Desjardins Group surplus earnings increase a historic 34% or $1,437 million for 2010

Desjardins Group's caisse network and business sectors experienced strong growth.
Its capitalization ratio among the best in the industry.
Desjardins won national and international recognitions for its cooperative
and financial performance.

LÉVIS, QC, Feb. 25 /CNW Telbec/ -


Financial highlights

  • Total income of $11.7 billion, up by close to 10% at the end of fiscal 2010
  • Strong balance sheet supported by a capitalization of over $13 billion, up 15.1% since December 31, 2009
  • Total capital funding of $2.1 billion: $1.6 billion from Canadian institutional investors and $0.5 million from members
  • Tier 1 capital ratio of 17.7%
  • Assets of over $172 billion, up 9.4% from one year earlier
  • Quality loan portfolio, with a gross impaired loans ratio of 0.44%, one of the best in the Canadian banking industry
  • Deposit growth of $6.8 billion, evidence of a dynamic caisse network
  • Named "Bank of the Year 2010" in Canada by The Banker, a London-based British magazine
  • Winner in the social responsibility category of the Prix québécois de l'entreprise citoyenne - Québec corporate citizenship award, presented by L'actualité magazine and Korn Ferry/International
  • One of the Canada's 10 Most Admired Corporate Cultures of 2010 ProgramTM
  • 7th place among the 50 Best Corporate Citizens in Canada, as awarded by Corporate Knights' Magazine
  • Take-over bid on the shares in Western Financial Group aimed at continuing Desjardins Group's business development in the rest of Canada
  • Successful launch of Desjardins mobile services, with close to 3 million transactions in the first 3 months

Key financial data

RESULTS
  For the year
ended December 31
For the quarter
ended December 31
(Unaudited,
in millions of $ and as a %)
2010 2009* Change    2010 2009* Change
Total income $11,685   $10,670   9.5%   $2,669   $2,583    3.3%  
Combined surplus earnings before    
member dividends
$1,437   $1,074   33.8%   $181   $267   (32.2%)  
Return on equity 11.6%   10.2%   ---   5.5%   9.5%   ---  

BALANCE SHEET AND RATIOS
In millions of $ and as a % As at December 31, 2010 As at December 31, 2009*
Assets $172,275   $157,442  
Equity $13,063   $11,346  
Tier 1 capital ratio 17.7%   15.8%  
Total capital ratio 18.7%   15.8%  
Gross impaired loans ratio                              0.44%   0.46%  

* 2009 figures have been restated

For the fiscal year ended December 31, 2010, Desjardins Group, the largest cooperative financial group in Canada, announces surplus earnings before member dividends of $1,437 million, an increase of $363 million or 33.8% from the previous year. Return on equity was 11.6%, compared to 10.2% for 2009. 

"We owe these exceptional results to our dynamic caisse network and all our business sectors," said Ms. Monique F. Leroux, Chair of the Board, President and CEO. "These results clearly demonstrate the relevance of the cooperative financial model. Now more than ever, Desjardins Group is viewed as an industry leader, here in Canada and around the world. This is particularly true given the recent accolades that we received this past year. I would like to thank our members and clients for the trust they have shown us. I would also like to thank our 6,000 elected officers and 42,000 employees for their ongoing commitment that contributed to our success. In conclusion, this success was achieved by remaining a solid and effective cooperative financial group at work for the benefit of its members and communities. Through these efforts, we're building a foundation of sustainable prosperity from which future generations will benefit."

Total income was $11,685 million, up $1,015 million or 9.5% compared to the previous year. Net interest income was $3,886 million, a $364 million or 10.3% increase over 2010, mainly due to the strong performance by the caisses in the mortgage and business loan markets. More specifically, there was substantial growth in outstanding mortgages to individuals, which were up $5.2 billion at the end of 2010. This was due to strong momentum in housing starts and the resale market, an average selling price for houses and a rate environment that continued to favour buyers. In addition, consumer spending boosted credit card and point-of-sale financing activities, which further enhanced net interest income. Despite strong competition in the insurance industry, net premiums, which consist of life and health insurance and property and casualty insurance premiums as well as annuity premiums, rose $121 million or 2.8%, to $4,368 million as at December 31, 2010.

Other income stood at $3,431 million, up $530 million or 18.3%. This increase was due to transaction income and income from available-for-sale securities and brokerage, investment fund and trust services. This increase was largely offset by higher actuarial liabilities related to life and health insurance activities.

Non-interest expense grew $254 million or 4.9% from fiscal 2009, to $5,403 million as at December 31, 2010. This increase was mainly due to higher salaries and fringe benefits, partly as a result of the annual indexing of salaries and expenses related to pension plans.

Expenses related to claims, benefits, annuities and changes in insurance provisions totalled $4,168 million in 2010, up $410 million or 10.9% from 2009. A large part of this increase was due to actuarial liabilities related to life and health insurance activities, which were higher because of an increase in the fair value of matched investments.

Desjardins Group's productivity ratio improved by 2.6 points in 2010, from 71.9% for 2010 compared to 74.5% for the previous year as a result of income growth and ongoing Group-wide efforts to improve productivity. The Group's productivity index is calculated as non-interest expense to total income, net of expenses related to claims, benefits and annuities, and changes in insurance provisions.

Desjardins Group's approach allows it to distribute surplus earnings and achieve a healthy balance between development, capitalization and sustainability. At the end of fiscal 2010, in a context of prudent management that has accounted for the impact of new accounting standards (International Financial Reporting Standards, or IFRS) on the capital ratios of financial institutions, the provision for member dividends, which is calculated on the basis of the surplus earnings of the caisse network, was $305 million, compared to $282 million distributed in 2009. In addition, an amount of $80 million was returned to the community in the form of sponsorships, donations and bursaries. In all, member dividends and contributions to the community totalled $385 million.

Quality loan portfolio

The quality of Desjardins Group's loan portfolio remains excellent. At the end of fiscal 2010, provisions for credit losses had declined $63 million from one year earlier, to $197 million.

Gross impaired loans outstanding stood at $512 million, up $3 million since December 31, 2009.  The ratio of gross impaired loans to the total gross loan portfolio was 0.44% at the end of 2010, or approximately the same as in 2009. Desjardins Group continues to have one of the best ratios in the Canadian banking industry.

Assets over $172 billion, up 9.4%

Desjardins Group had $172.3 billion in total assets at the end of 2010, up $14.8 billion or 9.4% from $157.4 billion recorded one year earlier. This increase was essentially due to increases in residential mortgages outstanding and the value of the Group's securities portfolio.

Deposits grow $6.billion

As at December 31, 2010, Desjardins Group's outstanding deposits had grown $6.8 billion or 6.4% over the year, to $112.9 billion. This compares to a growth of $4.7 billion or 4.7% recorded in 2009.

Personal savings, which is the main source of financing, grew 4.4% or $3.3 billion, to $78.8 billion. At the end of fiscal 2010, personal savings represented 69.7% of the total savings portfolio.

Desjardins Group was also very active in savings recruitment from business and government. As at December 31, 2010, outstanding deposits by businesses and governments stood at $23.4 billion, up 7.1% or $1.5 billion since December 31, 2009.

Savings from deposit-taking institutions and other sources, such as securities issued on capital markets, grew 21.5% or $1.9 billion during the same period, to $10.8 billion.

Sustained growth in off-balance sheet savings in 2010

Despite a few turbulent periods in 2010 due to concerns over the strength of the global economic recovery and the debt problems of some European countries, the Canadian stock market experienced strong growth. The S&P/TSX index of the Toronto stock exchange rose 14.4% for the year, compared to the 30.7% jump recorded in 2009.

This was a good environment for sales of off-balance sheet savings products, such as investment funds and other securities, which recaptured the interest of investors. Desjardins Group was very active in this area; outstanding assets administered or managed for members and clients grew $6.1 billion, or 14.4% for the year, to $48.5 billion. This compares with a $8.6 billion or 27.2% jump recorded at the end of fiscal 2009.

A strong capital base

Desjardins Group's Tier 1 capital ratio, determined under the regulatory framework of Basel II, was 17.7% as at December 31, 2010, compared to 15.8% as at December 31, 2009. This was above the Group's capitalization target of 15.0% and remains one of the best ratios in the industry. The total capital ratio was 18.7%, compared to 15.8% as at December 31, 2009. 

Funding and capital supply 

In fiscal 2010, Caisse centrale Desjardins (CCD) launched several issues of debt securities in different markets in order to achieve even better diversification of the Group's sources of financing and further extend the average term.

Caisse centrale Desjardins floated three issues on the Canadian market - one in February, one in June and one in October - for $400 million, $500 million and $600 million, respectively. As in previous years, CCD also floated an issue in the European market, for an amount of $1.7 billion. Finally, on September 8, 2010, it successfully floated an issue of fixed-rate, medium-term deposit notes in the United States for $1 billion. This made Desjardins Group the first Canadian cooperative financial institution to issue senior debt on the U.S. market.

Furthermore, Capital Desjardins inc. launched two issues of senior notes in May and November 2010 worth $900 million and $700 million, respectively.

Finally, caisse members also participated in the capitalization of their financial cooperative by purchasing $506 million worth of permanent shares in 2010.

Senior management appointments

In the interest of fully realizing the potential of the new structure implemented almost two years ago, continuing to pursue Desjardins Group's strategic and cooperative development, and strengthening its market position, Ms. Monique F. Leroux, Chair of the Board, President and CEO, has made some changes and appointments to several senior management positions.

Ms. Leroux wants to focus more on the promotion of cooperation within the Group and communities, organizational strategy and development, governance and the engagement of the Group's elected officers and employees. To this end, Marc Laplante, the current Senior Executive Vice-President, Strategy, Performance and Development for Desjardins Group, will take on an expanded role and responsibilities, becoming Senior Executive Vice-President for both the Group and the Fédération. He will manage operational files for the Group and the Fédération. He will also coordinate the Group's main strategic and organization-wide projects, as well as Desjardins Group's various senior management support committees.

Réal Bellemare, currently Vice-President, Corporate Banking and Capital Market Risk and Special Assignments, has been promoted to the position of Executive Vice-President, Risk Management, and will report to Mr. Laplante. An MBA graduate of HEC Montréal, Mr. Bellemare has many years of risk management experience. He will sit on Desjardins Group's Senior Management Committee.

Ms. Leroux also announced the appointment of Louis-Daniel Gauvin, currently Senior Vice-President and Chief Risk Officer, to the position of Senior Vice-President and General Manager, Caisse centrale Desjardins (CCD) and Capital Desjardins Inc. Mr. Gauvin will be responsible for investor relations at a time when the Group plans to grow its presence in national and international financial markets. He will also be responsible for the Group's compliance activities and regulatory relations. Mr. Gauvin will continue to sit on Desjardins Group's Management Committee.

Finally, Ms. Leroux announced the retirement of Bruno Morin, General Manager of CCD and Capital Desjardins Inc., and expressed her appreciation for his contributions to the success of the Group and CCD. Mr. Morin will continue as General Manager of Capital régional et coopérative Desjardins (CRCD) and will remain on the boards of some of the Group's components.

These appointments take effect on February 25, 2011. 

Results by business segment

Personal Services and Business and Institutional Services

The Personal Services and Business and Institutional Services segment offers the members and clients of Desjardins Group a broad range of standard financial services and products that are mainly distributed by the caisse network. Its products are also available through complementary networks.

For fiscal 2010, surplus earnings before member dividends attributable to the Personal Services and Business and Institutional Services segment were $840 million, up 32.9% or $208 million compared to 2009.

The segment reported total income of $5.4 billion, up $466 million or 9.4%. These results include a $486 million or 15.3% increase in net interest income. The dynamic caisse network made a major contribution to this increase through greater mortgage and business loans outstanding. More specifically, by the end of 2010 residential mortgage loans outstanding had grown by a substantial $5.3 billion. This performance takes into account strong growth in housing starts, the resale market and the average selling price for properties, all in an interest rate environment that continued to favour buyers. In addition, consumer spending boosted credit card and point-of-sale financing activities, which further enhanced net interest income.

Investment income for fiscal 2010 totalled $109 million, or $64 million less than in 2009, which was an exceptional year for investments.

Other income grew $44 million, or 2.7%, compared to fiscal 2009. This increase was mainly due to growth in activities that generated additional service charges and lending fees and credit card service revenues.

As a result of proactive management of the loan portfolio and credit card and point-of-sale financing activities, provisions for credit losses declined $61 million or 23.6% compared to 2009.

Non-interest expense grew $263 million or 6.9%. This was mainly due to higher salaries and fringe benefits due to the annual indexation of salaries and expenses related to pension plans.

Wealth Management and Life and Health Insurance

The Wealth Management and Life and Health Insurance segment offers the members and clients of Desjardins Group a range of advisory services and products tailored to individuals' changing needs for asset management and financial security. These products are distributed by the caisse network and through complementary networks.

This segment posted $279 million in surplus earnings before member dividends for 2010, 18.7% more than the $235 million reported for the previous year. This growth was mainly the result of strong business in insurance and annuities and increased assets under management.

Total income for the segment stood at $4,958 million, up $532 million or 12.0%, compared to 2009. This growth came mainly from a $347 million increase in transaction income, most of which was offset by a change in actuarial liabilities, which appear under the heading Claims, benefits, annuities and changes in insurance provisions. Furthermore, a $124 million increase was recorded in income from fees earned on asset management, the distribution of savings products, brokerage services and private management.

Total sales of personal insurance, in particular by financial security advisors assigned to Desjardins caisses, the SFL network and Desjardins Financial Security Independent Network financial centres, were $55 million for the year. This was 12.2% more than the $49 million reported for 2009.

Premium volume for personal insurance was $467 million, up $30 million compared to 2009. Premium volume generated by the network of financial security advisors assigned to Desjardins caisses grew 15.8% in 2010. Due to remarkable sales growth over the last few years in the different distribution networks, premiums cashed increased by 3.4% or $12.1 million from fiscal 2009. In addition, premiums for products distributed without a representative totalled $76 million, representing an increase of $10 million from 2009.

Sales of group retirement savings reached $372 million and sales of individual savings stood at $959 million. Sales of mutual funds totalled $477 million, up 51.7% compared to 2009.

Expenditures associated with expenses related to claims, benefits, annuities and changes in insurance provisions increased by $346 million, primarily due to higher actuarial liabilities as a result of an increase in the fair value of matched investments.

Non-interest expense grew $139 million, or 10.3%. This increase was mainly due to growth in commissions on sales of savings products, in remuneration paid to caisses, and in salaries and fringe benefits.

Property and Casualty Insurance

The Property and Casualty Insurance segment offers the members and clients of Desjardins Group a range of auto and home insurance products for individuals and businesses. In addition to being sold through the caisse network, these products are distributed by many call centres, over the Internet and, for some, through an intelligent telephone service.

The Property and Casualty Insurance segment's surplus earnings before member dividends were $103 million for 2010, up $9 million or 9.6% from the previous year. This growth, which was due to increased net premiums and other income, was partly offset by a greater auto loss ratio related to injury claims in Ontario.

Total income for the segment was $1,606 million, up $97 million or 6.4% from fiscal 2009 due to growth in premiums and other income. The increase in other income resulted from gains realized in the portfolio of fixed income securities and stock market performance. 

The greater number of policies resulted in a $147 million or 9.8% increase in gross premiums written compared to 2009. The caisse network contributed $26 million to this growth. In the individual insurance market, the increase stemmed from successful growth initiatives in the Greater Montreal area and in Ontario as well as from the private label partnership signed in 2009 with a Canadian financial institution.

In group insurance, adding new partners and renewing existing agreements allowed the segment to post a 6.9% growth. In commercial lines, gross premiums written in Québec grew 10.5% compared to fiscal 2009.

The combined ratio, which corresponds to claims and operating expenses divided by net premiums earned, stood at 94.7%, up 0.3 point over 2009. 

The winter of 2010 was characterized by particularly mild weather, which led to few claims in the first six months of 2010 in both property and auto insurance. However, the auto claims experience in Ontario related to personal injuries (particularly in the Greater Toronto area) deteriorated in the second half of 2010, leading to a significant increase in provisions for claims.

The increase in non-interest expense was due to a higher salaries expense, the result of having more employees and advertising. These initiatives that were undertaken to support business growth.

Other

The "Other" heading consists mainly of treasury activities related to the operations of Caisse centrale Desjardins. The segment is also responsible for all ABTN securities held by Desjardins Group, and records consolidation adjustments for all the components of Desjardins Group.

Combined surplus earnings under the "Other" heading stood at $215 million for 2010, up $102 million or 90.3% from fiscal 2009. This increase was due in part to a net positive change of $64 million in all items related to the restructured term notes (ABTN) portfolio, including the implementation of hedges, as well as the change in the fair value of derivatives and the application of hedge accounting, up $41 million after income taxes compared to the previous year.

As at December 31, 2010, treasury activities had contributed $88 million to net surplus earnings, $20 million less than for fiscal 2009 when market conditions were particularly favourable.

Finally, Desjardins Group's combined results included consolidation adjustments such as the adjustment to employee future benefits, which declined $12 million from 2009. 

2010 Fourth Quarter Results

For the fourth quarter ended December 31, 2010, Desjardins Group recorded surplus earnings before member dividends of $181 million. This was $267 million or 32.2% less than the surplus earnings recorded for the same quarter of 2009. The decline was due in part to a $142 million increase in claims, benefits, annuities and changes in insurance provisions, write-offs of certain assets and an increase in provisions related to agreements with suppliers and the investment portfolio.

The return on equity for the quarter was 5.5%, compared with 9.5% for the fourth quarter of 2009.  The Tier 1 capital ratio was 17.7%, compared to 15.8% one year earlier.

Non-interest expense grew $75 million, or 5.3%, largely due to adjustments related to salaries and fringe benefits.

Rise of total income

Desjardins Group's total income for the fourth quarter was $2,669 million, up $86 million or 3.3% compared to the same quarter of 2009. Net interest income grew $38 million or 4.0% compared to the same quarter of 2009, to $979 million. This growth stemmed mainly from increased personal loans outstanding and the credit card and point-of-sale financing activities of the Personal Services and Business and Institutional Services segment.

Other income for the fourth quarter declined $53 million or 9.5%, to $507 million. This compares to $560 million for the same period of 2009, which was particularly favourable. This difference was also due to less transaction income.

Moderate growth in non-interest expense

Non-interest expense for the fourth quarter of 2010 totalled $1,499 million, up $75 million or 5.3% from the same period of last year, mainly due to increased salaries and fringe benefits as a result of the annual indexing of salaries. Provisions for credit losses for the fourth quarter of 2010 were $41 million or $16 million less than for the same period of last year. This was mainly due to a good return on the credit portfolio of Desjardins Card Services, improved portfolio quality and shorter terms on the business loans made by Caisse centrale Desjardins. As mentioned above, expenses related to claims, benefits, annuities and changes in insurance provisions totalled $915 million, up $142 million or 18.4% from the same quarter of 2009.

Results by business segment

Personal Services and Business and Institutional Services

The Personal Services and Business and Institutional Services segment ended the fourth quarter of 2010 with $152 million in surplus earnings before member dividends. This represents an 11.1% or $19 million decline from the same period of last year. The difference stemmed mainly from the fact that transaction income and income from available-for-sale securities was higher in the fourth quarter of 2009 than it was in the same period of 2010. 

The segment's total income for the fourth quarter of 2010 was $1,366 million, up 4.4% or $57 million from the same period of 2009. Other income declined 4.4% or $19 million compared to the same quarter of 2009.

Wealth Management and Life and Health Insurance

For the fourth quarter of 2010, the Wealth Management and Life and Health Insurance segment posted $43 million in surplus earnings before member dividends, a $15 million or 25.9% decline from the same period of 2009. The difference was largely due to the reversal of a temporary gain resulting from the management of interest rate risk in the market-linked temporary investments (MLTI) program in a net amount of $10.6 million.

The segment's total income was $1,026 million, up $59 million or 6.1% from the same period of 2009. This increase was mainly due to activities related to life and health insurance, where net premiums increased $67 million.

Property and Casualty Insurance

In the fourth quarter of 2010, the Property and Casualty Insurance segment contributed $10 million to Desjardins Group's combined surplus earnings. This was $17 million less than its contribution for the same period of 2009.

Other

The Other heading posted a $24 million deficit before member dividends for the fourth quarter, a $35 million decline from the same quarter of 2009. This was due to write-offs of certain assets, an increase in provisions related to agreements with suppliers and the investment portfolio and the adjustment to the pension cost.

Desjardins Group, the leading cooperative financial group in Canada, inspires trust around the world through the commitment of its people, its financial strength and its contribution to sustainable prosperity. Desjardins Group's mission is to contribute to the improved economic and social well-being of people and communities. For more information, visit www.desjardins.com.

 

SOURCE DESJARDINS GROUP

For further information:

(for journalists only):

André Chapleau  
Director, Media Relations
Desjardins Group
514-281-7229 - 1-866-866-7000, ext. 7229      
andre.chapleau@desjardins.com  
Raymond Laurin
Senior Vice-President, Finance and Treasury
and Chief Financial Officer
Desjardins Group

Profil de l'entreprise

DESJARDINS GROUP

Renseignements sur cet organisme


FORFAITS PERSONNALISÉS

Jetez un coup d’œil sur nos forfaits personnalisés ou créez le vôtre selon vos besoins de communication particuliers.

Commencez dès aujourd'hui .

ADHÉSION À CNW

Remplissez un formulaire d'adhésion à CNW ou communiquez avec nous au 1-877-269-7890.

RENSEIGNEZ-VOUS SUR LES SERVICES DE CNW

Demandez plus d'informations sur les produits et services de CNW ou communiquez avec nous au 1‑877-269-7890.