Investor Presentation Q1 2019 Results - Desjardins
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Investor Presentation Q1 2019 Results
2
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This presentation contains forward-looking statements regarding, among other things, Desjardins Group’s business objectives and priorities,
financial targets and maturity profile. Such statements are typically identified by words or phrases such as “believe”, “expect”, “anticipate”, “intend”,
“estimate”, “plan” and “may”, words and expressions of similar import, and future and conditional verbs.
By their very nature, such statements involve assumptions, uncertainties and inherent risks, both general and specific. It is therefore possible that,
due to many factors, these forward-looking statements may not materialize or may prove to be inaccurate and that actual results differ materially.
Desjardins Group cautions readers against placing undue reliance on these forward-looking statements since actual results, conditions, actions and
future events could differ significantly from those anticipated.
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 the
accuracy of the forward-looking statements in this presentation. These factors include: credit, market, liquidity, operational, insurance, strategic, and
reputation risks; regulatory and legal environment risk; environmental risk; risk related to pension plans; technological advancement and regulatory
developments; cybersecurity; household indebtedness; real estate market trends; geopolitical risks; communication and information; general
economic and business conditions in regions in which Desjardins Group operates; changes in the economic and financial environment in Quebec,
Canada and globally; monetary policies; the accuracy and completeness of information concerning clients and counterparties; the critical accounting
estimates and accounting standards applied by Desjardins Group; new products and services to maintain or increase Desjardins Group’s market
share; the ability to recruit and retain key management personnel, including senior management; geographic concentration; acquisitions and joint
arrangements; credit ratings; amendments to tax laws; unexpected changes in consumer spending and saving habits; the ability to implement
Desjardins Group’s disaster recovery plan within a reasonable time; the potential impact of international conflicts or natural disasters; and
Desjardins Group’s ability to anticipate and properly manage the risks associated with these factors.
It is important to note that the above list of factors that could influence future results is not exhaustive. Other factors could have an adverse effect
on Desjardins Group’s results. Additional information about these and other factors is found in the “Risk management” sections of Desjardins
Group’s most recently published annual and any subsequent quarterly MD&As.
Any forward-looking statements contained in this presentation 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 balance sheet as at the dates indicated or its results for the
periods then ended, as well as its business objectives and priorities. These 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.
DISCLAIMER 2
3
About Us 4
Financial Results 8
Balance Sheet Quality 11
Capital and Funding
Strategies 15
Contact Information 25
34
ABOUT US
WHO WE ARE
1900 7 million > 46,000 238 938 1,957
ATMs
Established Members & Employees Caisses Points of sale Largest
Clients network in
QC
WHAT WE DO
Personal and Property & Life Wealth
Business Casualty Insurance Insurance Management
#1 in Quebec #2 in Quebec & #2 in Quebec & > 61 billion in assets
#3 in Canada #5 in Canada under management
ABOUT US 45
HIGHLIGHTS Q1 2019 RESULTS
Results Balance Sheet Liquidity & $389 Million
Redistributed to
As at March 31, 2019 As at March 31, 2019
(Comparison against Q1 2018) (Comparison against Q1 2018) Capital members and the
As at March 31, 2019 community
$401 million $304 billion 18.1% $100 Million
For a new development
fund
Surplus earnings, down 20% Total assets, up 7.8% CET1 ratio (Tier 1A)
Strong, Shared and
Commitment to Action
On climate change
$5.7 billion $186.3 billion 122.5%
Total income, up 31% Total deposits, up 6.7% Average LCR ratio Carbon Neutral
Starting 2017
The Banker
6th largest financial cooperative 6th safest financial institution in 97th most important financial
group in the world by total North America and 37th in the institution by Tier 1 capital
income world
ABOUT US 56
ORGANIZATION CHART
238 caisses
Capital Desjardins
Inc. Fédération
des caisses
Desjardins
Desjardins Security du Québec
Fund
Desjardins Global
Desjardins Desjardins General Desjardins
Asset Desjardins Trust
Financial Security Insurance Group Securities
Management
ABOUT US 67
LEADING MARKET SHARES IN QUEBEC
42% 41% 38%
Personal savings Farm loans Residential mortgages
23% 21%
Consumer credit Commercial &
industrial loans
Sources: Data at December 31, 2018; Market shares in Quebec: Desjardins Economic Studies; Life & Health Insurance: Canadian Life Insurers’ Annual Reports and
Autorité des marchés financiers’ 2017 Annual Report on Financial Institutions; General Insurance: 2017 MSA Market Share Report; Desjardins Securities, ABOUT US 7
fixed-income group: Market Trade Reporting System.8
PROFITABILITY AND INCOME DIVERSIFICATION
SURPLUS EARNINGS, MEMBER DIVIDENDS AND
OPERATING INCOME DISTRIBUTION
ROE ($M)
9.1% 9.0%
8.0% 8.3%
2,326 Net interest
Other banking
2,151 6.5% income
activities
31%
7%
1,772 Brokerage and
investment
fund services
Net premiums
5%
Life & Health
Other income Net premiums 29%
-1% Property and
501 Casualty
401 Insurance
202 253 29%
144 77
50
2016 2017 2018 Q1 2018 Q1 2019
Surplus earnings Member dividends ROE
Source: Desjardins Group’s Financial Reports FINANCIAL RESULTS 89
SURPLUS EARNINGS BY SEGMENT
▪ Surplus earnings for the Personal and
Business services segment increased by
Personal and Business services and $60M, or 21.8%, compared to Q1 2018.
Other category (M$) ▪ Operating income for the Personal and
Business services segment increased by
1 259 11.1%, compared to Q1 2018, as a result of
1 093 growth in the average portfolio of loans and
Titre de l'axe
1 015
acceptances, as well as higher interest
rates.
343 ▪ Increase in caisse network sales of various
269
products, such as investment funds.
2016 2017 2018 Q1 2018 Q1 2019
▪ Productivity initiatives in the caisse network
are working as increase in expenses was
limited to 3.7%, compared to Q1 2018.
FINANCIAL RESULTS 910
SURPLUS EARNINGS BY SEGMENT
Wealth Management and Life and
Health Insurance (M$)
894
1 ▪ Surplus earnings decreased by $67M mainly
attributable to gains on disposition of securities
612 and real estate investments that were less than in
461 Q1 2018.
206
139 ▪ Net premiums increased by $54M, or 4.7%,
compared to Q1 2018.
2016 2017 2018 Q1 2018 Q1 2019
Property and Casualty Insurance (M$) ▪ Negative surplus earnings of $81M, mainly due to
446 2 weather conditions that contributed to increase in
frequency of claims compared to Q1 2018.
296
173 ▪ Net premiums increased by $125M, or 11.8%,
compared to Q1 2018, attributable to increases in
26
the average premiums and in number of policies
issued from multiple growth initiatives across all
-81
segments and regions.
2016 2017 2018 Q1 2018 Q1 2019
Source: Desjardins Group’s Financial Reports
1 – Includes a non recurrent gain on the creation of Aviso Wealth. FINANCIAL RESULTS 10
2 – Includes a non recurrent gain on the sale of Western Financial Group.11
STRONG BALANCE SHEET
LOANS AND ACCEPTANCES ($B) DEPOSITS ($B)
0.8% 1.7%
191.4 192.9 183.2 186.3
178.0 171.6 1.7 2.4 1%
45.1 46.1 24% 1.9
40.8
13% 76.2 76.7 41%
26.2 26.0 69.1
24.0
113.1 120.1 120.7 63%
107.1 58%
100.6 105.3
2017 2018 Q1 2019 2017 2018 Q1 2019
Residential mortgages Consumer and other personal loans Business and government Individuals Business and government Deposit-taking institutions
TOTAL ASSETS ($B) EQUITY ($B)
Q1 2019 304.0 Q1 2019 26.1
2018 295.5 2018 25.6
2017 275.1 2017 24.8
Source: Desjardins Group’s Financial Reports
BALANCE SHEET QUALITY 1112
DIVERSIFIED RESIDENTIAL MORTGAGE PORTFOLIO
BY PRODUCT TYPE BY PROPERTY TYPE
2%
Insured
8%
31%
36% 15%
Total of Total of
$120.7B $120.7B
14% 61%
5%
28%
Average LTV of
56.8% Single-family
Insured mortgages
Multi-properties (4 or less)
Conventional term mortgages Multi-properties (5 or more)
Heloc (lines of credit) Condominiums
Heloc (term mortgages) Secondary houses
BALANCE SHEET QUALITY 1213
WELL-BALANCED BUSINESS AND GOVERNMENT LOAN PORTFOLIO
INDUSTRY DISTRIBUTION
Other businesses
Other
1%
Finance and insurance 3%
▪ 15% WERE GUARANTEED OR INSURED AT 2%
Utilities
Q1 2019 2% Agriculture
Arts and entertainment 20%
▪ HIGH QUALITY OF TOP SECTORS 2%
Company management
o Agriculture: $9.3B, most loans are 2%
Real estate
guaranteed and covered by income Professional services 17%
protection programs 2%
Other services
o Real estate: $8.0B 2%
Transportation
o Manufacturing: $4.1B 3%
Manufacturing
9%
Accommodation
o Health care: $3.3B
3%
o Retail trade: $3.3B Wholesale trade Construction
Health care
3% Retail trade 7%
Public agency loans 7%
▪ OTHER INDUSTRIES WELL-DIVERSIFIED 7% 7%
Source: Desjardins Group’s Financial Reports
BALANCE SHEET QUALITY 1314
ASSET QUALITY
PROVISION FOR CREDIT LOSSES AS A % OF AVERAGE LOANS
(Trailing 12 months at Q1 2019)
1.06
Canadian Banks
US Commercial
Desjardins
0.54
0.49 0.51
0.40 0.42
0.39
0.37
0.31 0.32
0.27 0.29
0.25 0.26
0.22 0.24
0.22
0.20
0.17
0.13
0.11
0.08
Huntington
Keycorp
M&T Bank
BMO
Wells Fargo
NBC
BNS
Fifth Third
Citigroup
Desjardins
Regions Financial
Suntrust Banks
CIBC
JPMorgan
Bank of America
PNC
State St Corp
BB&T
First Republic
RBC
TD
US Bancorp
Sources: Desjardins Group’s Financial Reports and Bloomberg for Canadian banks and US commercial banks
1. Only US Banks with more than US$60B of deposits are illustrated. BALANCE SHEET QUALITY 1415
LEADING NORTH AMERICAN FINANCIAL INSTITUTION
TIER 1A OR COMMON EQUITY TIER 1 CAPITAL RATIO (%)(1)
18.1
Tier 1A/
CET1
Canadian Banks
US Banks
13.5
12.1 12.0 11.9 11.9 11.9
11.6 11.5 11.5 11.4 11.4 11.2 11.1 11.0
10.3
9.8 9.7
9.3 9.1
TD
Wells Fargo
Scotia
Sun Trust Banks
Bank of America
Citigroup
Bank of NY
NBC
RBC
Capital One
BB&T
US Bancorp
CIBC
DESJARDINS
PNC
BMO
Northern Trust
State Street
JP Morgan
Fifth Third Bank
Mellon
Sources: Financial Reports of Desjardins Group, U.S. banks and Canadian banks
1. As at Q1 2019 for Canadian banks and U.S. banks. Only US Banks with more than US$60B of deposits are illustrated. CAPITAL AND FUNDING STRATEGIES 1516
EXCELLENT TIER 1A CAPITAL AND LEVERAGE RATIOS
LEVERAGE RATIO TIER 1A CAPITAL RATIO (CET1)
Desjardins 8.4% Desjardins 18.1%
Scotia 4.4% TD 12.0%
RBC 4.3% NBC 11.5%
CIBC 4.2% RBC 11.4%
BMO 4.2% BMO 11.4%
TD 4.1% CIBC 11.2%
NBC 4.1% Scotia 11.1%
Canadian Banks Canadian Banks
4.2% 11.4%
(average) (average)
Sources: Banks and Desjardins Group’s Financial Reports
CAPITAL AND FUNDING STRATEGIES 1617
LEADING NORTH AMERICAN FINANCIAL INSTITUTION
LARGEST FINANCIAL INSTITUTIONS BY DEPOSITS(1) (US $B)
Canadian Banks
US Banks
1,493
1,379
1,264
#16 OF > 7,500 DEPOSIT TAKING FINANCIAL
1,030 INSTITUTIONS IN NORTH AMERICA
638 636
518
399
348 348
271 255 222
162 162 140 130 130 108 96 96
State Street Corp
KEYCORP
TD
Capital One
NBC
BNS
Sun Trust Banks
Wells Fargo
RBC
BB&T CORP
Bank of NY
Citigroup
Bank of America
US Bancorp
CIBC
Desjardins
PNC
BMO
Northern Trust
JP Morgan
Fifth Third Bank
Mellon
Sources: Desjardins Group’s Financial Reports and Bloomberg
1. As at Q1 2019 for Canadian and U.S. banks; exchange rate as at March 29, 2019: C$ 1.0000 = US$ 0.74911978. CAPITAL AND FUNDING STRATEGIES 1718
ROBUST LIQUIDITY POSITION
TOTAL DEPOSITS LIQUIDITY COVERAGE RATIO (LCR)
77% from personal & commercial sector
122.5%
Q1 2019
100%
20%
122.1%
Q4 2018
14% 100%
120.0%
Q3 2018
8% 100%
57%
119.8%
1% Q2 2018
100%
119.1%
Q1 2018
Individual Deposits 100%
Business and Government
Long Term Wholesale Funding LCR Regulatory requirement
Short Term Funding
Subordinated Debt
CAPITAL AND FUNDING STRATEGIES 1819
ROBUST LIQUIDITY POSITION
SECURITIES PORTFOLIO
DESJARDINS (Q1 2019) CANADIAN BANKS (Q4 2018)
(AVERAGE)
Equities
7%
Other issuers Canadian and
15% US
governments
44%
Other Canadian and
governments US Other
1% governments Equities governments
77% 25% 8%
Other
issuers MBS
14% 5%
ABS
4%
Sources: Banks and Desjardins Group’s Financial Reports
MBS: Mortgage-Backed Securities CAPITAL AND FUNDING STRATEGIES 19
ABS: Asset-Backed Securities20
WELL-ESTABLISHED GLOBAL FUNDING PROGRAMS
PROGRAMS CURRENCY LIMIT
Short term
Commercial paper – Canada Canadian None
Commercial paper – United-States United-States US$15B
Commercial paper – Europe Euro €3B
Mid-Long term
Medium term notes – Canada Canadian C$10B
Global medium term notes Multi-currency €7B
Covered bonds Multi-currency C$10B
Securitization program (CMHC) Canadian Allocation
CAPITAL AND FUNDING STRATEGIES 2021
WELL-ESTABLISHED GLOBAL FUNDING PROGRAMS
WHOLESALE FUNDING
BY PROGRAM TYPE BY CURRENCY
3%
24% 37%
12%
19%
10% 37%
42%
14%
2%
Short term (CAD, USD & Euro) CAD
Medium Term Notes (CAD)
USD
Global MTN (USD & Euro)
Covered Bonds EURO
Subordinated Debt
GBP
Mortgage Securitization
CAPITAL AND FUNDING STRATEGIES 2122
MATURITY PROFILE
(IN $M, AS AT MARCH 29, 2019)
9,000
8,000
1,427
7,000
6,000 1,169
5,000 900
4,000
1,445
1,130 1,142
3,000
1,272 1,730
1,309 4,499
2,000
500 1,844
2,767
1,000 1,738 1,850
1,520
800
- -
2019 2020 2021 2022 2023 2024 & +
MT Deposit Note & Term debt Subordinated debt Securitization Covered bonds
Note: exchange rate used at the time of issuance of securities
CAPITAL AND FUNDING STRATEGIES 2223
CREDIT RATINGS AMONG THE BEST IN THE INDUSTRY
Moody’s S&P DBRS Fitch
Counterparty/Deposits(1) Aa1 A+ AA AA-
Short-term debt P-1 A-1 R-1 (high) F1+
Senior medium- and long-term legacy debt(2) Aa2 A+ AA AA-
Senior medium- and long-term debt(3) A2 A- AA (low) AA-
Covered bonds Aaa -- -- AAA
Outlook Negative Stable Stable Stable
1. Represents Moody's Counterparty Risk Rating and Deposit Rating, S&P's Issuer Credit Rating, DBRS' Long Term Deposit Rating and Fitch's Long-Term
Issuer Default Rating, counterparty Rating and Long Term Deposit Rating
2. Includes senior debt issued prior to March 31, 2019, and senior debt issued on or after March 31, 2019, which is excluded from the recapitalization
regime applicable to Desjardins.
3. Includes senior debt issued on or after March 31, 2019, subject to conversion under the recapitalization regime applicable to Desjardins.
Note : as at April 24, 2019
CAPITAL AND FUNDING STRATEGIES 2324
RECENT DEBT TRANSACTION HIGHLIGHTS
January September September
2019 2018 2018
Covered Bonds
Senior Unsecured Notes Senior Unsecured Notes
Rated Aaa/AAA
C$800,000,000 €1,000,000,000
€750,000,000
Due September 2023 Due September 2021
Due January 2024
May October August
2018 2017 2017
Covered Bonds
Senior Unsecured Notes Senior Unsecured Notes
Rated Aaa/AAA
US$1,500,000,000 C$850,000,000
€750,000,000
Due October 2020 Due August 2022
Due May 2023
January November
2017 2015
Covered Bonds
Senior Unsecured Notes
Rated Aaa/AAA
C$1,000,000,000
€1,000,000,000
Due January 2022
Due November 2020
CAPITAL AND FUNDING STRATEGIES 2425
CONTACT INFORMATION
Complexe Desjardins, Montreal
PATRICK NADEAU
Head of Investor Relations and Capital Instruments
1-866-866-7000 ext. 555 8634
patrick.nadeau@desjardins.com
INVESTOR RELATIONS
www.desjardins.com/ca/about-us/investor-relations/
info_ir@desjardins.com
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