In Q3 2012, Desjardins Group posted solid earnings of $443 million (before member dividends), consistent with Q3 2011 profits.
“Our efforts to maintain a high level of capitalization continue to pay off,” says Monique F. Leroux, chair of the board, and president and CEO.
However, total income for the third quarter came to $3,219 million, a decrease of $507 million or 13.6% from the same period of 2011. This was mainly due to lower investment income.
Net interest income for the third quarter declined slightly to $962 million, compared to $968 million for the same period last year. Despite an $8.4 billion drop in aggregate outstanding loans over last year, this was mainly due to the low interest rate environment and fierce competition in the mortgage lending market.
Net premiums jumped 3.6% to $1,278 million due to business growth in insurance activities. This was mainly due to various growth initiatives in property and casualty insurance across Canada.
Other income stood at $979 million, down $546 million or 35.8% compared to the same quarter of 2011, due to lower investment income from life and health insurance activities.
This decline was offset by a plunge in investment contract liabilities, however. This includes expenses related to claims, benefits, annuities and changes in insurance and investment contract liabilities.
These expenses stood at $1,235 million, down $515 million or 29.4% from the same period in 2011. This change was essentially due to a decrease in actuarial provisions in the wealth management and life and health insurance segment.
Fluctuations in the fair value of various investment portfolios and hedging positions also helped offset losses, along with growth in credit card activities and commission income.
Quality loan portfolio: The quality of Desjardins Group’s loan portfolio remains excellent, with gross impaired loans standing at $536 million at the end of Q3 2012. This is up $16 million from December 31, 2011.
Assets grew 5%: Desjardins Group’s total assets grew $9.5 billion, or 5%, since December 31, 2011, to $199.7 billion. This sustained growth was mainly due to a surge in demand from individuals for credit and, in particular, for residential mortgage loans.
Strong capital base: The company continues to be one of the best capitalized financial institutions in Canada, with its Tier 1 and total capital ratios of 16.5% and 19.0%, respectively, as at September 30, 2012.
Results by segment
At the end of the third quarter of 2012, surplus earnings attributable to the personal services and business and institutional services segment were $237 million, down $30 million or 11.2% from the same period of 2011.
Net interest income rose slightly due to an increase in residential mortgages and business loans outstanding. On the other hand, the impact was mitigated by the continuing low interest rate environment and strong competition in the residential mortgage market.
Looking at the wealth management and life and health Insurance segment, its surplus earnings stood at $87 million, a slight increase over 2011’s $48 million. This was essentially due to life and health insurance activities, which posted better performance in the third quarter of 2012 than in the same quarter of 2011.
The company’s property and casualty insurance earnings were $25 million, down $13 million or 34.2% compared to 2011.