Desjardins Group Announces Surplus Earnings of $338 Million for the Second Quarter of 2009



    LEVIS, QC, Aug. 17 /CNW Telbec/ -

    Financial highlights

    
    - Surplus earnings before member dividends of $338 million for the second
      quarter of 2009, unchanged from the amount posted for the same period
      of 2008.
    - Surplus earnings before member dividends of $455 million for the first
      six months of 2009, compared to $405 million in the same period of
      2008.
    - Strong balance sheet with over $10 billion in capitalization and a
      quality loan portfolio.
    - Tier 1 capital ratio still among the best in the industry.
    - Assets grew 5.2% to $159.9 billion.
    - Good growth in financing activities, which expanded over 7%.
    - Issuance of $500 million of subordinated debt, which improved
      Desjardins Group's capital base.

    Key financial data:
    -------------------------------------------------------------------------
                        For the three months           For the six months
                            ended June 30                 ended June 30
                  -----------------------------------------------------------
                      2009      2008    Change      2009      2008    Change
    -------------------------------------------------------------------------
    Surplus
     earnings
     before
     member
     dividends        $338      $338         -      $455      $405      12.3%
                   million   million             million   million
    -------------------------------------------------------------------------
    Return on
     equity           13.4%     14.3%        -       9.2%      8.7%        -
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
    Assets          $159.9    $151.9       5.2%
                   billion   billion
    -------------------------------------------------------------------------
    Equity           $10.1      $9.6       6.0%
                   billion   billion
    -------------------------------------------------------------------------
    Tier 1
     capital
     ratio(*)        14.73%    13.98%        -
    -------------------------------------------------------------------------
    Growth
     in total
     loans             7.2%      8.2%        -
    -------------------------------------------------------------------------
    Growth
     in total
     deposits          5.5%      9.5%        -
    -------------------------------------------------------------------------
    (*): 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 second quarter results

    For the second quarter of 2009, Desjardins Group, the largest cooperative
financial group in Canada, announced surplus earnings before member dividends
of $338 million, unchanged from the amount posted for the same period of 2008.
Return on equity was 13.4%, compared to 14.3% on a year-over-year basis.
    Results for the quarter benefitted from strong business volume growth and
very good investment income growth, despite lower interest rates, which
restrained net interest income at the caisses and, at the same time, limited
their profitability.
    In terms of income, Desjardins Group's total income attained $2,772
million at the end of the second quarter of 2009, for an increase of $320
million or 13.1% compared to the same period of 2008.
    Net interest income stood at $828 million for the second quarter of 2009,
down $19 million or 2.2% compared to the same quarter last year, due to lower
interest rates. Net premiums grew $60 million or 6.0% as a result of good
growth in insurance premiums, particularly in the life and health insurance
subsidiary.
    Other income stood at $887 million, up $279 million or 45.9% over the
same quarter last year. Other income benefitted from strong growth in
investment income, in part as a result of improved market conditions but also
from the strategies implemented. It should nevertheless be noted that an
equivalent amount of the increase in investment income at the life and health
insurance subsidiary drove up expenses related to claims, benefits, annuities
and changes in this subsidiary's insurance provisions. Income from brokerage,
investment fund and trust services were also affected by uncertainty in the
markets and fell $24 million or 14.7%, a performance similar to the industry
as a whole.
    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 second quarter of 2009 stood at $45 million, compared to $46 million a
year earlier.
    Expenses related to claims, benefits, annuities and changes in insurance
provisions stood at $980 million, up $203 million or 26.1% compared to the
same 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.
    At $1,275 million, non-interest expense grew $99 million or 8.4% over the
same quarter of 2008. Much of this growth was due to increased salaries and
fringe benefits related to the annual indexation of salaries. The cumulative
results for the second quarter of 2009 also include a $28 million expense for
severance benefits and professional fees, presented as part of reorganization
expenses.

    Funding and capital supply

    During the second quarter of 2009, Desjardins Group successfully
completed a $500 million offering of senior notes - 5.541% Series F maturing
in 2021 - through Capital Desjardins. This was the second 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.

    Results for the first six months of 2009

    For the six-month period ended June 30, 2009, Desjardins Group announced
surplus earnings before member dividends of $455 million, as compared to $405
million for the same period of 2008. Return on equity was 9.2%, compared to
8.7% on a year-over-year basis.
    Results for the first six months of 2009 profited from improved market
conditions, which had a favourable influence on investment income, and from a
write-down of the portfolio of restructured ABCP notes that was smaller than
the write-down in the first six months of 2008. An amount of $84 million was
recorded in the first six 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 $198 million recorded for the same period of 2008. As for the
caisse network, it posted $216 million in surplus earnings for the first six
months of 2009, 39.7% less the $358 million it recorded for the same period of
2008. The drop was primarily due to lower interest rates, which affected net
interest income.
    "Overall, we're satisfied with these results," said Monique F. Leroux,
Chair of the Board, President and CEO of Desjardins Group. "Despite an
environment that has at times been difficult, our caisse network and our
subsidiaries actively pursued business development, particularly our general
insurance and securities subsidiaries, which outperformed forecasts. Our
capitalization has also been strengthened by issuing subordinated debt. Even
though the economy seems to be improving, we will continue to exercise caution
and remain vigilant in the second half of the year."
    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 $106 million
provision for member dividends for the first six months of 2009, compared to
$294 million a year earlier. The provision for 2009 includes a $29 million
upward adjustment for 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), stood at 14.73% as at June 30, 2009, compared to 13.98%
as assessed under the former regulatory framework (Basel I Accord) a 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, was 14.73%, compared to 13.17% as assessed
under the Basel I Accord as at June 30, 2008.
    Desjardins Group's total income stood at $5,017 million at the end of the
first six months of 2009, up $383 million or 8.3% compared to the same period
of 2008.
    Net interest income attained $1,623 million, down $33 million or 2.0%
compared to the same period of 2008. Net premiums grew $70 million or 3.5% as
a result of growth in insurance premiums, particularly in life and health
insurance. Other income benefitted from a large increase in investment income
as a result of improved market conditions and the strategies implemented. It
should be recalled that an equivalent amount of the increase in investment
income at the life and health insurance subsidiary affected expenses related
to claims, benefits, annuities and changes in insurance provisions. Income
from brokerage, investment fund and trust services were affected by
uncertainty in the markets and fell $67 million or 20.3%.
    The quality of Desjardins' loan portfolio remains excellent, even though
provisions for credit losses grew to $105 million, as compared to $90 million
one year earlier.
    Expenses related to claims, benefits, annuities and changes in insurance
provisions totalled $1,769 million at the end of the first six months of 2009,
up $169 million or 10.6% 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 $2,496 million, non-interest expense increased $98 million or 4.1%
compared to the first six months of 2008. Over half 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 six months
of 2009 include a $28 million expense for severance benefits and professional
fees. It is also worth noting that the non-interest expense 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 76.8% at the end of the first six months of 2009, an
improvement over the 79.0% ratio posted for the same period of 2008. Various
initiatives were taken to improve productivity, such as implementing a new
organizational structure for Desjardins Group.
    Desjardins Group had $159.9 billion in total assets as at June 30, 2009,
compared to $151.9 billion one year earlier. This represents growth of close
to $8 billion or 5.2%.

    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 on earlier quarters has been reclassified to conform to the
    new presentation.
    

    At the end of the second quarter of 2009, surplus earnings before member
dividends in the Personal and Commercial segment stood at $231 million, down
$27 million or 10.5% compared to the second quarter of 2008.
    After the first six months of 2009, surplus earnings before member
dividends for this segment were $357 million, down $82 million or 18.7% from
the same period of 2008 due to lower profitability in the caisse network.
However, Caisse centrale Desjardins posted improved profitability.
    For the first six months of 2009, total income for the Personal and
Commercial segment was $2,517 million, down $16 million or 0.6% compared to
the same period a year earlier. Net interest income stood at $1,643 million,
down $18 million or 1.1% due to lower interest rates.
    Other income totalled $874 million for the first six months of 2009,
similar to the figure posted one year earlier. As mentioned above, other
income was enhanced by higher investment income following improved market
conditions combined with the strategies implemented, as well as a $12 million
or 6.0% increase in income related to credit card activities. However, the
growth of other income was tempered, primarily by a $36 million or 20.3% drop
in income from brokerage, investment fund and trust services.
    Provisions for credit losses for the first six months of 2009 totalled
$104 million compared to $90 million for the same period one year earlier.
    Non-interest expense was $1,919 million, a limited increase of $70
million or 3.8% from the first six months of 2008. Much of this increase
stemmed from a greater salaries and fringe benefits expense, due in part to
the annual indexation of salaries.
    In addition, net income of Caisse centrale Desjardins (CCD) stood at
$43.8 million for the second quarter of 2009, up $15.5 million compared to the
second quarter of 2008. For the six months ended June 30, 2009, CCD's net
income was $83.3 million, up $36.8 million compared to the same period of
2008. This excellent performance was due to the results posted by all of CCD's
segments, particularly the Group Treasury segment, which reported 72% more
gross income compared to the same period of 2008. CCD's contribution to the
Personal and Commercial segment was $72 million, compared to $45 million in
2008.
    In the Personal and Commercial segment's financing activities, loans
outstanding net of the allowance for credit losses grew 7.6% or $7.4 billion
over the year, to $105.2 billion as at June 30, 2009.
    More specifically, the segment's outstanding residential mortgages stood
at $60.2 billion as at June 30, 2009 and represented close to 57% of its total
portfolio. This was a 6.3% or $3.6 billion increase year-over-year, despite
22.5% and 42.6% fewer housing starts in Québec and Ontario, respectively, than
in 2008. In addition, home resale transactions in Québec and Ontario also
fell, but less markedly: 7.5% and 9.1%, respectively.
    The Personal and Commercial segment also saw strong growth in consumer
loans in the second quarter of 2009. Outstanding loans in this category
increased 13.0% or $2.2 billion annually, to $18.9 billion as at June 30,
2009. This increase is explained by the great success of the Versatile Line of
Credit product among members and clients, sustained growth in automobile
loans, and the success of the various financing programs offered through the
Desjardins VISA credit card. The Personal and Commercial segment's outstanding
loans to businesses and governments grew 6.7% or $1.7 billion year-over-year,
to $26.9 billion as at June 30, 2009.
    As for savings recruitment, deposit liabilities outstanding stood at
$107.5 billion, up 5.5% or $5.6 billion over 2008. Personal savings, which
represented 69.0% of the Personal and Commercial segment's deposits at the end
of the second quarter, grew 6.8% or $4.7 billion from one year earlier.
Deposits by businesses and governments grew 2.8% or $642 million over 2008, to
$23.3 billion as at June 30, 2009. The other sources of financing available to
the Personal and Commercial segment to fuel its growth are primarily deposits
related to securities issued on capital markets. Such sources grew 2.4% or
$234 million over the year, to $10.0 billion as at June 30, 2009.
    Lastly, in the sale of off-balance sheet savings products such as
investment funds and other securities, the results of the Personal and
Commercial segment improved significantly in the second quarter of 2009 as a
result of the modest gains in the stock markets, which created a rather
favourable environment for these products. For example, as at June 30, 2009,
the S&P/TSX index had risen 37.1% from the bottom of the trough on March 9.
Despite this improvement, outstanding investment funds and assets under
management in the securities brokerage segment fell, but much less than in the
previous quarter: only 9.9% or $2.7 billion on a year-over-year basis, to
$24.4 billion as at June 30, 2009.

    Life and Health Insurance

    For the second quarter of 2009, the contribution of Desjardins Financial
Security (DFS) to the Group's combined results was $52.0 million, compared to
$55.0 million in 2008. Net income for the quarter was $52.8 million, compared
to $59.3 million for the same quarter of 2008. Insurance premium income stood
at $675.7 million, and insurance sales totalled $51.2 million, compared to
$57.5 million posted for the same quarter in 2008 and $65.1 million for the
first quarter of 2009.
    At the end of the first six months of 2009, DFS recorded $83.3 million in
net income and a return on shareholder's equity of 22.9%, one of the best in
the financial services industry. Its contribution to Desjardins Group's
combined results stood at $82.1 million, compared to $90.0 million in 2008.
Insurance premium income for this period was $1,344.9 million, up 3.3%, while
insurance sales totalled $116.3 million. Sales also grew in retirement
savings, attaining $799.5 million as compared to $527.4 million for the same
period of 2008.
    DFS has an excellent capitalization that provides all the financial
strength it needs to confront sometimes difficult financial and economic
conditions. In addition, its fundamental insurance activities continue to be
highly profitable.
    In group insurance, the volume of gross premiums from groups and
companies and those related to the plans provided through financial
institutions, including caisses Desjardins, stood at $1,095.7 million, up
$33.0 million from the results for the same period of 2008. Sales totalled
$94.3 million.
    In personal insurance, the volume of gross premiums was $249.2 million.
Sales totalled $22.0 million.
    In savings, aggregate sales stood at $799.5 million. In personal savings,
sales totalled $465.6 million, more than double the amount recorded for the
same period of 2008, while sales of group retirement savings were $175.8
million. Sales of mutual funds totalled $158.1 million.
    Lastly, DFS assets under management and under administration were $20.4
billion.

    General Insurance

    Desjardins General Insurance Group (DGIG) contributed $28.0 million to
the Group's results for the second quarter of 2009 compared to $15.3 million
for the same period of 2008, bringing the cumulative contribution to $35.4
million at the end of the first six months of 2009, compared to $13.1 million
in 2008.
    This increase in the second quarter of 2009 was the result of an
excellent loss experience in home insurance in the Québec subsidiaries, as
claims were markedly down for the quarter. The relatively small number of
major events and the good climatic conditions helped limit claims over the
last three months. Premium income from all the subsidiaries operating across
Canada grew 3.4% in the second quarter.
    At the end of the first six months of 2009, DGIG's return on equity was
14.4% compared to 5.8% for the same period of 2008. The increase in
profitability is primarily due to a good claims experience in both automobile
and home insurance. Gross premiums written rose 2.0%, from $754.5 million in
2008 to $769.5 million in 2009. DGIG continues to maintain its Québec market
share and is working to expand sales in the rest of Canada.
    The investment portfolio continued to perform well since the beginning of
the year, posting income of $42.5 million, up $6.1 million compared to 2008.
Even though interest rates were down from last year, a reorganization of the
portfolio in the first quarter allowed DGIG to maintain investment income at
the intended level, despite a financial crisis that continues to ravage world
markets.

    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 $7 million in the second quarter of
2009 compared to $1 million in the same quarter of 2008, bringing cumulative
net income to $10 million for the first six months of 2009 compared to a net
loss of $3 million one year earlier. This represents good performance in an
environment where financial markets were characterized by uncertainty,
particularly in terms of the fixed income activities of the Desjardins
Securities subsidiary. Despite this improvement to segment profitability, the
venture capital component was affected by the volatile financial markets and
by changes in the value of certain investments in public companies as a result
of changes in share prices on exchanges.

    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. 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 $20 million in net income for the second quarter of
2009 compared to $9 million 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 $29 million for the first six
months of 2009 compared to a net loss of $134 million for the same period one
year earlier. These results were primarily the result of a change in the net
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 increased $19 million after taxes compared to the
first six months 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