Investor Presentation Q1 2018 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 25
3 4 HIGHLIGHTS AT MARCH 31, 2018
Results Balance Sheet Liquidity & Capital Three months ended March 31, 2018 At March 31, 2018 At March 31, 2018 (Comparison against Q1 2017) (Comparison against December 31, 2017)
$501 million $282 billion 17.4% Surplus earnings, up 31% Total assets, up 3% CET1 ratio (Tier 1A)
$4.3 billion $175 billion 119.1% Total income, up 3% Total deposits, up 2% Average LCR ratio
The Banker
5th largest financial cooperative Strongest financial institution 100th most important financial group in the world by total in North America and 5th in institution by Tier 1 capital income the world (1)
1. July 2015 edition. ABOUT US 4 5 ORGANIZATION CHART
271 caisses
Capital Desjardins Inc. Fédération des caisses Desjardins Desjardins Security du Québec Fund
Desjardins Global Desjardins Desjardins General Desjardins Asset Desjardins Trust Financial Security Insurance Group Securities Management
Note: 271 caisses at January 1, 2018 ABOUT US 5 6 MARKET LEADERSHIP
LEADING MARKET SHARES IN QUEBEC
Personal LIFE & HEALTH savings 41.6% #2 insurer in Quebec #5 insurer in Canada . Extensive range of products Farm loans 39.3% . Offices across Canada
GENERAL
Residential #1 in direct distribution in Quebec 36.1% mortgages #2 insurer in Quebec #3 insurer in Canada
Consumer credit 22.4%
Commercial & industrial 19.7% . 47 full‐service branches loans . No. 7 fixed income group in Canada
Sources: Data at December 31, 2017; Market shares in Quebec: Desjardins Economic Studies; Life & Health Insurance: Canadian Life Insurers’ Annual Reports and Autorité des marchés financiers’ 2016 Annual Report on Financial Institutions; General Insurance: 2016 MSA Market Share Report; Desjardins Securities, ABOUT US 6 fixed‐income group: Market Trade Reporting System. 7 SOLID AND STEADY PROFITABILITY
SURPLUS EARNINGS, MEMBER DIVIDENDS AND ROE ($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 –Q1 2018 OPERATING INCOME DISTRIBUTION –Q1 2018
Property and Casualty Insurance ($26M; 5%) Other banking Net interest activities income 7% 28% Personal and Business Brokerage and Wealth Services and investment Management Other fund services Net premiums category and Life and 7% Life & Health ($269M; 54%) Health Net premiums 29% Insurance Property and ($206M; 41%) Other income Casualty 3% Insurance 26%
Source: Desjardins Group’s Financial Reports FINANCIAL RESULTS 8 9 SURPLUS EARNINGS BY SEGMENT
Personal Services and Business and . Good performance from the caisse Institutional Services and Other category (M$) network, especially in net interest income, as a result of growth in the average portfolio of loans and 1,096 1,093 1,002 1,015 acceptances, as well as higher interest rates . Growth in business volume as a result of card payment activities
258 269 . Increase in caisse network sales of various products, such as 2014 2015 2016 2017 Q1 2017 Q1 2018 investment funds
Source: Desjardins Group’s Financial Reports FINANCIAL RESULTS 9 10 SURPLUS EARNINGS BY SEGMENT
Wealth Management and Life and Health Insurance (M$) . Higher gains on the disposal of securities and real estate investments 612 and higher income from growth in 503 461 411 assets under management . Net premiums increase of 6% 206 143 . Less favourable claims experience 2014 2015 2016 2017 Q1 2017 Q1 2018
Property and Casualty Insurance (M$)
446 . Higher investment income 360 296 . Net premiums increase of 10% 180 . Less favourable claims experience (18) 26 2014 2015 2016 2017 Q1 2017 Q1 2018
Source: Desjardins Group’s Financial Reports FINANCIAL RESULTS 10 11 STRONG BALANCE SHEET
LOANS AND ACCEPTANCES ($B) DEPOSITS ($B)
1% 2%
178.0 179.6 171.6 174.6 166.5 160.5 1.9 2.0 1% 40.8 40.9 23% 1.5 37.6 69.1 71.4 41% 24.0 24.5 14% 62.8 22.2
113.1 114.2 63% 106.7 96.3 100.6 101.2 58%
2016 2017 Q1 2018 2016 2017 Q1 2018 Residential mortgages Other personal loans Business and government Individuals Business and government Deposit‐taking institutions
TOTAL ASSETS ($B) EQUITY ($B)
Q1 2018 282.1 Q1 2018 24.6
2017 275.1 2017 24.8
2016 258.4 2016 23.3
Source: Desjardins Group’s Financial Reports BALANCE SHEET QUALITY 11 12 DIVERSIFIED RESIDENTIAL MORTGAGE PORTFOLIO
BY PRODUCT TYPE BY PROPERTY TYPE
2%
Insured 8% 32% 34% 15% Total Total of of $114B $114B 13% $105B 62% 6% 28% Average LTV of 55.8% 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 Q1 2018 Mining, oil and gas . HIGH QUALITY OF TOP SECTORS 1% Other Utilities 6% 1% o Real estate: $8.1B Professional services Real estate 2% 20% o Agriculture: $8.1B, 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 Wholesale trade 7% o Retail trade: $3.0B 3% Accommodation Retail trade o Manufacturing: $2.9B 3% Transportation Health care 7% 4% Construction 6% Manufacturing o Health care: $2.6B 6% 7% o Construction: $2.3B
Source: Desjardins Group’s Financial Reports BALANCE SHEET QUALITY 13 14 ASSET QUALITY
PROVISION FOR CREDIT LOSSES AS A % OF AVERAGE LOANS (Trailing 12 months at Q1 2018) 1.09
Canadian Banks US Commercial
Desjardins 0.56 0.49 0.45
0.36 0.38 0.38
0.29 0.26 0.22 0.23 0.23 0.20 0.21 0.21 0.21 0.22 0.22 0.18 0.14 0.11 0.09 TD RBC BNS PNC NBC CIBC Bank BMO Third
BB&T Fargo
Banks
Keycorp Bancorp America Republic Financial
Citigroup
Comerica JPMorgan Fifth Desjardins M&T of Huntington
US Wells First Suntrust Bank Regions
Sources: Canadian banks and Desjardins Group’s Financial Reports and Bloomberg for US Commercial banks 1. For Canadian banks and Desjardins, provision for credit losses is under IFRS 9 for Q1 2018 and under IAS 39 for the last three quarters of 2017. BALANCE SHEET QUALITY 14 Only US Banks with more than US$55B of deposits are illustrated. 15 LEADING NORTH AMERICAN FINANCIAL INSTITUTION
TIER 1A OR COMMON EQUITY TIER 1 CAPITAL RATIO (%)(1)
17.4 Tier 1A/ CET1
Canadian Banks
US Banks
12.3 12.1 11.9 11.8 11.3 11.2 11.2 11.1 11.0 10.8 10.8 10.8 10.7 10.6 10.5 10.2 9.8 9.6 9.0 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
Sources: Financial reports of Desjardins Group, U.S. banks and Canadian Banks 1. As at Q1 2018 for Canadian banks and U.S. banks. Only US Banks with more than US$55B of deposits are illustrated. CAPITAL AND FUNDING STRATEGIES 15 16 EXCELLENT TIER 1A CAPITAL AND LEVERAGE RATIOS
LEVERAGE RATIO TIER 1A CAPITAL RATIO (CET1)
Desjardins 8.2% Desjardins 17.4%
Scotia 4.6% Scotia 11.2%
BMO 4.3% NBC 11.2%
RBC 4.2% BMO 11.1%
NBC 4.0% RBC 11.0%
CIBC 4.0% CIBC 10.8%
TD 4.0% TD 10.6% Canadian Banks Canadian Banks 4.2% 11.0% (average) (average)
Sources: Banks and Desjardins Group’s Financial Reports (Q1 2018 for banks and Desjardins) CAPITAL AND FUNDING STRATEGIES 16 17 CAPITAL MANAGEMENT
REGULATORY CAPITAL COMPOSITION ($M) TOTAL CAPITAL TIER 1 CAPITAL TIER 1A (CET1) CAPITAL
2,558 849 429
18,201
20,897 20,908 21,328
Tier 1A Tier 1 Total ratio ratio ratio 668 17.4% 17.4% 17.7%
4,586
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 $B) Canadian Banks
US Banks
1,487
1,329 1,304 #17 OF > 7,500 DEPOSIT TAKING FINANCIAL INSTITUTIONS IN NORTH AMERICA 1,001
703 620 493 369 346 345 265 251 242 192 162 158 135 122 105 105 105 TD RBC One BNS PNC NBC CIBC
Corp Bank BMO Trust
BB&T
Fargo Banks
Mellon
Morgan Bancorp America KeyCorp
Citigroup NY JP Third of
Street
US Capital Trust Wells
DESJARDINS of
Northern Fifth Sun Bank State Bank
Sources: Desjardins Group’s Financial Reports and Bloomberg 1. As at Q1 2018 for Canadian and U.S. banks; exchange rate as at March 30, 2018: C$ 1.0000 = US$ 0.775193798. CAPITAL AND FUNDING STRATEGIES 18 19 ROBUST LIQUIDITY POSITION
DESJARDINS (Q1 2018) CANADIAN BANKS (Q4 2017) Equities (AVERAGE) 8%
Canadian SECURITIES Other issuers and US 13% governments PORTFOLIO 42%
Other Canadian governments and US Other governments 1% governments Equities 9% 78% 25%
MBS Other issuers 4% 15% ABS 5%
Q1 2018 100% 119.1%
Q4 2017 100% 121.4% Regulatory requirement LIQUIDITY COVERAGE Q3 2017 100% 119.9% LCR
RATIO (LCR) Q2 2017 100% 121.9%
Q1 2017 100% 121.9%
Sources: 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$15B . 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% 24% 33%
13% 11%
9% 8% 14% 57% 40% 48% 13% 1% 5%
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 March 31, 2018 CAPITAL AND FUNDING STRATEGIES 21 22 BALANCED MATURITY PROFILE
(IN $M, AS AT MARCH 31, 2018)
9,000
8,000 1,427 7,000
6,000 1,169
5,000 900
4,000 2,969 3,000 1,730 4,508 2,000 1,371 1,627 2,217 1,000 1,850 1,250 1,272 700 500 ‐ ‐ ‐ 2018 2019 2020 2021 2022 2023 & +
MT Deposit Note & Term debt Subordinated debt Securitization Covered bonds
Note: exchange rate used at the time of issuance of securities CAPITAL AND FUNDING STRATEGIES 22 23 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 STABLE
BANK OF MONTREAL A1 NEGATIVE A+ STABLE AA‐ STABLE AA STABLE
SCOTIA BANK A1 NEGATIVE A+ STABLE AA‐ STABLE AA STABLE
TD BANK Aa2 NEGATIVE AA‐ STABLE AA‐ STABLE AA STABLE
NATIONAL BANK A1 NEGATIVE A STABLE A+ STABLE AA (low) STABLE
LAURENTIAN BANK N/A N/A BBB NEGATIVE N/A N/A A (low) NEGATIVE
Note: at May 14, 2018 CAPITAL AND FUNDING STRATEGIES 23 24 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 24 25 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]
25 INVESTOR RELATIONS