Investor Presentation Q3 2017 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 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.
2 3
About Us 4
Financial Results 7
Balance Sheet Quality 11
Capital and Funding Strategies 15
Contact Information 26
3 4 HIGHLIGHTS AT SEPTEMBER 30, 2017
Results Balance Sheet Liquidity & Capital Nine months ended September 30, 2017 At September 30, 2017 At September 30, 2017 (Comparison against 9M 2016) (Comparison against December 31, 2016)
$1,722 million $276 billion 17.8% Surplus earnings, up 36% Total assets, up 7% CET1 ratio (Tier 1A)
$12.5 billion $172 billion 119.9% Total income, down to 2% Total deposits, up 7% Average LCR ratio
The Banker
6th largest financial cooperative Strongest financial institution 100th most important financial group in the world by total in North America and 5th in institution by Tier 1 capital income the world (1)
1. July 2015 edition. ABOUT US 4 5 ORGANIZATION CHART
293 caisses
Capital Desjardins Inc. Fédération des caisses Desjardins Desjardins Security du Québec Fund
Desjardins Global Desjardins Desjardins General Desjardins Asset Desjardins Trust Financial Security Insurance Group Securities Management
ABOUT US 5 6 MARKET LEADERSHIP
LEADING MARKET SHARES IN QUEBEC
Personal LIFE & HEALTH savings 42.4% #1 insurer in Quebec (ex aequo) #5 insurer in Canada . Extensive range of products Farm loans 39.1% . Offices across Canada
GENERAL
Residential #1 in direct distribution in Quebec 36.1% mortgages #2 insurer in Quebec #3 insurer in Canada
Consumer credit 23.1%
Commercial & industrial 22.3% . 47 full‐service branches loans . No. 6 fixed income group in Canada
Source: Data at December 31, 2016; Market shares in Quebec: Desjardins Economic Studies; Life & Health Insurance: Canadian Life Insurers’ Annual Reports and Autorité des marchés financiers’ 2015 Annual Report on Financial Institutions; General Insurance: 2016 MSA Market Share Report; Desjardins Securities, ABOUT US 6 fixed‐income group: Market Trade Reporting System. 7 SOLID AND STEADY PROFITABILITY
SURPLUS EARNINGS, MEMBER DIVIDENDS AND ROE ($M)
Source: Desjardins Group’s Financial Reports Note: Since 2010, financial statements are prepared in accordance with IFRS. Previously, Desjardins Group issued financial FINANCIAL RESULTS 7 statements prepared in accordance with Canadian generally accepted accounting principles. 8 DIVERSIFIED SURPLUS EARNINGS AND INCOME
SURPLUS EARNINGS BY SEGMENT –9M 2017 OPERATING INCOME DISTRIBUTION –9M 2017
Other banking Net interest Property and activities income Casualty Personal 7% 28% Insurance Services and ($398M; 23%) Business and Brokerage and Institutional investment Services and fund services Net premiums Wealth Other 7% Life & Health Management category 28% and Life and ($871M; 51%) Net premiums Health Property and Insurance Other income Casualty ($453M; 26%) 5% Insurance 25%
Source: Desjardins Group’s Financial Reports FINANCIAL RESULTS 8 9 SURPLUS EARNINGS BY SEGMENT
. Growth in credit card and point‐of‐ Personal Services and Business and sale financing activities Institutional Services and Other category (M$) . Increase in caisse network sales of
1,096 various products and in income 1,002 1,015 929 from capital markets 871 802 . Growth in the loan portfolio but pressure continues on interest margins . Increase in non‐interest expense due to business growth, offset by 2013 2014 2015 2016 9M 2016 9M 2017 productivity efforts
Source: Desjardins Group’s Financial Reports FINANCIAL RESULTS 9 10 SURPLUS EARNINGS BY SEGMENT
Wealth Management and Life and Health Insurance (M$) . Good performance of investments and higher income from growth in assets 503 461 453 under management 389 411 347 . Reduction in actuarial liabilities, including the effect of a decrease in the fair value of matched investments 2013 2014 2015 2016 9M 2016 9M 2017
Property and Casualty Insurance (M$) . Excluding the gain realized on the sale of Western Financial Group Inc. and
398 Western Life Assurance Company, 360 adjusted surplus earnings are $181M(1) 296
212 . More favourable claims experience for 180 the current year (more major events 114 and disasters for the same period of 2013 2014 2015 2016 9M 2016 9M 2017 2016)
Source: Desjardins Group’s Financial Reports 1. For reconciliation of adjusted surplus earnings, refer to the Q3 2017 Desjardins Group’s MD&A FINANCIAL RESULTS 10 11 STRONG BALANCE SHEET
LOANS AND ACCEPTANCES ($B) DEPOSITS ($B)
5% 7%
166.5 174.6 171.9 160.3 160.5 156.6 1.8 1% 39.8 23% 1.5 1.5 36.8 37.6 70.5 41% 23.4 13% 63.8 62.8 21.2 22.2
106.7 111.4 64% 102.3 91.2 96.3 99.5 58%
2015 2016 Q3 2017 2015 2016 Q3 2017 Residential mortgages Other personal loans Business and government Individuals Business and government Deposit‐taking institutions
TOTAL ASSETS ($B) EQUITY ($B)
Q3 2017 276.3 Q3 2017 24.7
2016 258.4 2016 23.3
2015 248.1 2015 21.7
Source: Desjardins Group’s Financial Reports BALANCE SHEET QUALITY 11 12 DIVERSIFIED RESIDENTIAL MORTGAGE PORTFOLIO
BY PRODUCT TYPE BY PROPERTY TYPE
2%
Insured 8% 33% 34% 15% Total Total of of $111B $111B 13% $105B 62% 6% 27% Average LTV of 56.2% Insured mortgages Single‐family Conventional term mortgages Multi‐properties (4 or less) Multi‐properties (5 or more) Heloc (lines of credit) Condominiums Heloc (term mortgages) Secondary houses
BALANCE SHEET QUALITY 12 13
WELL-BALANCED BUSINESS AND GOVERNMENT LOAN PORTFOLIO
INDUSTRY DISTRIBUTION
. 17% WERE GUARANTEED AT Q3 2017 Mining, oil and gas 1% Other Utilities . HIGH QUALITY OF TOP SECTORS 5% 1%
o Real estate: $8.1B Professional services Real estate 2% 20% o Agriculture: $7.7B, most loans are Finance and guaranteed and covered by income insurance 2% protection programs Arts and Agriculture entertainment 20% o Public agencies: $3.0B (governmental 2% Company agencies and school boards) management 2% . OTHER INDUSTRIES WELL‐DIVERSIFIED Other services Public agency 2% loans o Retail trade: $2.8B Wholesale trade 8% 3% Accommodation Retail trade o Manufacturing: $2.6B 3% Transportation Health care 7% 4% Construction 6% Manufacturing o Health care: $2.5B 7% 5% o Construction: $2.1B
Source: Desjardins Group’s Financial Reports BALANCE SHEET QUALITY 13 14 SUPERIOR ASSET QUALITY
GROSS IMPAIRED LOANS AS A % OF GROSS LOANS
COMPARED TO PEERS BY BORROWER CATEGORY (Q3 2017 for banks and Desjardins)
3.12 1.30 0.61 0.46 2.38 Business and 1.20 government 0.43 0.70 1.77 1.59 0.80 0.80 0.41 0.40 1.39 0.73 0.35 1.06 Consumer, 0.36 0.63 0.33 credit card and 0.81 0.71 0.75 0.59 0.62 other 0.58 0.64 0.68 0.34 0.34 0.32 0.53 personal loans 0.27
0.13 Residential 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q3 2017 mortgages Desjardins 0.32 Canadian Banks (average) Desjardins Canadian Banks (average) US Banks (average)(1)
Source: Banks and Desjardins Group’s Financial Reports and Bloomberg Note: Since 2010, financial statements are prepared in accordance with IFRS. Previously, Desjardins Group issued financial statements BALANCE SHEET QUALITY 14 prepared in accordance with Canadian generally accepted accounting principles. 1. Average of commercial US Banks with more than US$55B of deposits. 15 LEADING NORTH AMERICAN FINANCIAL INSTITUTION
TIER 1A OR COMMON EQUITY TIER 1 CAPITAL RATIO (%)(1) 17.8 Tier 1A/ CET1
Canadian Banks
US Banks 13.0 12.5 12.3 11.9 11.8 11.3 11.3 11.2 11.2 11.0 10.9 10.7 10.6 10.5 10.4 10.1 9.8 9.5 9.4 TD RBC BNS One PNC NBC CIBC
Bank BMO Trust
BB&T
Fargo Banks Street
Mellon
Morgan Bancorp America
Citigroup NY JP Third of
US Capital Trust Wells State
DESJARDINS of
Northern Fifth Sun Bank Bank
Source: Financial reports of Desjardins Group, U.S. banks and canadian Banks 1. As at Q3 2017 for canadian banks and U.S. banks. Only US Banks with more than US$55B of deposits are illustrated. For US CAPITAL AND FUNDING STRATEGIES 15 Banks, the lower of the Standardized Approach or the Advanced Approached is shown. 16 EXCELLENT TIER 1A CAPITAL AND LEVERAGE RATIOS
LEVERAGE RATIO TIER 1A CAPITAL RATIO (CET1)
Desjardins 8.3% Desjardins 17.8%
Scotia 4.4% Scotia 11.3%
RBC 4.4% BMO 11.2%
BMO 4.4% NBC 11.2%
TD 4.1% TD 11.0%
NBC 4.0% RBC 10.9%
CIBC 3.9% CIBC 10.4% Canadian Banks Canadian Banks 4.2% 11.0% (average) (average)
Source: Banks and Desjardins Group’s Financial Reports (Q3 2017 for banks and Desjardins) CAPITAL AND FUNDING STRATEGIES 16 17 CAPITAL MANAGEMENT
REGULATORY CAPITAL COMPOSITION ($M) TOTAL CAPITAL TIER 1 CAPITAL TIER 1A (CET1) CAPITAL
3,012 1,001 585
18,105
20,410 20,422 20,838
Tier 1A Tier 1 Total ratio ratio ratio 821 17.8% 17.9% 18.2%
4,496
Federation Capital Reserves and Other Total Total Senior notes Other Total capital instruments undistributed Tier 1A Tier 1A Tier 1 subject to Tier 2 capital shares subject to surplus capital capital phase out capital phase out earnings Tier 2
Source: Desjardins Group’s Financial Reports CAPITAL AND FUNDING STRATEGIES 17 18 LEADING NORTH AMERICAN FINANCIAL INSTITUTION
LARGEST FINANCIAL INSTITUTIONS BY DEPOSITS(1) (US $B)
Canadian Banks
US Banks
1,439 1,307 1,284 #17 OF > 7,500 DEPOSIT TAKING FINANCIAL INSTITUTIONS IN NORTH AMERICA 964
686 624 496 379 352 343 261 239 231 179 163 156 138 122 106 103 101 TD RBC BNS One PNC NBC CIBC
Corp Bank BMO Trust
BB&T
Fargo Banks
Mellon
Morgan Bancorp America KeyCorp
Citigroup NY JP Third of
Street
US Capital Trust Wells
DESJARDINS of
Northern Fifth Sun Bank State Bank
Source: Desjardins Group’s Financial Reports and Bloomberg 1. As at Q3 2017 for Canadian and U.S. banks; exchange rate as at September 29, 2017: C$ 1.0000 = US$ 0.801796023. CAPITAL AND FUNDING STRATEGIES 18 19 ROBUST LIQUIDITY POSITION
DESJARDINS (Q3 2017) CANADIAN BANKS’ AVERAGE (Q4 2016) Equities 8% Canadian and US SECURITIES Other issuers governments 16% PORTFOLIO 43% Canadian and US Other governments Other governments 75% Equities governments 25% 1% 10% Other issuers MBS 4% 13% ABS 5%
Q3 2017 100% 119.9%
Q2 2017 100% 121.9% Regulatory requirement LIQUIDITY COVERAGE Q1 2017 100% 121.9% LCR
RATIO (LCR) Q4 2016 100% 121.1%
Q3 2016 100% 124.4%
Source: Banks and Desjardins Group’s Financial Reports MBS: Mortgage‐Backed Securities CAPITAL AND FUNDING STRATEGIES 19 ABS: Asset‐Backed Securities 20 FUNDING STRATEGY
KEY OBJECTIVES WHOLESALE FUNDING PROGRAMS
PROGRAMS CURRENCY LIMIT . Rely on a large, sticky, retail deposit Short term Commercial paper – base as a primary source of funding Canadian None Canada Commercial paper – United‐States US$10B . Seek diversification by market, United‐States currency and term Commercial paper – Euro €3B Europe . Balance between short‐term (1/3) Mid‐Long term Medium term notes – and long‐term (2/3) Canadian C$7B Canada Global medium term Multi‐currency €7B . Typically issued 2 to 10 years notes maturities, fix and float, covered Covered bonds Multi‐currency C$10B bonds, senior unsecured and Securitization program Canadian Allocation securitization (CMHC)
CAPITAL AND FUNDING STRATEGIES 20 21 WELL-ESTABLISHED GLOBAL FUNDING PROGRAMS
TOTAL DEPOSITS WHOLESALE FUNDING
77% from personal & commercial sector BY PROGRAM TYPE BY CURRENCY
4%
20% 23% 28%
13% 11%
20% 9% 10% 57% 37% 49% 15% 1% 3%
Individual Deposits Short term (CAD, USD & Euro) CAD Business and Government Medium Term Notes (CAD) USD Long Term Wholesale Funding Global MTN (USD & Euro) Short Term Funding Covered Bonds EURO Subordinated Debt Subordinated Debt GBP Mortgage Securitization
Note: As at September 30, 2017, excludes issuance of US$1.5B in October 2017 CAPITAL AND FUNDING STRATEGIES 21 22 BALANCED MATURITY PROFILE
(IN $M, AS AT SEPTEMBER 30, 2017)
7,000
6,000
1,427 5,000 1,755
4,000 2,969 1,005 2,754
3,000 900
2,000 4,048 500 1,791 2,607 1,000 570 1,850 1,272 600 700 ‐ ‐ 2017 2018 2019 2020 2021 2022 & +
MT Deposit Note & Term debt Subordinated debt Securitization Covered bonds
Note: Exchange rate used at the time of issuance of securities, excludes issuance of US$1.5B in October 2017 CAPITAL AND FUNDING STRATEGIES 22 23 FÉDÉRATION DES CAISSES DESJARDINS DU QUÉBEC
FCDQ AT A GLANCE (At September 30, 2017) . Manages services for the caisses (such as IT, treasury, finance, HR, etc.) TOTAL ASSETS: $148.0B TOTAL DEPOSITS: $53.3B . Offers payment card services and payroll EQUITY: $16.1B and human resources services NET INCOME (9M 2017): $1,235M . Ultimate controlling shareholder of a number of provincially and federally CAPITAL RATIOS* regulated entities such as insurance TIER 1A: 17.7% subsidiaries TIER 1: 17.6% . Official representative to the Bank of TOTAL: 17.6% Canada and the Canadian banking system LEVERAGE RATIO: 7.5%
. Reporting issuer: F capital shares to SENIOR CREDIT RATINGS members of the caisses and short term and long term securities on the market MOODY’S: Aa2 S&P: A+ . May issue a capital call to its member DBRS: AA caisses FITCH: AA‐
Source: Financial Reports of the Fédération des caisses Desjardins du Québec * Effective January 1, 2017, the Federation is subject to the requirements of the AMF guideline on capital adequacy. The minimum CAPITAL AND FUNDING STRATEGIES 23 requirements are 8.0% for Tier 1A, 9.5% for Tier 1 capital ratio, 11.5% for total capital ratio and 3.0% for the leverage ratio. 24 CREDIT RATINGS AMONG THE BEST IN THE INDUSTRY
MOODY’S S&P FITCH DBRS RATING OUTLOOK RATING OUTLOOK RATING OUTLOOK RATING OUTLOOK
FÉDÉRATION DES CAISSES DESJARDINS Aa2 NEGATIVE A+ STABLE AA‐ STABLE AA NEGATIVE DU QUÉBEC
ROYAL BANK OF CANADA A1 NEGATIVE AA‐ NEGATIVE AA STABLE AA STABLE
CIBC A1 NEGATIVE A+ STABLE AA‐ NEGATIVE AA NEGATIVE
BANK OF MONTREAL A1 NEGATIVE A+ STABLE AA‐ STABLE AA NEGATIVE
SCOTIA BANK A1 NEGATIVE A+ STABLE AA‐ STABLE AA NEGATIVE
TD BANK Aa2 NEGATIVE AA‐ STABLE AA‐ STABLE AA STABLE
NATIONAL BANK A1 NEGATIVE A STABLE A+ STABLE AA (low) NEGATIVE
LAURENTIAN BANK N/A N/A BBB NEGATIVE N/A N/A A (low) STABLE
Note: At November 7, 2017 CAPITAL AND FUNDING STRATEGIES 24 25 RECENT DEBT TRANSACTION HIGHLIGHTS
October August January 2017 2017 2017
Senior Unsecured Notes Senior Unsecured Notes Senior Unsecured Notes US$1,500,000,000 C$850,000,000 C$1,000,000,000 Due October 2020 Due August 2022 Due January 2022
January November September 2016 2015 2015 Covered Bonds Senior Unsecured Notes Senior Unsecured Notes Rated Aaa/AAA €1,000,000,000 €750,000,000 €1,000,000,000 Due January 2018 Due September 2017 Due November 2020
March January January 2015 2015 2015
Senior Unsecured Notes Senior Unsecured Notes Senior Unsecured Notes C$1,500,000,000 €500,000,000 US$1,000,000,000 Due March 2020 Due January 2020 Due January 2018
CAPITAL AND FUNDING STRATEGIES 25 26 CONTACT INFORMATION
PATRICK NADEAU Head of Investor Relations and Capital Instruments (514) 281‐8634, 1‐866‐866‐7000, ext. 5558634 [email protected]
INVESTOR RELATIONS www.desjardins.com/ca/about‐us/investor‐relations/ [email protected]
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