Results for the first quarter of 2024
LÉVIS,
QC, May
10, 2024 /CNW/ - For the first quarter ended
March 31, 2024, Desjardins Group,
North America's largest financial
cooperative group, recorded surplus earnings before member
dividends of $855 million, up
$513 million from the same quarter of 2023. All business
segments contributed to these outstanding results, including higher
insurance revenue, lower incurred claims in Property and Casualty
Insurance, and an increase in the net insurance finance result due
to favourable trends in financial markets. Of particular note is
the Personal and Business Services segment's strong performance,
driven by growth in net interest income related primarily to
business growth and a reduction in non-interest expense due to
rigorous expenditure management.
For the first quarter of 2024, the provision for
member dividends stood at $110
million, an increase of $4
million or 3.8%, compared to the corresponding period of
2023. Sponsorships, donations and scholarships amounted to
$27 million, of which $11 million came from caisse Community
Development Funds.
"For the first quarter of 2024, Desjardins posted
outstanding financial results, due to strong performance by all our
business segments," said Guy
Cormier, President and Chief Executive Officer of Desjardins
Group. "I'm proud of our results and the hard work put in by
everyone across our organization. Our financial solidity allows us
to proactively meet the needs of members, clients and communities.
Moreover, Desjardins presents capital ratios and credit ratings
that are among the best in the industry."
Supporting a green economic and social
recovery
Desjardins is contributing to regional
development and the economy through the GoodSpark Fund, which has
set aside $250 million to stimulate
social and economic activity in communities.
Since 2017, Desjardins Group has committed a
total of $187 million to 833 projects
related to the GoodSpark Fund.
Last March, Desjardins Group released its
Social and Cooperative Responsibility Report and its 2023
Climate Action at Desjardins Report. The cooperative produces
these documents to report on its progress in integrating
environmental, social and governance (ESG) criteria into its
business model and operations, and on how it is increasingly taking
the risks and opportunities associated with climate change into
account.
In particular, Desjardins is still working to
implement the climate goal announced in 2021. The goal is to
achieve, by 2040, net zero emissions in its operations, its supply
chain, its lending activities and its own capital investments in
three key carbon-intensive sectors: energy, transportation and real
estate.
Governance
At the annual general meeting (AGM) of the
Federation on March 24 and 25, 2023,
delegates from Desjardins caisses in Québec and Desjardins Ontario
Credit Union voted to separate the roles of chair of the board of
directors from the role of president and CEO of Desjardins Group,
positions which had been held for almost 30 years.
The separation of these roles came into effect on
March 23, at the end of the 2024 AGM.
This marked the beginning of the shift to a new governance model.
To this end, Guy Cormier became
president and CEO under the new model. In addition, the board of
directors will elect a new Chair in May
2024.
Doing what's best for members and
clients
Desjardins is involved in people's lives, whether
by supporting community initiatives related to diversity,
inclusion, cooperation, financial literacy and healthy living, or
by offering innovative financial solutions to meet their needs.
Here are some of the ways that Desjardins made a positive
difference in people's lives in the first quarter of 2024.
Giving back to the community
- Desjardins Group was once again recognized as one of
Canada's best employers, earning
several major awards. Forbes magazine and Mediacorp ranked
Desjardins as one of Canada's Best
Employers in the banking and finance industry in 2024. In addition,
Desjardins Group is once again one of the country's greenest
employers according to Mediacorp's ranking.
- Renewal of a partnership with La Ruche (in French only)
to support local entrepreneurs, organizations and citizens and
advance promising projects that stimulate the economy and vitality
of Quebec and its regions through
crowdfunding.
- Desjardins earned an MSCI ESG (in French only) of AAA. This is
the highest possible rating from MSCI, which is internationally
recognized in ESG. This places Desjardins among the top 5% of
financial institutions in the world in terms of ESG.
Innovating
- On March 27, 2024, Desjardins
Group, through its subsidiary Desjardins General Insurance Group
Inc., announced that it had entered into definitive agreements to
acquire all of the issued and outstanding shares of The Insurance
Company of Prince Edward Island.
This acquisition will help diversify its insurance offer and better
meet the needs of businesses.
- Desjardins received five awards at the annual Fundata Canada
Inc. FundGrade A+® Awards ceremony for sustained performance in
2023. The FundGrade A+® Awards celebrate Canadian funds that posted
the best risk-adjusted returns and maintained high FundGrade scores
throughout an entire calendar year.
Financial highlights
Comparison of first quarter 2024 with first quarter 2023:
- Surplus earnings before member dividends of $855 million, up $513
million.
- Total net income of $3,564
million, up $897 million or
33.6%:
- Net interest income of $1,733
million, up $192 million or
12.5%, due to growth in average outstanding business and
residential mortgage loans.
- Insurance service result of $409
million, up $300 million due
to increased insurance revenue and decreased expenses related to
claims, mainly in the Property and Casualty Insurance segment.
- Net insurance finance result of $310
million, up $187 million, due
to favourable trends in financial markets.
- Other income of $1,112 million,
up $218 million or 24.4%, mainly due
to the increase in revenues related to the activities acquired from
Worldsource(1) of $119
million, as well as the increase in revenues from growth in
assets under administration and assets under management.
- Provision for credit losses of $133
million, an increase of $28
million compared to the corresponding period of 2023.
- Gross non-interest expense of $2,556
million, up $211 million,
compared to the first quarter of 2023, of which $120 million was due to expenses related to the
activities acquired from Worldsource.(1) The measures
rolled out to improve efficiency and effectiveness, including
reduced fees, made it possible to limit the increase in other items
included under this heading to $91
million, or 3.9%.
- $137 million returned to members
and the community(2) including a provision
for member dividends of $110 million and sponsorships,
donations and scholarships of $27
million, up $5 million or 3.8%
from the corresponding period of 2023.
Other highlights:
- Tier 1A capital ratio(3) of 21.0%, compared to
20.4% as at December 31, 2023.
- Total capital ratio(3) of 22.0%, compared to 21.9%
as at December 31, 2023.
- Total assets grew 3.0% since December
31, 2023, for a total of $435.8
billion as at March 31,
2024.
- Multi-currency medium-term note program, subject to the bail-in
regime:
- Issuance of €1.0 billion on January 17,
2024.
- Issuance of US$1.0 billion on
January 26, 2024.
- Legislative covered bond program:
- Issuance of GBP 750 million on
April 12, 2024.
- Issuance of 440 million Swiss
francs on April 18, 2024.
- In March 2024, Moody's rating
agency confirmed the ratings of the instruments issued by the
Fédération des caisses Desjardins du Québec, while
maintaining the outlook at "stable". This assessment reflects,
among other things, the strong capitalization of Desjardins
Group.
_____________________________________
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(1)
|
On March 1, 2023,
through Worldsource Group of Companies Inc. (formerly 9479-5176
Québec Inc.), a wholly-owned indirect subsidiary of the Federation,
Desjardins Group acquired, among others, all the outstanding shares
of IDC Worldsource Insurance Network Inc., Worldsource Financial
Management Inc. and Worldsource Securities Inc. (collectively
designated as "Worldsource").
|
(2)
|
For additional
information on supplementary financial measures, see "Non-GAAP
Financial Measures and Other Financial Measures" on this
page.
|
(3)
|
In accordance with the
Capital Adequacy Guideline for financial services cooperatives
issued by the Autorité des marchés financiers (AMF).
|
Non-GAAP financial measures and other
financial measures
To measure its performance, Desjardins Group uses
different GAAP (IFRS) financial measures and various other
financial measures, some of which are non-GAAP financial measures.
Regulation 52-112 respecting Non-GAAP and Other Financial
Measures Disclosure (Regulation 52-112) provides guidance to
issuers disclosing specified financial measures, including the
following measures used by Desjardins Group:
- A non-GAAP financial measure;
- Supplementary financial measures.
Non-GAAP financial measure
The non-GAAP financial measure used by Desjardins
Group in this press release, and which does not have a standardized
definition, is not directly comparable to similar measures used by
other companies, and may not be directly comparable to any GAAP
measure. It is defined as follows:
Return to members and the community
As a cooperative financial group contributing to
the development of communities, Desjardins Group gives its members
and clients the support they need to be financially empowered. The
amounts returned to members and the community, a non-GAAP financial
measure, are used to present the overall amount returned to the
community and are composed of member dividends, as well as
sponsorships, donations and scholarships.
More detailed information about the amounts
returned to members and the community may be found in the
"Financial Highlights" table on the following page.
Supplementary financial measures
In accordance with Regulation 52-112,
supplementary financial measures are used to show historical or
expected future financial performance, financial position or cash
flows. In addition, these measures are not disclosed in the
financial statements. Desjardins Group uses certain supplementary
financial measures, and their composition is presented in the
Glossary on pages 49 to 56 of the MD&A for the first
quarter of 2024.
FINANCIAL HIGHLIGHTS
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As at and for
the
three-month periods ended
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(in millions of
dollars and as a percentage)
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March 31,
2024
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December
31,
2023(1)
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March 31,
2023(1)
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Results
|
|
|
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Net interest income
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$
|
1,733
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$
|
1,696
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$
|
1,541
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Net insurance service income
|
719
|
918
|
232
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Other income
|
1,112
|
924
|
894
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Total net income
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3,564
|
3,538
|
2,667
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Provision for credit
losses
|
133
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231
|
105
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Net non-interest
expense
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2,311
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2,499
|
2,096
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Surplus earnings before member
dividends(2)
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$
|
855
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$
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750
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$
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342
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Contribution to surplus earnings by business
segment(3)
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Personal and Business
Services
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$
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401
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$
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161
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$
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194
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Wealth Management and
Life and Health Insurance
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169
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229
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92
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Property and Casualty
Insurance
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280
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360
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(25)
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Other
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5
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—
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81
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$
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855
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$
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750
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$
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342
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Returned to members and the
community(4)
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Member
dividends
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$
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110
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$
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91
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$
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106
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Sponsorships, donations
and scholarships(5)
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27
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38
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26
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$
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137
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$
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129
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$
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132
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Indicators
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Return on
equity(6)
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9.8 %
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8.6 %
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4.3 %
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Credit loss
provisioning rate(6)
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0.21
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0.34
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0.18
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Gross credit-impaired
loans/gross loans and acceptances(6)
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0.80
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0.74
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0.50
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Liquidity coverage
ratio(7)
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152
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154
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140
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Net stable funding
ratio(7)
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125
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124
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127
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Productivity index –
Personal and Business Services(6)
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70.3
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79.8
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82.2
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Insurance and annuity
premiums – Wealth Management and Life and Health
Insurance(6)
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$
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1,607
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$
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1,446
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$
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1,307
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Total contractual
service margin (CSM) - Wealth Management and Life and Health
Insurance(8)
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2,630
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2,595
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2,668
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Direct Written Premiums
– Property and Casualty Insurance(6)
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1,556
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1,645
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1,440
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On-balance sheet and off-balance
sheet
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Assets
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$
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435,819
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$
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422,940
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$
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398,604
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Net loans and
acceptances
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269,012
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265,935
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252,401
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Deposits
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281,189
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279,329
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262,358
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Equity
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35,169
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34,390
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33,213
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Assets under
administration(6)
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549,580
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535,264
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471,575
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Assets under
management(6)
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83,289
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81,551
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79,390
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Capital measures
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Tier 1A capital
ratio(9)
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21.0 %
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20.4 %
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19.9 %
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Tier 1 capital
ratio(9)
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21.0
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20.4
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19.9
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Total capital
ratio(9)
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22.0
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21.9
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21.4
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TLAC
ratio(10)
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29.8
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29.4
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29.3
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Leverage
ratio(9)
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7.4
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7.3
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7.7
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TLAC leverage
ratio(10)
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10.4
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10.5
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11.4
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Risk-weighted
assets(9)
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$
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142,266
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$
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140,481
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$
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140,232
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Other information
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Number of
employees
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55,188
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56,165
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59,384
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(1)
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The data have been
adjusted to conform to the current period's
presentation.
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(2)
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The breakdown by line
item is presented in the Statement of Income in the Interim
Combined Financial Statements.
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(3)
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The breakdown by line
item is presented in Note 11, "Segmented information," to the
Interim Combined Financial Statements.
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(4)
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For more information
on non-GAAP financial measures, see "Non-GAAP financial measures
and other financial measures" on page 4.
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(5)
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Including $11 million
from the caisses' Community Development Funds ($22 million for the
fourth quarter of 2023, $8 million for the first quarter of
2023).
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(6)
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For additional
information on supplementary financial measures, see "Non-GAAP
Financial Measures and Other Financial Measures" on page
4.
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(7)
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In accordance with the
Liquidity Adequacy Guideline issued by the AMF.
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(8)
|
Total CSM of $2,844
million ($2,923 million as at March 31, 2023) presented net of
reinsurance in the amount of $214 million ($255 million as at March
31, 2023). Included in "Insurance contract liabilities" and
"Reinsurance contract assets (liabilities)" in the Combined Balance
Sheets. For more information, see Note 7 "Insurance and Reinsurance
Contracts" to the Interim Combined Financial Statements.
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(9)
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In accordance with the
Capital Adequacy Guideline for financial services
cooperatives issued by the AMF.
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(10)
|
In accordance with
the Total Loss Absorbing Capacity Guideline ("TLAC
Guideline") issued by the AMF and based on risk-weighted assets and
exposures for purposes of the leverage ratio at the level of the
resolution group, which is deemed to be Desjardins Group, excluding
Caisse Desjardins Ontario Credit Union Inc.
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Strong capital base
Desjardins Group maintains strong capitalization
levels, in accordance with Basel III rules. As at
March 31, 2024, its Tier 1A and total capital ratios
stood at 21.0% and 22.0%, respectively, compared to 20.4% and
21.9%, respectively, as at December 31, 2023.
Analysis of business segment results
PERSONAL AND BUSINESS SERVICES SEGMENT
Results for the first quarter
For the first quarter of 2024, surplus earnings
before member dividends were $401
million, up $207 million from
the same period in 2023, mainly due to an increase in net interest
income related to the increase in loan volumes, an increase in
other income, and a decrease in non-interest expense following
measures taken to improve efficiency and effectiveness, affecting
in particular spending on personnel. This increase in surplus
earnings was offset by a higher allowance for credit losses
compared to the corresponding period of 2023.
WEALTH MANAGEMENT AND LIFE AND HEALTH
INSURANCE SEGMENT
Results for the first quarter
For the first quarter of 2024, the segment posted
$169 million in net surplus earnings,
up $77 million from the same period
of 2023. This increase was primarily due to a higher net insurance
finance result, in particular related to favourable developments in
equity markets and the favourable impact of asset-liability
management as a result of interest rate fluctuations. This increase
was offset by a decrease in insurance activities as a result of a
less favourable experience, partly offset by business growth. It
should be noted that the group insurance experience was
particularly favourable in the first quarter of 2023, including in
long-term disability.
PROPERTY AND CASUALTY INSURANCE SEGMENT
Results for the first quarter
For the first quarter of 2024, the segment posted
surplus earnings of $280 million,
compared to a net deficit of $25 million for the same period
of 2023. This increase was mainly due in particular to higher
insurance revenue, in automobile and property insurance. In
addition, the cost of claims fell as a result of a more favourable
change in prior year claims, especially in property and automobile
insurance. The claims experience in automobile and business
insurance in the first quarter of 2024 was also lower than in the
comparative period of 2023, due to a reduced frequency of claims as
a result of milder weather conditions. This increase was also due
to a significantly higher net insurance finance result.
OTHER CATEGORY
Results for the first quarter
For the first quarter of 2024, the Other category
posted surplus earnings of $5
million, compared to $81
million for the same quarter of 2023. The Other category
includes treasury activities and those related to financial
intermediation between the liquidity surpluses and needs of the
caisses. It also includes investments in the continued
implementation of Desjardins-wide strategic projects, which are
aimed at creating innovative technological platforms, protecting
privacy and improving business processes. The Other category also
includes changes in contingency provisions for our operations,
supplier agreements and the investment portfolio, as well as
commitments made to the GoodSpark Fund, with the aim, in
particular, of providing social and economic support to the
regions.
More detailed financial information can be found
in Desjardins Group's interim Management's Discussion and Analysis
(MD&A) for the first quarter of 2024, available on the
Desjardins website or on the SEDAR+ website, at www.sedarplus.com
(under the Fédération des caisses Desjardins du Québec
profile).
About Desjardins Group
Desjardins Group is the largest cooperative
financial group in North America
and the fifth largest in the world, with assets of $435.8 billion as at March
31, 2024. It has been named one of Canada's Best Employers by Forbes
magazine and by Mediacorp. 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, its online platforms, and its subsidiaries
across Canada. Ranked among the
world's strongest banks according to The Banker magazine,
Desjardins has one of the highest capital ratios and one of the
highest credit ratings in the industry.
Caution concerning forward-looking
statements
Desjardins Group's public communications often
include oral or written forward-looking statements, as defined by
applicable securities legislation, particularly in Québec,
Canada and the United States. This press release contains
forward-looking statements that may be incorporated in other
filings with Canadian regulators or in any other communications. In
addition, Desjardins Group's representatives may make verbal
forward-looking statements to investors, the media and others.
The forward-looking statements include, but are
not limited to, comments about Desjardins Group's objectives
regarding financial performance, priorities, vision, operations,
targets and commitments, the review of economic conditions and
financial markets, the outlook for the Québec, Canadian, U.S. and
global economies, its results and its financial position, as well
as on economic conditions and financial markets. Such
forward-looking statements are typically identified by words or
phrases such as "target," "objective," "believe," "expect," "count
on," "anticipate," "intend," "estimate," "plan," "forecast," "aim,"
"propose," "should" and "may," words and expressions of similar
import, and future and conditional verbs.
By their very nature, such statements require us
to make assumptions, and are subject to uncertainties and inherent
risks, both general and specific. Desjardins Group cautions readers
against placing undue reliance on forward-looking statements when
making decisions since a number of factors, many of which are
beyond Desjardins Group's control and the effects of which can be
difficult to predict, could influence, individually or
collectively, the accuracy of the assumptions, predictions,
forecasts or other forward-looking statements in this press
release. Although Desjardins Group believes that the expectations
expressed in these forward-looking statements are reasonable and
founded on valid bases, it cannot guarantee that these expectations
will materialize or prove to be accurate. It is also possible that
these assumptions, predictions, forecasts 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 future actual results, conditions, actions or events differ
materially from targets, expectations, estimates or intentions that
have been explicitly or implicitly put forward. Readers who rely on
these forward-looking statements must carefully consider these risk
factors and other uncertainties and potential events, including the
uncertainty inherent in forward-looking statements.
The factors that may affect the accuracy of the
forward-looking statements in this press release include those
discussed in the "Risk management" section of Desjardins Group's
2023 annual MD&A and of its MD&A for the first quarter of
2024, and include credit, market, liquidity, operational,
insurance, strategic and reputation risk, environmental, social and
governance risk, and regulatory risk.
Such factors also include those related to
security (including cybersecurity) breaches, fraud
risk, the housing market and household and corporate indebtedness,
technological advancement and regulatory developments, including
changes to liquidity and capital adequacy guidelines, and
requirements relating to their presentation and interpretation, as
well as interest rate fluctuations, inflation, climate change and
geopolitical uncertainty. Furthermore, there are factors related to
general economic and business conditions in the regions in which
Desjardins Group operates; monetary policies; the critical
accounting estimates and accounting standards applied by Desjardins
Group; new products and services to maintain or increase Desjardins
Group's market share; geographic concentration; acquisitions, joint
arrangements and the ability to achieve the anticipated benefits;
changes in the credit ratings assigned to Desjardins Group;
reliance on third parties; the ability to recruit and retain
talent; and tax risk. Other factors include interest rate benchmark
reform, unexpected changes in consumer spending and saving habits,
the potential impact of international conflicts on operations,
public health crises, such as pandemics and epidemics, including
the COVID-19 pandemic, or any other similar disease affecting the
local, national or global economy, as well as Desjardins Group's
ability to anticipate and properly manage the risks associated with
these factors despite a disciplined risk management environment.
Additional information on these factors is available under the
"Risk management" section of Desjardins Group's 2023 Annual Report
and of its MD&A for the first quarter of 2024.
It is important to note that the above list of
factors that could influence future results is not exhaustive.
Other factors could have an effect on Desjardins Group's results.
Additional information on these and other factors is found in the
"Risk management" section of Desjardins Group's 2023 Annual
MD&A and of its MD&A for the first quarter of 2024 and can
be updated in subsequent quarterly MD&As.
The significant economic assumptions underlying
the forward-looking statements in this document are described in
the "Economic environment and outlook" section of Desjardins
Group's 2023 MD&A and of its MD&A for the first quarter of
2024 and can be updated in the interim MD&As subsequently
filed. Readers are cautioned to consider the foregoing factors when
reading this section. To determine our economic growth forecasts in
general, and for the financial services sector in particular,
Desjardins Group mainly uses historical economic data provided by
recognized and reliable organizations, empirical and theoretical
relationships between economic and financial variables, expert
judgment and identified upside and downside risks for the domestic
and global economies.
Any forward-looking statements contained in this
press release represent the views of management only as at the date
hereof, and are presented for the purpose of assisting readers in
understanding and interpreting Desjardins Group's financial
position as at the dates indicated or its results for the periods
then ended, as well as its strategic priorities and objectives as
considered as at the date hereof. These forward-looking statements
may not be appropriate for other purposes. Desjardins Group does
not undertake to update any oral or written forward-looking
statements that could be made from time to time by or on behalf of
Desjardins Group, except as required under applicable securities
legislation.
Basis of presentation of financial
information
The financial information in this document comes
primarily from the Annual and Interim Combined Financial
Statements. Those statements have been prepared by Desjardins
Group's management in accordance with IFRS issued by the
International Accounting Standards Board (IASB) and the accounting
requirements of the AMF, which do not differ from IFRS. IFRS
represent Canada's GAAP. The
Interim Combined Financial Statements of Desjardins Group have been
prepared in accordance with International Accounting Standard (IAS)
34, "Interim Financial Reporting." All the accounting policies were
applied as described in Note 2, "Accounting policies," to the
Annual Combined Financial Statements except for certain comparative
figures from the prior period, which have been reclassified to
conform with the presentation of the Interim Combined Financial
Statements for the current period. During the first quarter of
2024, a presentation accounting policy relating to interest income
and interest expense recognized on the financial instruments of
Desjardins Securities Inc. has been changed, and these items are
now presented under "Net interest income" instead of "Other
income." This new presentation has been considered preferable to
provide reliable and more relevant information. As a result, for
the three-month period ended March 31,
2023, a net amount of $116 million has been moved in
two gross amounts from "Other income" to interest income and
interest expense, under "Net interest income," changing these line
items by $270 million and $386 million, respectively.
This change had no impact on total net income and net surplus
earnings for the comparative period.
This press release has been prepared in
accordance with the current regulations of the Canadian Securities
Administrators (CSA) on continuous disclosure obligations. Unless
otherwise indicated, all amounts are presented in Canadian dollars
($) and are primarily from Desjardins Group's annual and interim
combined financial statements.
SOURCE Desjardins Group