Desjardins Group, with its credit union model, shows the best performance among Canada’s leading banks, with a large jump in profits compared with its peers. 

Desjardins Group is an outlier among Canada’s largest banks. While the country’s top names have a typical banking structure and capital that belongs to shareholders, as a federation of credit unions, Desjardins is ultimately owned by its customers.

It is also the lender that has expanded the most in 2019, both in terms of Tier 1 capital and assets and, in particular, in terms of pre-tax profits: a 17.85% jump compared to the other five banks’ small percentage changes, hovering just above or a few digits below zero.

Desjardins is also Canada’s best-performing bank according to The Banker’s analysis, and by a good margin. It leads in six out of the eight performance indicators: growth, profitability, asset quality, return on risk, soundness and leverage. These metrics point to an exceptionally good 2019 financial year for the lender.

Further, analysts believe that Desjardins is also in a better position than its peers to weather the economic consequences of the coronavirus pandemic in 2020. In June, rating agency Moody’s improved its outlook on the group from negative to stable on the back of the bank’s reduced reliance on wholesale funding, which can be particularly volatile during crises.

It also reflects the group’s presence in Quebec, an area where consumers have average lower levels of indebtedness compared with other provinces of Canada. This makes the group’s loan portfolio less vulnerable to the economic implications of Covid-19 compared to banks that serve more highly indebted customers elsewhere in the country.

Household indebtedness has been a problem for Canada for the past few years. The average level of household debt to disposable income began to rise prominently in 2015 and, although appearing to have plateaued at the end of 2019, it was still a worrying 176%, according to Statistics Canada. It might spike again. In May, the central bank of Canada warned of a rise in vulnerable households that would likely struggle to keep up with loan repayments.

This is a problem even for the largest and still solid Canadian banks. Royal Bank of Canada, the country’s largest by Tier 1 capital, is second in the overall performance ranking. Perhaps reassuringly, based on 2019 annual financial data, it is also second in the asset quality ranking, which looks at the ratio of provisions for loan losses to gross total loans, the non-performing loans ratio, the impairment charges to total operating income ratio, and their annual changes. 

Canada’s other big banks follow in the overall performance ranking in order of their ranking by size: Toronto Dominion Bank, Scotiabank, Bank of Montreal and Canadian Imperial Bank of Commerce.


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