The downside of Desjardins' dominance is, of course, that there is precious little room left for it to grow in its home province. Past attempts to diversify have been stalled by the credit union's decentralized structure, some misadventures in new financial products and intense competition outside Quebec from the financial giants that dominate English-Canadian markets.
Leroux's predecessors sought for years to diversify by acquiring insurance companies and peddling life and property and casualty policies in the Maritimes and Ontario through Desjardins offices and partnerships with other credit unions. But more than 20 years after it bought its first non-Quebec insurance company, Desjardins remains a minor player. Dwarfed by the likes of Manulife, Great-West Life and Sun Life, Desjardins holds only a 4% share of Canada's property and casualty insurance market, and an 8% share of life insurance.
Back home in Quebec, Desjardins was so prolific that it grew into an unwieldy tangle of fiefdoms with layers upon layers of management. Some of its 12 divisions, or so-called federations, were so powerful that acquisitions were sometimes made without head-office approval. In the late 1990s, then-president Claude Béland persuaded members to create a single centralized federation, the better to foster innovation at a time of deregulation and rapid change in the financial industry.
Under Béland, Desjardins was led by a centralized executive group that pushed further into insurance, and expanded discount brokerage, wealth management and investment services. The new direction brought rapid growth and, by the late 2000s, increased risks. Under CEO Alban D'Amours, Desjardins followed other Quebec financial players such as the National Bank and Caisse de dépôt et placement into the high-octane world of intricately engineered securities that promised higher yields and investment security.
Desjardins embraced two classes of the new securities. One, known as principal protected notes (PPNs), guaranteed that clients would fully recover what they invested. Desjardins took some of the cash it raised from selling PPNs and traded in Asset-Backed Commercial Paper, a popular class of high-yielding notes based on underlying pools of mortgages and other assets. The notes seemed indestructible because of their high credit ratings. In addition to trading in ABCP, Desjardins also bought the notes for pension funds it manages.
In August of 2007, Desjardins and hundreds of other investors learned how flawed the celebrated ABCP was when a panic over subprime mortgage fraud in the United States paralyzed the booming Canadian market. The failure of these and other securities left backers of investment insurance products on the hook for billions of dollars of losses. Desjardins, the company founded expressly to protect Quebeckers from financial legerdemain, was exposed to $2 billion of the toxic assets. The co-operative bought back the tainted notes it had sold to customers and absorbed a large writedown on the remainder.
Desjardins was luckier than most of its brethren during the financial crisis because it did not have to endure a public beating of its stock price on equity markets. As a member-owned co-operative, Desjardins has no publicly listed stock. What it does have, however, are debentures and other debt securities that are sold to investors and rated by credit agencies.
As the crisis started to boil in late 2007, Peter Routledge, then an analyst with Moody's Investors Service, began assessing the damage at Desjardins. After discussions with a number of executives, he concluded that the company's most informed executive was its chief financial officer. Routledge was impressed by how unusually frank and co-operative the executive was regarding the complex products and their potential impact on the company. Monique Leroux, he recalls, had such an "extraordinary" grasp of the details that "I could never stump her. She always had an answer."
Although many other financial players saw their credit ratings downgraded, Moody's left Desjardins' rating intact.
Monique Leroux has been taking charge of messy situations ever since her 1960s childhood in the Montreal suburb of Boucherville. When her parents were in financial straits, and the family wanted "to make sure we were able to keep our house," it was Monique who came up with a name, logo and marketing plan for the shoe store that her parents were opening. The budding executive was 12 at the time.
To supplement the family's modest income, Leroux played the piano at a local dance studio and the organ during services every Sunday at the local Catholic church. Juggling schoolwork, part-time jobs and piano lessons instilled in Leroux a strong discipline and appetite for challenges. It also cultivated an infectious optimism about work. Famous to this day for keeping long hours at the office and an active file of community causes, Leroux makes little distinction between work and personal life. "When you have an opportunity in your life that is aligned with what you like to do, you can invest a lot of passion and a lot of time in your work," she says.Report Typo/Error
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