Desjardins Group is looking to acquire insurers, wealth managers and payments firms to expand further outside Quebec and challenge the dominance of Canada’s big financial services firms, Chief Executive Officer Guy Cormier said.
Cormier, who oversees North America’s largest financial co-operative, said he’d consider deals up to C$3 billion ($2 billion) over the next three to five years, though he’s also interested in pursuing partnerships with other credit unions and co-ops.
“We’re open for business, open to increase our revenues and focus on these three targets,” Cormier, 47, said in an April 20 interview in his Montreal office. “We’ll be really open to any kind of transaction and acquisition, especially in property and casualty insurance.”
Cormier oversees a network of 313 credit unions — known as caisses — in Quebec and Ontario, as well an operation that includes retail and business banking, insurance, asset management and capital markets. The group serves more than 7 million members and clients and employs about 48,000 people.
Earlier Expansion
Desjardins expanded through takeovers under former CEO Monique Leroux, starting with the C$443 million purchase of insurer Western Financial Group in 2011. The firm bought 40 percent of Vancouver-based online brokerage Qtrade Financial Group in 2013, and two years later acquired State Farm Mutual Automobile Insurance Co.’s Canadian property and casualty and life insurance operations, as well as its mutual fund, loan and living benefit companies.
Cormier, who succeeded Leroux in April 2016 after being elected to a four-year term, said his first two years are about “taking a deep breath” on takeovers and focusing on integration. He has already undone part of the Western Financial deal, shedding its pet insurance business to Economical Mutual Insurance Co. in January and a month later agreeing to a C$775 million sale of its insurance brokerage network to Wawanesa Mutual Insurance Co.
“Desjardins is still really involved, really focused and really interested in doing business outside Quebec,” Cormier said. “We feel we have the technology, the knowledge, the capital, the money and we’re ready for that.”
Desjardins, with C$258.4 billion in assets at the end of December, has a capital strength rivaling North America’s big banks, with a Common Equity Tier 1 ratio of 17.3 percent. The Levis, Quebec-based entity is the world’s sixth-largest financial co-op by income, according to the World Co-operative Monitor.
Surplus Earnings
Desjardins posted C$14.1 billion in operating income and had surplus earnings before member dividends of C$1.77 billion in 2016 — its second-best year since Alphonse Desjardins founded North America’s first savings and credit co-operative in 1900 near Quebec City.
Its largest segment is personal and business services, which accounted for more than half of surplus earnings last year. Wealth management, which includes life and health insurance, is the second biggest, representing about a quarter of earnings, while property and casualty insurance accounted for about 17 percent of earnings.
Cormier said he wants to build on Desjardins’ property and casualty operations, challenging industry leaders in Canada including Toronto-based Intact Financial Corp. and Aviva Plc, Britain’s second-largest insurer.
“In the next two to five years, we feel that there’ll be another consolidation in Canada with the property and casualty insurers, and we’re there to buy right now,” Cormier said, noting that there are a lot of smaller insurers ripe for takeover.
‘More Aggressive’
Desjardins will boost what’s become a majority stake in the Qtrade platform into full ownership, while seeking more wealth-management deals and adding more products such as exchange-traded funds, he said.
“We want to be more aggressive and have a stronger presence outside Quebec on wealth management,” Cormier said.
He also wants to expand the firm’s existing credit card, debit and mobile technology beyond its home province and leverage its partnership with Credit Mutual on payments platform Monetico. Desjardins is currently testing a tap-and-go credit-card payment system on buses in the Montreal suburb of Laval.
Desjardins also aims for greater market share in commercial loans, consumer lending and wealth management in Quebec, notably in Montreal and among younger customers, while pushing further into Ontario, he said.
That will include five new branches in Ottawa and around Toronto — Canada’s largest city and home to five of the country’s six largest banks — to add to its existing network of 15 Ontario locations.
“One of the provinces that is booming a lot from a population point of view is Ontario, so for us, we want to be there,” Cormier said. “Do we want to compete with Royal Bank? They have their own niche and they’re there, but we feel that there is a spot for us in Ontario.”