Desjardins Group Announces Surplus Earnings of $117 Million for the First Quarter of 2009



    LEVIS, QC, May 15 /CNW Telbec/ -

    
    Financial highlights

    - Surplus earnings before member dividends of $117 million for the first
      three months of 2009 compared to $67 million in the same period of
      2008.
    - Strong balance sheet with over $10 billion in capitalization and a
      quality loan portfolio.
    - Rigorous management of operating expenses.
    - Tier 1 capital ratio still among the best in the industry.
    - Assets grew 6.7% to $159.7 billion.
    - Strong growth in financing activities, which expanded over 8%.
    - Issuance of $500 million of subordinated debt through Capital
      Desjardins and (euro)500 million of medium-term notes on European
      markets of Caisse centrale Desjardins.
    - Confirmation of credit ratings by the three rating agencies (Moody's,
      DBRS and Standard & Poor's).

    Main financial data:

    -------------------------------------------------------------------------
                                               For the three months
                                                  ended March 31
                                   ------------------------------------------
                                     2009             2008           Change
    -------------------------------------------------------------------------
    Surplus earnings before
     member dividends                $117 million      $67 million     74.6%
    -------------------------------------------------------------------------
    Return on equity                  4.8%             2.9%            ----
    -------------------------------------------------------------------------
    Assets                         $159.7 billion   $149.8 billion      6.7%
    -------------------------------------------------------------------------
    Equity                          $10.1 billion     $9.4 billion      6.9%
    -------------------------------------------------------------------------
    Tier 1 capital ratio ((*))      13.67%           14.04%            ----
    -------------------------------------------------------------------------
    Growth in total loans             8.7%             8.5%            ----
    -------------------------------------------------------------------------
    Growth in total deposits          5.5%             8.5%            ----
    -------------------------------------------------------------------------
    ((*)): 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 first quarter results

    For the first three months of 2009, Desjardins Group, the largest
cooperative financial group in Canada, announced surplus earnings before
member dividends of $117 million, up $50 million compared to the first quarter
of 2008. Return on equity was 4.8%, compared to 2.9% on a year-over-year
basis.
    Despite strong business volume growth - particularly in the Group's
financing activities - and tight control over operating expenses, results for
the first quarter of 2009 were affected by a decline 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) totalling $88 million,
while a $220 million write-down was recorded in the first quarter of 2008.
    "Even though the effects of the current economic environment have led us
to adopt an even more rigorous approach to managing our activities and costs,"
says Monique F. Leroux, Chair of the Board, President and Chief Executive
Officer of Desjardins Group, "the Group posts good balance sheet growth, has a
quality loan portfolio, and can count on capitalization of over $10 billion.
This allows us to face the situation with confidence."
    In terms of income and due to lower interest rates, net interest income
for the first quarter of 2009 was $795 million, down $14 million or 1.7%
year-over-year. Net premiums grew $10 million or 1.0% as a result of good
growth in insurance premiums, particularly in the life and health insurance
subsidiary.
    Other income was affected by a decline 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. As for income from brokerage,
investment fund and trust services, they were also affected by uncertainty in
the markets and fell $43 million or 25.7%.
    Overall, Desjardins Group's total income stands at $2,245 million for the
first quarter of 2009, up $63 million or 2.9% on a year-over-year basis.
    Provisions for credit losses for the first quarter of 2009 stood at $60
million, up $16 million or 36.4% from the same quarter of 2008. The quality of
Desjardins' loan portfolio remains excellent, with a ratio of gross impaired
loans to gross loans of 0.44%.
    At $1,221 million, non-interest expense for the first quarter of 2009 was
relatively unchanged on a year-over-year basis, evidence of the rigorous
control exercised over operating expenses. It is worth noting that the
non-interest expense posted last year included a $25 million write-off of
deferred expenses for technological development.
    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 83.9% at the end of the first three months of 2009,
compared to 89.9% one year ago. The ratio was nevertheless affected by the
decline in the fair value of the ABCP restructured notes portfolio and the
write-off of an ABCP security that was excluded from the moratorium of the
Montreal Accord.
    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 Group therefore recorded a $65 million
provision for member dividends for the first quarter of 2009, compared to $122
million a year earlier. The provision for 2009 includes a $26 million upward
adjustment for 2008 dividends.
    Lastly, Desjardins Group's total assets stood at $159.7 billion as at
March 31, 2009, compared to $149.8 billion a year ago, i.e., an increase of
$9.9 billion or 6.7%. Despite a deteriorating economic climate, the Group
continued to grow at a sustained pace. These good results are clearly tied to
the Group's strong presence in residential financing in Québec and its solid
performance recruiting personal savings.

    Specific items

    On January 21, 2009, following the implementation of a restructuring plan
approved by investors, non bank-sponsored ABCP was replaced by new
variable-rate long-term notes with maturities similar to those of the
underlying assets.
    However, without an active market for this type of financial product and
taking into account requirements under Canadian accounting standards,
Desjardins had to make an assessment of the fair value of these new notes as
at March 31, 2009. For the first quarter of 2009, the change in the fair value
of notes between December 31, 2008 and March 31, 2009, combined with the
write-off of an ABCP security excluded from the moratorium of the Montreal
Accord, came to $88 million before taxes. This compares to the $220 million
write-down recorded for the first quarter of 2008.
    Furthermore, in the first quarter of 2009 and following an amendment to
the provincial tax law, Desjardins Group recorded an income tax expense of $16
million for 2007 and 2008.
    It should also be noted that in the first quarter of 2008, Desjardins
repositioned some of its Canada-wide development initiatives, in particular
its offer of IT services to Canadian credit unions and the development of
Desjardins Credit Union. This resulted in a $25 million write-off of deferred
expenses relating to technological developments ($19 million after taxes).
    Excluding the specific items described above and taking into account the
net cost of the financing associated with ABCP securities, surplus earnings
before member dividends for the quarter stood at $201 million, compared to
$263 million for the first quarter of 2008.

    Important events

    Funding and capital supply

    During the first quarter of 2009, Desjardins Group successfully completed
a $500 million offering of subordinated debt, 5.756% Series E maturing in
2019, through Capital Desjardins. This was the first issuance of debt by
Capital Desjardins under a base shelf prospectus dated June 30, 2008 that
allows the Group to issue up to $2 billion in securities. Capital Desjardins
invested the gross proceeds of the notes in subordinated notes to be issued by
the caisses in order to enhance the Group's capital base and meet general
needs.
    It should also be recalled that in the month of January 2009, Caisse
centrale Desjardins successfully issued five-year fixed-rate notes on European
markets in an amount of (euro)500 million.

    Confirmation of credit ratings

    In reports published in April 2009, the rating agencies DBRS and Standard
& Poor's confirmed the credit ratings of Caisse centrale Desjardins and
Capital Desjardins. These ratings reflect the financial strength of Desjardins
Group. In March 2009, the rating agency Moody's also announced that it would
maintain the credit rating of Caisse centrale Desjardins at Aa1, but
nevertheless changed the outlook associated with this rating from "stable" to
"negative."

    Basel Accord

    Under the guideline on adequacy of capital, the Autorité des marchés
financiers recently allowed Desjardins Group to use the Advanced Internal
Ratings Based approach for credit risk related to Personal retail loan
portfolios. Other credit exposures and market risk are assessed according to a
standardized approach, while operational risk is calculated based on the
"basic indicator" approach. This requirement is used to calculate the Group's
capital ratios, which are still one of the highest among the best capitalized
financial institutions in Canada. Under this approach, the Tier 1 capital
ratio stood at 13.67% as at March 31, 2009, compared to 14.04% a year earlier
(as assessed under the former regulatory framework based on the Basel I
Accord). The Tier 1 ratio therefore exceeds the Group's capitalization target.
The total capital ratio is also 13.67% under the new approach, compared to
13.25% as at March 31, 2008 (as assessed under the former regulatory framework
based on the Basel I Accord).

    Review of the organizational structure

    With a view towards consolidating its position in the Canadian financial
services market, Desjardins Group has adopted a new, simpler organizational
structure designed to optimize overall performance, ensure continued growth
and reinforce risk management.
    The reorganization is part of a development plan for Desjardins Group
announced last fall by the President and CEO. In addition to the attainment of
previously announced objectives, management expects the plan to produce
greater cohesion and efficiency among the different teams running its
components and, ultimately, generate recurring productivity gains of over $150
million per year. The reorganization was announced by Desjardins Group in a
separate press release on May 14.

    Results by business segment

    Personal and Commercial

    This segment primarily encompasses the caisse network, the Fédération des
caisses Desjardins du Québec, Caisse centrale Desjardins (CCD), the Fonds de
sécurité Desjardins, Capital Desjardins inc., Desjardins Trust and the Ontario
Federation and caisses. 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 on earlier quarters has been reclassified to
conform to the new presentation.
    At the end of the first quarter of 2009, surplus earnings before member
dividends in the Personal and Commercial segment stood at $126 million, down
$55 million or 30.4% from the first quarter of 2008.
    Financial results for this segment were affected by lower profitability
in the caisse network in the first quarter of 2009, which reports surplus
earnings of $78 million as compared to $179 million for the first quarter of
2008. CCD nevertheless posts improved profitability, with net income up $21
million from the first quarter of 2008 as a result of good cash management.
    For the first three months of 2009, total income for the Personal and
Commercial segment was $1,200 million, down $22 million or 1.8% compared to a
year earlier. Net interest income stood at $802 million, down $24 million or
2.9% as a result of lower interest rates.
    Other income totalled $398 million for the first quarter of 2009, similar
to the figure posted one year earlier. Other income was enhanced by a $5
million or 16.2% increase in income from securitization activities and a $6
million or 6.4% increase in income from credit card activities. Growth in
other income was nevertheless negatively affected by a $24 million or 26.4%
drop in income from securities brokerage, investment fund and trust services.
    The provisions for credit losses for the first quarter of 2009 totalled
$60 million, a $16 million increase from the first quarter of 2008.
    Non-interest expense for the first quarter of 2009 totalled $945 million,
up $13 million compared to the same period of 2008. Excluding the write-off of
$25 million in deferred expenses relating to technological developments
recorded in the first quarter of 2008, the increase in non-interest expense
would have been $38 million or 4.2% in the first quarter of 2009 as compared
to the first quarter of 2008.
    In addition, CCD's net income stood at $39.5 million in the first quarter
of 2009, a $21.3 million increase over 2008. A very large part of this growth
was due to Desjardins Group Treasury, which generated 86% more income in the
first quarter of 2009 as compared to the same period in 2008. CCD's
contribution to the Personal and Commercial segment was $36 million, versus
$18 million in the first quarter of 2008.
    In financing activities, the Personal and Commercial segment posted
excellent results. Loans outstanding, net of the allowance for credit losses,
grew 8.4% or $8.0 billion over the year, to $103.7 billion as at March 31,
2009.
    In residential mortgages, the Personal and Commercial segment also
reports success, despite a 26.3% drop in construction starts and an 18.5% drop
in resale homes in Québec during the first quarter of 2009. The segment's
outstanding credit in residential mortgages grew $3.9 billion or 7.2%
year-over-year, to $58.6 billion.
    The Personal and Commercial segment also posted strong results in
consumer financing, credit cards and other individual loans. Outstanding loans
in this industry grew 10.6% or 1.7 billion annually, to $18.0 billion as at
March 31, 2009. This growth stemmed from the segment's highly popular
Versatile Line of Credit and its financing programs provided through the VISA
Desjardins card.
    Finally, as at March 31, 2009 the Personal and Commercial segment's
outstanding loans to businesses and governments had grown 9.6% or $2.5 billion
year-over-year, to $27.9 billion.
    As for savings recruitment, deposit liabilities outstanding stood at
$103.3 billion as at March 31, 2009, up 5.2% or $5.1 billion over 2008.
Personal savings, which represented 70.6% of the Personal and Commercial
segment's deposits at the end of the quarter, grew 8.9% or $6.0 billion, to
$72.9 billion as at March 31, 2009.
    Deposits by businesses and governments grew 1.9% or $394 million
annually, to $20.7 billion as at March 31, 2009. Other sources of financing
available to the Personal and Commercial segment are primarily deposits
related to securities issued on capital markets. These deposits fell 11.7% or
$1.3 billion over the year, to $9.7 billion as at March 31, 2009.
    Lastly, the Personal and Commercial segment is also active in the sale of
off-balance sheet savings products, such as investment funds and other
securities. However, since stock markets did not advance during the first
quarter of 2009 (e.g.: at March 31, 2009 the S&P/TSX index was still down 3.0%
from December 31, 2008), the environment was not very conducive to the sale of
these products. Despite these difficult conditions, the Personal and
Commercial segment fared reasonably well. Outstanding investment funds and
assets under management in the securities brokerage segment fell 18.2% or $4.9
billion on an annual basis, to $22.0 billion as at March 31, 2009, while the
industry had declined 17.8% in Québec and 19.4% in Ontario at the same date.

    Life and Health Insurance

    For the first quarter of 2009, the contribution of Desjardins Financial
Security (DFS) to the Group's combined results was $30.3 million, compared to
$35.0 million in 2008. Return on shareholder's equity was 17.5%, as compared
to 21.5% in 2008. Assets under management and under administration stood at
$19.5 billion.
    The current economic crisis is affecting profitability at DFS but has not
tarnished its financial strength. DFS still enjoys excellent capitalization,
despite the disturbances in international financial markets, and its
fundamental insurance operations remain very profitable.
    Despite a difficult economic environment, DFS has again posted higher
insurance premium income, which was up 3.2% from the same period in 2008, to
$669.2 million. Insurance sales were $65.1 million, up 10.5% from the volumes
as at March 31, 2008.
    In group insurance, premium volume stood at $543.4 million, a $15.3
million increase from the first quarter of 2008. Sales totalled $54.3 million,
up $5.2 million from the quarter ended March 31, 2008.
    In personal insurance, the volume of gross premiums rose $5.6 million
year-over-year to $125.8 million as at March 31, 2009. Sales totalled $10.8
million.
    In Savings, aggregate sales of $354.6 million were up $41.7 million from
one year earlier. In personal savings, total sales amounted to $221.6 million,
up $127.5 million from the first three months of 2008. In group retirement
savings, sales totalled $44.4 million, compared to $55.4 million in 2008.

    General Insurance

    Desjardins General Insurance Group (DGIG) contributed $6.8 million to the
Group's results for the first quarter of 2009. This compares with a negative
contribution of $2.2 million for the same period of 2008. The return on equity
was 5.9%, as compared to -2.0% one year earlier.
    This good performance was mainly due to an excellent claims experience in
automobile insurance due to favourable climatic conditions in the first
quarter. At $349.3 million, gross premiums written were relatively unchanged
from the $348.1 million posted for the first three months of 2008. This was in
a slow market environment in which the industry also reported little change in
premiums written.
    The investment portfolio performed well, posting $23 million in income.
This was nevertheless slightly down from the first quarter of 2008 and in the
face of the global financial crisis.
    The operating expense ratio, expressed as a percentage of premiums,
compares favourably with that of the industry, although it increased slightly,
in part because the volume of premiums was affected by lower rates in Québec.

    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 sector posted net earnings of $3 million in the first quarter of
2009 compared to a $4 million net loss in the same quarter of 2008. This was
good performance in an environment where financial markets were characterized
by uncertainty. Profitability improved in the securities subsidiary due to the
excellent performance of its Fixed Income group and Online Brokerage segment,
while the venture capital subsidiary was affected by volatile financial
markets and the fluctuations in the value of its investments in some public
companies due to changes in listed prices.

    Other

    Since the first quarter of 2009, the "Other" segment has also included
the deficit of companies that were specifically created to hold the ABCPs
repurchased by Desjardins Group and previously included in the Personal and
Commercial segment. This segment reports a net loss of $49 million for the
first quarter of 2009, compared to a net loss of $143 million for the first
quarter of 2008. These results were primarily affected by a decline 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 $8 million after taxes compared to the same
period of 2008. This adjustment results 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 further information: (for journalists only): André Chapleau,
Director, Information and Media Relations, (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 of Desjardins
Group


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890