By JAMES BRADSHAW
Monday, October 15, 2018
Guy Cormier is in a dealmaking frame of mind, and he's likely to be both buyer and seller as he looks to sharpen the focus of Desjardins Group.
Emboldened by a robust Quebec economy, the president and chief executive of Canada's largest financial co-operative is on the lookout for ways to solidify its stronghold in Quebec, and to expand its growing footprint across other provinces.
Yet, after 21/2 years with Mr.Cormier at the helm, Desjardins is still juggling decisions about whether to sell off smaller business lines in insurance and retail banking to divert resources to higher priorities. A 12-month, top-to-bottom review undertaken after Mr. Cormier took over in 2016 already led to the sale of its Western Canadian insurance businesses, Western Financial Group Inc. and Western Life Assurance, for $775-million in 2017.
When his predecessor as CEO, Monique Leroux, passed the torch to Mr. Cormier in 2016, Desjardins was already expanding.
But Mr. Cormier has tempered those ambitions with talk of an overarching need to "refocus" on the co-op's members and nurture the aspects of the business that set it apart from traditional banks. Desjardins is still sorting out what it won't do, as much as what it will, as Mr. Cormier tries to ensure that "our money is really focused on what we think will have an impact on our members and clients."
"We don't want to play the same game [as] the big banks in Canada," he said in an interview, in advance of a speech he'll deliver at the Economic Club of Canada in Toronto on Thursday. "We want to differentiate ourselves."
The next phase in Mr.Cormier's efforts to transform Desjardins will unfold against a rapidly changing political backdrop. Quebec is in transition to an unfamiliar and untested government after the Coalition Avenir Québec (CAQ) won a historic victory in the provincial election early this month. But Mr. Cormier said nothing about "what we've heard and what we see" from the CAQ suggests a need for Desjardins to change course. "We will continue to collaborate with this government without any problem."
At the same time, a new tentative North American free-trade pact - the United States-MexicoCanada Agreement - could give U.S. dairy and poultry producers greater access to the Canadian market, which is expected to be hard on many Canadian farmers.
Desjardins has a large client base in the agri-food sector, and promised to support farmers as they await details on potential compensation from the federal government.
For now, however, conditions are ripe for Desjardins to expand as Quebec's economy generates solid growth with low unemployment. In the first six months of this fiscal year, Desjardins generated nearly $1.2-billion in surplus earnings - an increase of 22 per cent year-over-year, before accounting for member dividends.
The first priority in the months to come is to consolidate market share within its home province, which "will always remain our major centre," Mr. Cormier said.
But a strong local economy also "gives us a boost to continue our growth outside Quebec," he added. Mr. Cormier spoke to The Globe and Mail from Paris during a recent trip that also took him to London and Brussels to meet business partners and discuss investments in Europe.
About a quarter of Desjardins's $290-billion in assets and 30 per cent of its revenue come from outside Quebec. In property and casualty insurance, Desjardins trails only Intact Group and Aviva Group in premiums, according to statistics from the Insurance Bureau of Canada.
Desjardins expects the sector will consolidate in the coming years, "and we want to be part of this consolidation and stay in the top three," Mr. Cormier said. "We're open for acquisitions and we're open to do business in this field."
The same goes for wealth management, where Desjardins is looking to claim a larger slice of the investment industry after taking a 50-per-cent stake in the recent launch of Aviso Wealth, a joint venture with a limited partnership composed of other credit unions. Mr. Cormier said it is still "too soon" to reveal details of Aviso's growth, but said he's open to considering "other possibilities for us in Quebec and across the country" in the wealth space.
And as online banking changes the way customers interact with financial institutions, Desjardins is placing bets on financial technology firms, or fintechs.
In partnership with the Caisse de dépôt et placement du Québec, Desjardins set up a $50-million fund, named Luge Capital, which announced its first modest investment in July, backing Montreal-based startup Flinks.
Making Desjardins more accessible through mobile devices is a high priority for Desjardins, which has pushed more of its products and processes online under Mr. Cormier's watch. For example, the co-op's members can now purchase car insurance and process accident claims entirely online.
Not every venture into digital banking has paid off for Desjardins, however: The co-op is rumoured to have considered selling Zag Bank, a Calgary-based online bank fashioned out of assets acquired when Desjardins bought Western Financial in 2011.
Zag Bank lost $6.8-million in the first half of 2018, according to public filings.
Mr. Cormier would only say that Zag Bank is one of several assets under review. "There's no decision, no process, nothing ... that I can announce," he said.
"Do we want to maybe do a transaction or something else?
This is part of our analysis right now."
Since taking over as Desjardins CEO in 2016, Guy Cormier, seen in Quebec City on Friday, has tempered expansion goals with talk of an overarching need to 'refocus' on the co-op's members and nurture the aspects of the business that set it apart from traditional banks.
FRANCIS VACHON/THE GLOBE AND MAIL