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Results for the second quarter of 2019 – Desjardins Group records surplus earnings of $692 million for the second quarter

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At the end of the second quarter ended June 30, 2019Desjardins GroupCanada’s leading financial cooperative group, recorded surplus earnings before member dividends of $692 million, up $15 million from the same quarter of 2018. Adjusted surplus earnings(1) were up $144 million or 26.3 % for the specific item related to the creation of Aviso Wealth, i.e. the gain from the transaction involving Qtrade Canada Inc. and the interest in Northwest & Ethical Investments L.P. recognized in 2018. These results were due to strong performance in caisse network activities and the operations of the Property and Casualty Insurance segment, which posted higher premium income and a favourable claims experience compared to the same quarter of 2018. The higher surplus earnings were also due to a smaller provision for credit losses as a result of the parameter update for non-credit impaired loans and economic factors. As for the privacy breach, a total of $70 million in expenses and provisions for the implementation of protections for our members (i.e. the credit monitoring plan and the identity theft solution for Desjardins caisse members) were recognized in the second quarter of 2019.

The amount returned to members and the community was $112 million (Q2 2018: $106 million), including an $80 million provision for member dividends (Q2 2018: $71 million), $20 million in sponsorships, donations and scholarships (Q2 2018: $25 million), and $12 million in Desjardins Member Advantages (Q2 2018: $10 million). There was also another $8 million(Q2 2018: $6 million) in commitments related to the $100 million regional development fund.

“Our second quarter results are fully in line with our expectations, in particular due to the growth in caisse network operations,” said President and CEO Guy Cormier. “They demonstrate Desjardins Group’s financial strength and its ability to deal with the unexpected. Members who are worried about the privacy breach can rest assured that their cooperative protects them by providing automatic protection against identity theft to all its members. Our employees are working very hard to address our members’ concerns and needs.

It should be remembered that the identity theft solution for Desjardins caisse members includes the following:

Protection of assets and transactions

The assets and transactions of Desjardins members are protected. If the breach results in unauthorized transactions in members’ accounts, they will be reimbursed.

Individual support during the identity recovery process

In the event of identity theft, Desjardins offers its members individual support throughout the identity recovery process.

Reimbursement of $50,000

In relation to the identity recovery process, Desjardins members will be reimbursed up to $50,000 for certain expenses incurred, such as notary and legal fees and other expenses.

This offer, when combined with the Equifax credit monitoring plan and our Credit Score feature from TransUnion, will help members better protect themselves against identity theft and its consequences.

Giving back to the community

In addition to the sustained commitment of the caisses in the communities they serve, here are some of the other ways that Desjardins is making a positive difference in people’s lives.

  • Desjardins joined the Ready When the Time Comes program of the Canadian Red Cross. Through this initiative, Desjardins employees were trained to help the Red Cross with its activities during the recent floods.
  • Desjardins has strengthened its partnership with the Citadelle Cooperative, the flagship Quebec organization for maple syrup producers, beekeepers and cranberry producers, providing $1 million to modernize its plants inPlessisville, Château-Richer and Aston-Jonction.
  • Desjardins won L’actualité magazine’s social impact award in the Environment category.
  • The appointment of a new Desjardins Youth Advisory Board. This committee gives the young people in our cooperative group a voice.
  • Donation of $655,000 to support four community development projects in Abitibi-Témiscamingue, with a special focus on young people, mobility in the region and the agrifood sector.

Innovating

Desjardins is constantly innovating to meet the needs of its members and clients. Here are just a few examples of recent initiatives and the recognition received by Desjardins for its expertise.

  • Creation of a $45 million strategic fintech investment pool for Desjardins Group that will benefit members and clients and be managed by Desjardins Capital.
  • The Desjardins Group Pension Plan acquired a portion of EDF Renewables Canada Inc.’s stake in the Cypress Wind Project in Alberta as a contribution to the energy transition.
  • Desjardins Group has modernized its governance with new rules on how members are elected to its Board of Directors and its Board of Ethics and Professional Conduct, including to achieve greater diversity.
  • Responsible investment survey carried out on behalf of Desjardins to know Canadians’ perceptions and opinions of this concept in order to better serve our members and clients.
  • Launch of UX Lab, a new user experience laboratory.

Q2 financial results

  • Surplus earnings of $692 million, up $15 million from 2018.
  • Adjusted surplus earnings(1) up $144 million or 26.3% from 2018.
  • Increase in operating income(1) of $71 million or 1.7%.
  • Provision for member dividends of $80 million, up $9 million or 12.6%.
  • Outstanding residential mortgages up $3.3 billion since December 31, 2018.
  • Total capital ratio of 17.8% as at June 30, 2019.
  • Total assets of $310.9 billion as at June 30, 2019.

Net interest income was $1,299 million, up $124 million from the same period in 2018. This increase was due to growth in the entire average portfolio of loans and acceptances outstanding, and to higher interest rates.

Net premiums were $2,242 million (Q2 2018: $2,200 million), up 1.9%. This increase stemmed primarily from growth in activities and in the average premium in property and casualty insurance, offset by lower premiums from life and health insurance.

Other operating income(1) totalled $686 million, down $95 million from the corresponding period in 2018. Excluding the gain, before income taxes, of $132 million related to the transaction involving Qtrade Canada Inc. and the interest in Northwest & Ethical Investments L.P. recognized in 2018, other operating income would have been up $37 million or 5.7% compared to the same period of 2018. This increase came essentially from higher business volumes in payment and financing activities.

The recovery of the provision for credit losses totalled $11 million for the second quarter of 2019, compared to a provision for credit losses of $80 million for the same period in 2018. This decrease in the credit loss provision was primarily due to a refinement made to the risk measurement methodology for non-credit impaired loans concerning the estimated life of revolving exposures, such as credit cards and lines of credit, and an update of economic factors on the credit portfolios. The gross credit-impaired loans ratio, expressed as a percentage of the total gross loans and acceptances portfolio, was 0.56% as at June 30, 2019, relatively unchanged from what was recorded in 2018. Desjardins Group has continued to present a quality loan portfolio in 2019.

Non-interest expense was $2,053 million (Q2 2018: $1,853 million). This increase was mainly due to $70 million in expenses and provisions for the implementation of protections for our members, i.e. the credit monitoring plan and the identity theft solution for Desjardins caisse members, to higher salaries due to indexing and growth in operations and payment activities, including reward program expenses, as well as growth in financing activities.

Assets of $310.9 billion, an increase of $15.4 billion

As at June 30, 2019, Desjardins Group had $310.9 billion in assets, up $15.4 billion or 5.2% since December 31, 2018. This growth stemmed partly from a $6.2 billion increase in loans and acceptances. In addition, the growth was due to an increase in securities, including securities borrowed or purchased under reverse repurchase agreements, and net segregated fund assets, amounts receivable from clients, brokers and financial institutions included in other assets.

Strong capital base

Desjardins Group maintains very good capitalization levels in compliance with Basel III rules. Its Tier 1A and total capital ratios were 17.7% and 17.8%, respectively, as at June 30, 2019, compared to 17.3% and 17.6%, respectively, as at December 31, 2018.

Results for the first six months of 2019

At the end of the first six months of the year, surplus earnings before member dividends was $1,093 million (2018: $1,178 million), down 7.2%. Adjusted surplus earnings(1) for the specific item during the creation of Aviso Wealth, i.e. the gain related to the transaction involving Qtrade Canada Inc. and the interest in Northwest & Ethical Investments L.P. recognized in 2018, were up $44 million or 4.2%. In addition to the reasons given for the second-quarter results, this increase was offset by lower gains on the disposal of investments than in 2018 in the insurance segments and by the profit related to the restructuring of Interac Corp. recognized in the first quarter of 2018.

Segment results for the second quarter of 2019

Personal and Business Services

For the second quarter of fiscal 2019, the Personal and Business Services segment reported surplus earnings before member dividends of $461 million (Q2 2018: $299 million). This increase was largely due to solid results posted by the caisse network, especially related to the growth in net interest income, a decline in credit loss provisioning, and growth in payment and financing activities.

For the first six months of 2019, surplus earnings were $796 million (2018: $574 million).

Wealth Management and Life and Health Insurance

Net surplus earnings generated by the Wealth Management and Life and Health Insurance segment were $183 million at the end of the quarter (Q2 2018: $331 million). Results for the second quarter of 2018 benefited from the gain related to the transaction involving Qtrade Canada Inc. and the interest in Northwest & Ethical Investments L.P. Adjusted surplus earnings([4]) were down $19 million or 9.4%. This decline was primarily due to less favourable interest margins.

For the first six months of 2019, adjusted surplus earnings(1) were $322 million (2018: $408 million). In addition to the reasons given for the second-quarter results, this decline was primarily due to lower gains on the sale of securities and real estate investments than in 2018.

Property and Casualty Insurance

The Property and Casualty Insurance segment recorded net surplus earnings of $123 million in the second quarter of 2019 (Q2 2018: $52 million). This $71 million increase in surplus earnings was the result of higher net premiums, a smaller impact by catastrophe and major event claims and a lower claims experience for the current year in property and business insurance.

For the first six months of 2019, surplus earnings were $42 million (2018: $78 million). This decrease was primarily due to an unfavourable claims experience and lower gains on investments than in the same period of 2018.

Privacy breach

On June 20, 2019, Desjardins Group announced that some personal information of 2.9 million members had been shared with individuals outside the organization. This situation was caused by an ill-intentioned employee who has since been fired. Desjardins Group was not the victim of a cyberattack and its computer systems were in no way breached. In light of the situation, additional measures were put in place to protect the personal and financial information of all members and clients. Desjardins Group sent a letter to all members affected by the incident. It offers affected members, at its own cost, a credit monitoring plan and identity theft insurance with Equifax for five years.

In addition, on July 15, 2019, Desjardins Group announced to all its members that they are now automatically protected against identity theft. This protection is available not only to personal members, but also to business members, who are currently not served by any similar industry protection. This protection includes the following:

  • Protection of assets and transactions: The assets and transactions of Desjardins members are protected. Should unauthorized transactions be made in members’ accounts, they will be reimbursed.
  • Individual support in the identity recovery process: In the event of identity theft, Desjardins will offer its members individual support. It will be there for members throughout the identity recovery process.
  • Reimbursement of $50,000: Desjardins members may be reimbursed up to $50,000 for certain expenses related to identity theft, such as notary and legal fees and other expenses.

The expenses related to costs incurred and the establishment of a provision with respect to the implementation of these protections for our members, totalling $70 million, have been recognized in profit or loss in the second quarter of 2019. Desjardins Group could periodically reassess this provision based on the circumstances.

Following the announcement on June 20, 2019, the credit ratings assigned by the ratings agencies Standard & Poor’s, DBRS, Moody’s and Fitch to Desjardins Group’s senior securities were affirmed and remained unchanged.

_______________________________

(1) See “Basis of presentation of financial information”.

Key financial data

FINANCIAL POSITION AND INDICATORS

(in millions of dollars and as a percentage)

As at June 30, 2019(1)

As at December 31, 2018

Balance Sheet

Assets

$

310,906

$

295,465

Residential mortgage loans

$

123,457

$

120,113

Consumer, credit card and other personal loans

$

26,577

$

26,210

Business and government loans(2)

$

47,499

$

45,066

Total gross loans(2)

$

197,533

$

191,389

Equity

$

26,530

$

25,649

Indicators

Assets under administration

$

411,515

$

373,558

Assets under management(3)

$

63,740

$

57,448

Tier 1A capital ratio

17.7%

17.3%

Tier 1 capital ratio

17.7%

17.3%

Total capital ratio

17.8%

17.6%

Leverage ratio

8.4%

8.3%

Liquidity coverage ratio(4)

122.4%

122.1%

Gross credit-impaired loans/gross loans and acceptances ratio(5)

0.56%

0.54%

(1)

The information presented as at June 30, 2019 takes into account IFRS 16, “Leases”, adopted on January 1, 2019. The comparative data have not been restated. For more information, see Note 2, “Basis of presentation and significant accounting policies”, to the Interim Combined Financial Statements.

(2)

Includes acceptances.

(3)

Assets under management may also be administered by Desjardins Group. When this is the case, they are included in assets under administration.

(4)

The ratio result is presented based on the average of daily data for the quarter.

(5)

See “Basis of presentation of financial information.”

COMBINED INCOME

For the three-month periods

For the six-month periods

ended

ended

(in millions of dollars and as a percentage)

June 30,

2019(1)

March 31,

2019(1)

June 30,

2018

June 30,

2019(1)

June 30,

2018

Operating income(2)

$

4,227

$

4,312

$

4,156

$

8,539

$

8,188

Surplus earnings before member dividends

$

692

$

401

$

677

$

1,093

$

1,178

Adjusted surplus earnings before member dividends(2)

$

692

$

401

$

548

$

1,093

$

1,049

Return on equity(2)

10.6%

6.5%

11.0%

8.6%

9.7%

Adjusted return on equity(2)

10.6%

6.6%

8.9%

8.6%

8.6%

Credit loss provisioning rate(2)

(0.02)%

0.23%

0.18%

0.10%

0.22%

(1)

The information presented for the three-month and six-month periods ended June 30, 2019 and the three-month period ended March 31, 2019 takes into account IFRS 16, “Leases”, adopted on January 1, 2019. The comparative data have not been restated. For more information, see Note 2, “Basis of presentation and significant accounting policies”, to the Interim Combined Financial Statements.

(2)

See “Basis of presentation of financial information”.

CONTRIBUTION TO COMBINED SURPLUS EARNINGS BY BUSINESS SEGMENT

For the three-month periods

For the six-month periods

ended

ended

(in millions of dollars)

June 30,

2019(1)

March 31,

2019(1)

June 30,

2018

June 30,

2019(1)

June 30,

2018

Personal and Business Services

$

461

$

335

$

299

$

796

$

574

Wealth Management and Life and Health Insurance

183

139

331

322

537

Property and Casualty Insurance

123

(81)

52

42

78

Other

(75)

8

(5)

(67)

(11)

Desjardins Group

$

692

$

401

$

677

$

1,093

$

1,178

(1)

The information presented for the three-month and six-month periods ended June 30, 2019 and the three-month period ended March 31, 2019 takes into account IFRS 16, “Leases”, adopted on January 1, 2019. The comparative data have not been restated. For more information, see Note 2, “Basis of presentation and significant accounting policies”, to the Interim Combined Financial Statements.

CREDIT RATINGS OF SECURITIES ISSUED AND OUTSTANDING

DBRS

STANDARD & 
POOR’S

MOODY’S

FITCH

Fédération des caisses Desjardins du Québec

Short-term

R-1 (high)

A-1

P-1

F1+

Existing senior medium and long-term(1)

AA

A+

Aa2

AA-

Senior medium and long-term(2)

AA (low)

A-

A2

AA-

Desjardins Capital Inc. 

Senior medium and long-term

A (high)

A

A2

A+

(1)

Includes the senior medium and long-term debt issued before March 31, 2019, as well as that which was issued from this date and has been excluded from the recapitalization regime applicable to Desjardins Group.

(2)

Includes the senior medium and long-term debt issued from March 31, 2019, which may be converted under the terms and conditions of the recapitalization (bail-in) regime applicable to Desjardins Group.

More detailed financial information can be found in Desjardins Group’s interim Management’s Discussion and Analysis (MD&A), which is available on the SEDAR website, under the Desjardins Capital Inc. profile.

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VersaPay Announces Dream Office REIT as Newest CRE Client

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VersaPay Corporation (TSXV: VPY) (“VersaPay”), a leading provider of cloud-based invoice-to-cash solutions including electronic invoice presentment and payment, automated accounts receivable, cash application and collections management, is pleased to announce that it has added Dream Office REIT (“Dream Office”) as its newest commercial real estate client.

“With our real estate portfolio expanding in Canada and the US, our objective is to enhance our tenants’ experience and provide them with a convenient web-based and mobile portal where they can access their account, retrieve invoices, communicate and make secure electronic payments,” stated Joanne Leitch, Vice President, Property and Operations Accounting at Dream Office. “We want to create efficiencies by eliminating manual processes, minimize errors and reduce the need for tenant account reconciliations. VersaPay offered the platform to make all of this possible.”

“Through our vendor selection process we searched for a company who could provide a platform with extensive functionality with whom we could partner to provide our tenants an improved experience. VersaPay provided what we were looking for in addition to a robust integration with our JD Edwards ERP to provide real-time AR and cash review,” stated Travis Vokey, Vice President and Head of Technology for Dream Office.

“We are so pleased to be working with Dream Office, a forward-thinking Commercial Real Estate company located right here in Toronto,” said Craig O’Neill, CEO of VersaPay. “Dream is a leader in its industry, offering high-quality central business district office properties to an impressive list of tenants. One of the keys to its success has been providing tenants with a market leading experience in all facets of the business, and we’re delighted to extend this to their tenants’ experience in billing and payments.”

 

SOURCE VersaPay Corporation

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Xoom Rolls Out Domestic Money Transfer Services in the U.S.

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Xoom, PayPal’s international money transfer service, today rolled out the ability for customers to send money to recipients in the U.S. for the first time. Through strategic alliances with Walmart and Ria, Americans can now use Xoom to send money fast for cash pick-up typically in minutes at nearly 5,000 locations across the country*.

Xoom’s services potentially benefit more than 44 million foreign-born people in the U.S.1 who send remittances to family and friends in their home countries. With the introduction of domestic money transfer services, Xoom will now serve even more customers, including more than half of Americans who make domestic person-to-person (P2P) payments2. Using Xoom’s mobile app or website, consumers will have the ability to send money quickly and securely for cash pick-up at any Walmart or Ria-owned store in the U.S.

“Many of our customers in the U.S. already send money to loved ones in the country, and they usually prefer that the money is available right away,” shared Julian King, Xoom’s Vice President and General Manager. “This rollout reinforces our commitment to make money transfers fast, easy and affordable for everyone, whether they are at home or on-the-go.”

“At Ria, we are delighted to further consolidate our relationship with Xoom and Walmart,” said Juan Bianchi, CEO of Euronet’s Money Transfer Segment. “Our continued partnership is a fine example of how Ria’s technology can serve as an enabler between platforms, offering consumers and partners an added layer of security and compliance screening, in turn facilitating value creation within the Fintech ecosystem.”

Many consumers in the U.S. face personal, institutional and policy-related barriers to access the financial system. These underbanked consumers rely heavily on fringe financial service providers to conduct routine financial transactions and pay high fees in the process. With Xoom’s introduction of domestic transfers, Americans can send money at affordable rates for cash pick-up quickly at 4,684 Walmart stores and 175 Ria locations across the United States. For more information on store locations and eligible banks, visit xoom.com.

A pioneer in digital remittances, Xoom is a fast way to securely send money, pay bills and reload phones for loved ones in over 160 countries globally. These remittances serve as a lifeline for many people around the world and are used to pay for every day needs like utility bills, healthcare, and education costs, as well as emergencies. The largely cash-based system of sending money across borders is full of paperwork, high fees, standing in line and an ever-present uncertainty of when, and if, the money will arrive when it’s needed. By providing fast and more secure payment options for customers to seamlessly and securely send money across borders by going online or using a mobile device, PayPal and Xoom are helping to expand and improve the financial health of millions of people worldwide.

*Fees and Limitations apply

 

SOURCE PayPal, Inc.

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SpeakEasy Awarded Cultivation, Processing and Cannabis Sales Licence by Health Canada

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SpeakEasy Cannabis Club Ltd. (CSE: EASY) (Frankfurt: 39H) (“SpeakEasy” or the “Company“) is pleased to announce that it has received Health Canada’s coveted licence for cultivation, processing and medical sales. The Company, situated on 290 acres of fertile land in the Okanagan’s renowned Golden Mile, has demonstrated adherence to the industry’s rigorous compliance standards, and can now grow and provide its high quality, small-batch cannabis to the burgeoning recreational and medical markets.

With the receipt of the licences, the Company has immediately begun cultivation of cannabis in its 10,000-square-foot, purpose-built, state of the art facility. The Company has aquired an extensive library of unique genetics that will be used as starting material for the cultivation of cannabis at the facility.

SpeakEasy’s outdoor cultivation site has also been completed and stands ready to receive these genetics for the 2020 growing season. SpeakEasy plans to submit its evidence package for the outdoor field and amend its licence to allow outdoor cultivation on its 60 acre field. “Receiving our licence at long last, is a dream come true for all of us in the SpeakEasy family. The support we have received from shareholders, employees, family and friends has been overwhelming and I appreciate you all more than I can say,” says Marc Geen, founder of SpeakEasy. “When it comes to producing phenomenal craft cannabis, farms will always be superior to factories and culture will always speak louder than corporations. Real people recognize authenticity and SpeakEasy intends to lead by example, sharing the story of our people through the excellence of our product.” With the anticipation of receiving its outdoor licence, SpeakEasy is positioned to become one of the largest cannabis producers in Canada with extremely low cost per gram outdoor grown flower and extremely high quality small batch indoor flower.

SpeakEasy recently completed the transformation of a 60 acre orchard into a custom built outdoor cannabis cultivation environment. The fertile agricultural land is expected to enable the farm to produce up to approximately 70,000kg of cannabis flower and the Company plans to double the output to up to approximately 150,000kg, pending approval of its outdoor cultivation licence.

Construction commenced in the fall of 2017 on the 80,000-square-foot SpeakEasy campus in anticipation of demand for SpeakEasy’s craft cannabis flower and value added products. Buildings two and three were completed to lock-up in the second quarter of 2019 and building four, another 26,600-square-foot facility commenced in the spring of 2019 and is also at the lock-up stage of its development. The anticipated use of building four is the processing of sun grown outdoor flower and biomass for extraction. SpeakEasy has accumulated an impressive library of unique genetics from sources outside existing licence holders, empowering the Company to develop new strains, unique to SpeakEasy, for both indoor and outdoor cultivation.

SpeakEasy founders and team members are long standing advocates for the value of community and harnessing the power of combined expertise through successful farming cooperatives. SpeakEasy now plans to apply the same values for cannabis farming. SpeakEasy’s innovative business model is designed to support industry-leading talent through shared knowledge, resources and passion, with a commitment to maintaining exceptional quality standards and developing unique cannabis strains. The Company empowers experienced growers and geneticists to operate independently with the freedom to develop each cultivar to perfection.

 

SOURCE Speakeasy Cannabis Club Ltd.

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