Desjardins Group is not afraid of an increase in the number of borrowers in difficulty due to a possible rise in interest rates. The state of the job market would be more decisive in estimating the resilience of borrowers, explained the chief operating officer of the financial cooperative of Lévis, Réal Bellemare, during a press briefing aimed at discussing the results of the fourth trimester.
“It is certain that inflation and the interest rate have an impact, but the most important impact for credit losses is the employment rate. Currently, we are in a situation where we are almost at full employment. As long as people are working, the population is able to absorb a slightly higher interest rate. It is able to absorb inflation,” he adds.
The easing of sanitary measures should bring an economic “breath of fresh air”, believes Guy Cormier, the president and chief executive officer. “We have the financial capacity to have a good rebound in the economy. »
Desjardins Group has sharply lowered its provisions for credit losses in 2021 compared to 2020, the year in which the first phase of the pandemic forced the financial cooperative to put more money aside in the event of losses.
In 2021, the provision for credit losses of 69 million was down by 794 million compared to the 2020 financial year. “It’s difficult to go lower than that”, admits Mr. Bellemare, who warns that provisions could go back to their historical average in the future.
Desjardins Group said earlier Wednesday that its surplus had halved in the last three months of the year. Earnings before patronage refunds of 393 million is down 483 million, or 55.1%, compared to the same period in 2020. This drop is “really not representative” of the 2021 financial year, says Mr. Cormier. Management attributes this decline to an acceleration in investments, but also to a revision of its actuarial assumptions for personal insurance.
In the fourth quarter, the Wealth Management and Life and Health Insurance division posted a loss of 6 million, against a profit of 109 million in the same period last year.
The revision of actuarial assumptions is not linked to an increase in mortality or claims related to COVID-19, said Alain Leprohon, chief financial officer. The insurance policy lapse rate was a determining variable in the changes in the assumptions. Customers were “less likely to let go of their policy” in a low interest rate environment, he said. Desjardins had to strengthen its reserves to take into account the higher number of contracts that continued. “It has nothing to do with COVID, it’s more a matter of interest rates. »
The loss in the fourth quarter is not a harbinger of a future increase in premiums at Desjardins, said Mr. Bellemare. He indicated that the life and casualty insurance market was “highly, highly competitive” in Canada and that Desjardins did not dictate market prices.
The cooperative also pointed out that its non-interest expenses are up by 404 million, to 2.7 billion, mainly due to sums invested in strategic projects.
A record number of members
For the year 2021, the cooperative recorded an increase of 21.6%, or 523 million, to 2.9 billion, in its surplus before dividends. Mr. Cormier pointed out that the cooperative welcomed nearly 83,000 members, or 64,000 individuals and 18,000 businesses. “It’s the best performance for twenty years. »
The provision for patronage dividends in 2021 amounts to 387 million, which represents an increase of 17.3%, or 57 million, compared to the year 2020. Taking into account sponsorships, donations and scholarships , Desjardins claims to have donated 514 million to members and the community.