Desjardins Q1 earnings drop five per cent to $378 million despite loan growth

MONTREAL – Desjardins Group reported Friday that low interest rates caused its surplus earnings to drop five per cent to $378 million despite higher loans and insurance revenues.

Quebec’s largest financial institution said its earnings as of March 31 were down $20 million from $398 million a year ago.

Revenues increased to $2.86 billion from $2.77 billion on a 6.3 per cent increase in loans.

However, interest income decreased by $30 million to $934 million due to low interest rates.

“Our caisse network and our insurance companies have posted strong business volume growth,” said CEO Monique Leroux.

“However, the low interest rate environment has affected our profit margin and profitability, which we take as an incentive to continue exercising sound and prudent management of the group’s affairs.”

The provision of dividends paid to members dropped 29 per cent to $36 million, while it gave $16 million in donations to community groups and sponsorships.

Net insurance premiums increased 7.7 per cent to $1.3 billion, while other operating income was up 3.6 per cent to $602 million.

Investment income grew 55.3 per cent to $132 million due to an increase in the fair value of life and health insurance assets.

The provision for credit losses was $60 million, down $22 million or 26.8 per cent. Gross impaired loans totalled $469 million.

Its Tier 1a capital ratio under new Basel III rules was 16 per cent, while its return on equity decreased to 9.8 per cent from 11.7 per cent a year earlier.

Total assets increased to $201.6 billion from $196.8 billion as of Dec. 31.

During the quarter, Moody’s downgraded the credit ratings of Desjardins and five other Canadian financial institutions due to troubling economic signs, including high household debt and elevated housing prices.

Even after the downgrade, Desjardins said its credit ratings remain “among the best in Canada and compare favourably with those of several large international and Canadian financial institutions.”