Leroux leads quiet Desjardins Group expansion nearing end of her term

Share

Desjardins Group is pushing ahead with a measured expansion strategy as it gears up for a change in leadership next spring.

The financial co-operative, Canada's largest with total assets of $250-billion, currently generates about 35 per cent of its top-line revenue from business outside its home province. It is aiming to increase that to about 40 per cent over three to five years, said Desjardins chairwoman and chief executive Monique Leroux. Rather than a big flashy acquisition, which isn't really Desjardins's style, the group plans to broaden its relationship with current customers by offering them more products while remaining open to opportunistic asset purchases.

"Our footprint now is good but it cannot be the endgame, that's for sure," Ms. Leroux said in an interview Friday at Montreal's Complexe Desjardins tower. "We have a lot to do in Quebec. We've got a lot to do in Canada. If we were to do things on an international basis, we would do it in partnership."

Ms. Leroux is nearing the end of a second four-year term as head of Desjardins, Quebec's largest private-sector employer. Members will elect her replacement next spring and she'll stay on for three months to ensure a smooth transition. She's scheduled to speak to the Montreal Board of Trade on Monday about the financial group's response to the sweeping change brought about by digital computing and communications technology.

Reflecting on her priorities for the institution and what remains to be done, she said key focuses for Desjardins going forward include building more critical mass in its business lines and making sure it innovates. Last year's acquisition of State Farm Life Insurance Co.'s Canadian arm for an estimated $1.35-billion made Desjardins Canada's second-largest property and casualty insurer.

A deal with France-based mutual-savings bank Crédit Mutuel vaulted it into the top 10 for payment processing.

"It's very much important to be among the top five in your industry if not the top three," Ms. Leroux said of the financial-services sector. "You need to have a certain position to be pertinent and have the capacity to have good returns on your capital."

Those returns under Ms. Leroux have been brag-worthy. Surplus earnings in the latest quarter were up $183-million to $629-million while operating income rose 9 per cent. It finished the quarter with a tier 1A capital ratio of 16 per cent, besting many rivals.

Desjardins has a commanding share of retail deposits in Quebec with a roughly 40-per-cent share and about 5 million member-clients. It has another 2 million clients outside the province, including those served at caisse branches in Ontario. In her first mandate as CEO, Ms. Leroux led the purchase of High River, Alta.-based insurer Western Financial Group for $440-million. The deal also gave Desjardins Western's Bank West, which it relaunched as online depository Zag Bank.

"What [Desjardins is] trying to do is to leverage up their strength in Quebec and penetrate" farther into Canada, West of Quebec primarily, said Peter Routledge, an analyst at National Bank Financial. "That's going to be hard for them because they're going up against incumbents who don't want to cede share."

Mr. Routledge notes that the acquisitions Desjardins has done have been relatively small given its size. "They're pursuing a fairly diligent expansion strategy where they're trying to hit singles as opposed to hitting home runs. They're not swinging for the fences in anything they've done. And that's a pretty smart way to do it."

Ms. Leroux is coy when asked about her plans after leaving Desjardins, but they will almost certainly include more work as a corporate director. Last week, she joined the board of convenience store chain Alimentation Couche-Tard Inc., a company she holds up as a model of entrepreneurship and global growth ambition.

"As Canadians, we can do things that could make a difference, not only in this country but also more globally," she says of Canadian firms. "We need to grow on the international scene."