooperative group active in the community and close to its members and clients:

Annual results

LÉVIS, QC, Feb. 25, 2015 /CNW Telbec/ - Desjardins Group, Canada's largest cooperative financial group posted $12,654 million in operating income, an increase of close to 6% over the previous year. Surplus earnings before member dividends total $1,593 million, up 4.1%, compared to the $1,530 million recorded in 2013.

"These results are compelling evidence of our ability to stand out in a rapidly changing industry in which competition is becoming increasingly fierce," said Desjardins Group Chair of the Board, President and CEO Monique F. Leroux. "I would like to thank the Desjardins members and clients who place their trust in us, year after year. My thanks also to our elected officers and all our employees, whose efforts are paying off and will allow us to realize our goal of being a leader in our industry in terms of quality of service."

Major investments made to acquire the Canadian activities of State Farm, the completion of key strategic projects and the increase of average equity through the recent issues of Federation capital shares had an impact on return on equity, which was 8.7% at the end of fiscal 2014, compared to 9.4% one year earlier.

Total loan portfolio grew $9.9 billion or 7.1%, producing $3,976 million in net interest income, up $119 million or 3.1% compared to $3,857 million for the same period of 2013. This increase was nevertheless restrained by strong competition in the market, which placed pressure on interest margins.

Business growth related to insurance activities generated a $358 million or 6.4% increase in net premiums, which reached $5,916 million.

Other operating income totalled $2,762 million, up $226 million or 8.9% from 2013. This was partly due to an increase in assets under management, acquired through strong sales of various products, increased brokerage income and growth in credit card activities and point-of-sale financing.

Total income — which is made up of net interest income, net premiums, other operating income and investment income — stood at $15,235 million, up $3,501 million or 29.8% from one year earlier.

The provision for credit losses totalled $351 million, up $74 million or 26.7% from 2013. This increase is mainly due to the evolution of Desjardins Group's risk profile and the collective allowance related to growth of the loan portfolio and off-balance sheet commitments.  Desjardins Group's loan portfolio continues to be of very high quality. The ratio of gross impaired loans, as a percentage of the total gross loan portfolio, was 0.34% as at December 31, 2014, up slightly from 0.33% for the corresponding period of 2013.

Expenses incurred to acquire and integrate the Canadian activities of State Farm, the completion of strategic projects, annual salary indexing and business growth totalled $6,554 million. This represents an increase of $325 million or 5.2% compared to $6,229 million in 2013. Significant efforts made to improve productivity in the caisse network and in other Desjardins Group components provided a partial offset and contributed to limiting this expenses increase.

Assets of $229.4 billion, up $17.4 billion

As at December 31, 2014, Desjardins Group had total assets of $229.4 billion, up $17.4 billion or 8.2% for the year, compared to annual growth of $15.2 billion or 7.7% recorded one year earlier. This growth was primarily due to a $9.9 billion or 7.1% increase in net loans. Deposits increased $9.6 million or 7.0%.

A strong capital base

Desjardins Group maintains a strong capitalization in compliance with Basel III rules. Tier 1a and total capital ratios were 15.7% and 17.9% respectively as at December 31, 2014, compared to 15.7% and 18.4% one year earlier.

Quarterly results

Desjardins Group activities continued to grow over the fourth quarter of 2014, resulting in $3,225 million in operating income, an increase of 2.1%.

This performance is primarily attributable to growth in credit and asset management activities, which enabled Desjardins to post $354 million in surplus earnings before member dividends, an amount comparable to that of the fourth quarter of 2013. This result also factors in sizable investments in various Desjardins-wide strategic projects for member service delivery, among others.

Segment results

Personal Services and Business and Institutional Services

For fiscal 2014, surplus earnings before member dividends from the Personal Services and Business and Institutional Services segment were $888 million, up $79 million or 9.8% from fiscal 2013. This was primarily due to business growth, in particular in credit activities, in proprietary product sales in the caisse network; and to increased capital market activities. All these items, combined with enhanced productivity efforts in the caisse network, increased surplus earnings.

For the fourth quarter of 2014, the segment's surplus earnings before member dividends were $251 million, up $50 million or 24.9%, compared to the same period of 2013.

Wealth Management and Life and Health Insurance

As at December 31, 2014, net surplus earnings generated by the Wealth Management and Life and Health Insurance segment were $411 million, up $22 million or 5.7% from fiscal 2013. This increase was in part attributable to the return on investments, but this was partially offset by life and health insurance operations, which posted a more limited claims experience in 2014.

At the end of the fourth quarter of 2014, the segment's net surplus earnings stood at $94 million, up $17 million or 22.1% from the same period of 2013.

Property and Casualty Insurance

For 2014, net surplus earnings from the Property and Casualty Insurance segment, excluding the costs incurred to acquire the Canadian activities of State Farm, were $227 million up 2.7% from fiscal 2013, mainly due to business growth.

The segment's net surplus earnings for the fourth quarter of 2014, excluding the costs incurred to acquire the Canadian activities of State Farm, were $46 million, down $51 million or 52.6% compared to the same quarter in 2013. This decline was primarily due to a less favourable loss ratio than for the corresponding period in 2013, as well as lower investment income.

Other

Net surplus earnings of the Other segment totaled $114 million compared to $120 million in 2013.

This category posted a $22 million deficit for the fourth quarter, comparable to the $17 million deficit in 2013.

Key Financial Data

FINANCIAL POSITION AND KEY RATIOS

(in millions of $ and as a %)

As at December 31,

2014

As at December 31,

2013

Assets

$229,387

$212,005

Residential mortgage loans

$ 97,512

$ 91,389

Consumer, credit card and other personal loans

$ 20,495

$ 19,549

Business and government loans

$ 32,903

$ 30,013

Total gross loans

$150,910

$140,951

Equity

$ 18,893

$ 17,232

Tier 1a capital ratio

15.7

%

15.7

%

Tier 1 capital ratio

15.8

%

15.7

%

Total capital ratio

17.9

%

18.4

%

Gross impaired loans / gross loans ratio

0.34

%

0.33

%

COMBINED INCOME

For the three-month periods

ended December 31

For the years

 ended December 31

(in millions of $ and as a %)

2014

2013

Change

2014

2013

Change

Operating income

$3,225

$3,159

2.1

%

$12,654

$11,951

5.9

%

Surplus earnings before member dividends

$   354

$   351

0.1

%

$  1,593

$ 1,530

4.1

%

Return on equity

7.2

%

8.6

%

―

8.7

%

9.4

%

―

CONTRIBUTION TO COMBINED SURPLUS EARNINGS

BY BUSINESS SEGMENT

For the three-month periods

 ended December 31

For the years

 ended December 31

(in millions of $ and as a %)

2014

2013

Change

2014

2013

Change

Personal Services and Business and Institutional Services

$251

$201

24.9

%

$888

$809

9.8

%

Wealth Management and Life and Health Insurance

94

77

22.1

411

389

5.7

Property and Casualty Insurance

31

90

(65.6)

180

212

(15.1)

Other

(22)

(17)

(29.4)

114

120

(0.5)

$ 354

$ 351

0.1

%

$ 1,593

$ 1,530

4.1

%

CREDIT RATINGS OF SECURITIES ISSUED

DBRS

STANDARD &
POOR'S

MOODY'S

FITCH

Caisse centrale Desjardins




Short-term

R-1 (high)

A-1

P-1

F1+

Medium and long-term, senior

AA

A+

Aa2

AA-

Capital Desjardins inc.




Medium and long-term, senior

AA (low)

A

A2

A+

More detailed information will be available in Desjardins Group's 2014 annual Management's Discussion and Analysis, which will be available March 13, 2015 on the SEDAR site under the Capital Desjardins inc. profile.

About Desjardins Group

Desjardins Group is the leading cooperative financial group in Canada and the fifth largest cooperative financial group in the world with assets of more than $229 billion. It has been rated one of Canada's top 100 employers by Mediacorp Canada. To meet the diverse needs of its members and clients, Desjardins offers a full range of products and services to individuals and businesses through its extensive distribution network, online platforms and subsidiaries across Canada. The group has one of the highest capital ratios and credit ratings in the industry. In 2014, Desjardins was named the fourth safest bank in North America by Global Finance magazine and the second strongest bank in the world by Bloomberg News.

Caution concerning forward-looking statements

Certain statements made in this press release may be forward-looking. By their very nature, forward-looking statements involve assumptions, uncertainties and inherent risks, both general and specific. It is therefore possible that, due to a number of factors, the predictions, projections or other forward-looking statements as well as Desjardins Group's objectives and priorities may not materialize or may prove to be inaccurate and that actual results differ materially. Various factors that are beyond Desjardins Group's control, and therefore whose impacts on the Group are difficult to predict, could influence the accuracy of the forward-looking statements in this press release. Although Desjardins Group believes that the expectations expressed in these forward-looking statements are reasonable, it can give no assurance or guarantee that these expectations will prove to be correct. Desjardins Group cautions readers against placing undue reliance on forward-looking statements when making decisions. Desjardins Group does not undertake to update any written or verbal forward-looking statements that could be made from time to time by or on behalf of Desjardins Group, except as required under applicable securities.

SOURCE Desjardins Group

(for journalists only): André Chapleau, Public Relations, 514 281-7229 or 1 866 866-7000, extension 5557229, [email protected]; Daniel Dupuis, CPA, CA, Senior Vice-President - Finance and Chief Financial Officer

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