Desjardins Group has doubled the size of the reserves it sets aside in case of loan losses in 2023 while more entrepreneurs and credit card holders find themselves in a difficult financial position.
Its provisions for losses increased by 252 million, to reach 529 million in 2023, according to the results of the financial cooperative revealed on Wednesday.
For businesses, the hardest hit industries are those most vulnerable to a decline in discretionary spending like restaurants, lodging, construction and real estate. “It is certain that companies in the area of discretionary spending are more affected than companies that are in everyday consumer goods,” said the chief operating officer, Réal Bellemare, at a press conference. .
Mr. Bellemare expects headwinds to continue for these industries in 2024. “We still saw an increase in default situations on the business side. We expect 2024 to be a little more difficult. »
The portrait “is not black and white” when we look at the situation of companies, judges the president and CEO, Guy Cormier. “There are sectors of activity, unfortunately, which are more under pressure. […] There are other sectors of activity where the funds are at full capacity. I’m doing well. »
He adds that many entrepreneurs anticipated an economic slowdown and managed to prepare accordingly.
On the personal side, homeowners continue to repay their mortgage loans, but the quality of loan portfolios has deteriorated among credit card holders at a time when the finances of many households are tighter.
“Currently, the Desjardins mortgage portfolio doesn’t keep me from sleeping, it’s very solid,” replies Mr. Cormier.
In 2023, Desjardins Group called 70,000 of its members “deemed more vulnerable” with a variable rate mortgage loan in order to advise them.
Mr. Cormier acknowledged that the situation could be more difficult for households who are going to renew their mortgage loan while the rates for their previous term were at a low during the pandemic.
“There, we are seeing more significant mortgage renewals in terms of monthly costs. We can talk about $600 to $800 per month,” underlines the boss of Desjardins.
Results difficult to compare
Desjardins Group has revealed an increasing surplus for the 2023 financial year, but the change in accounting standards makes it difficult to interpret the real performance of the cooperative.
Insurers must make the transition from IFRS 4 to IFRS 17 accounting standards. Desjardins thus had to adjust its accounting standards for its insurance activities, as other Canadian insurers had to do.
The financial cooperative reports a surplus of 2.3 billion for the 2023 financial year. However, there is a lot of accounting noise when it comes to comparing the surplus with last year.
In theory, the surplus would have increased by 1 billion compared to last year, but this dazzling increase is not representative of the real performance of the cooperative, explains the head of finance of Desjardins, Alain Leprohon, in a session technical information to explain the impact of the change. “We cannot say that Desjardins made 1 billion more this year than last year,” he adds.
In summary, this difference is largely attributable to the moment when Desjardins decided to capitalize on certain impacts linked to the change in standards.
Mr. Leprohon believes that, although imperfect, a comparison between the 2023 surplus and the 2022 surplus as reported under the old standards would be more representative. In this case, the surplus would have increased by 10%. “That would be more appropriate,” he adds.
If the comparison is more complicated for 2023, the new IFRS 17 standard, which is mandatory, aims to increase transparency and comparability between insurance companies, specifies Mr. Leprohon. “Once past the transition year, it brings a lot more transparency to the figures. »
The cooperative increased its rebate by 9 million, to stand at 412 million in 2023. Including the rebate, aid to the community reaches 538 million.