Credit Union Group Rules Roost in Quebec

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Credit Union Group Rules Roost in Quebec

U.S. bankers may be envious of the coast-to-coast reach of Canada's big financial institutions, but the Quebec-based Caisses Desjardins have something even more attractive: killer market share.

Little known outside of Canada, the French Canadian confederation of credit unions has 35% of all savings deposits in Quebec province, 23.1% of the commercial lending market, 31% of personal loans, and 38% of all mortgages.

Behind the group's powerful market position lies Desjardins' traditional role as defender of the economic interests of some 6 million French Canadians ever since its founding 91 years ago.

But as growth in traditional banking products flattens out, Desjardins aims to turn itself into a financial supermarket for the independence-minded Quebecois, offering everything from trust banking to insurance.

"We're well ahead of the banks when it comes to diversifying," says Claude Beland, the group's 58-year-old president and mastermind of the growth.

"We think that's where our growth will come from in the future."

Since 1985, the group has nearly doubled consolidated assets to $45 billion, compared with a 75% increase in assets at banks in Quebec to $67 billion.

Desjardins is targeting three areas for expansion: asset management, insurance, and brokerage services.

To achieve this, the group has acquired or set up a string of nonbanking financial companies and set up a separate holding company, Societe Financiere des Caisses Desjardins Inc., to manage them, and strengthened capital by bringing institutional investors into the holding company and subsidiaries and listing some units, such as Trustco Desjardins Inc. on the Montreal stock exchange.

Contribution to Strength

The strategy is already paying off.

Desjardins is now second biggest in Quebec in life insurance with $488 million (U.S.) in premiums and 9.2% of the market and third-biggest in property insurance with $241 million (U.S.) in premiums and 7.7% of the market.

It owns the biggest discount broker in Quebec, Investissements Disnat Inc., and runs Canada's eighth-largest trust company, Trustco Desjardins, with $2.8 billion in assets and $22.3 billion in assets under management.

Analysts say several factors operate in the group's favor:

* Its special provincial charter that permits it to engage in financial activities that Canadian banks can't get into.

* A total of 1,336 locally managed branches across Quebec called Caisses Populaires. That includes 675 in communities where Desjardins is the only financial institution in town.

* Effective community relations that burnish the group's image as a corporate good citizen and an institution democratically run by its 4.3 million members.

* Rising French Canadian separatist sentiment.

"They're a force to reckon with and particularly so in Quebec," a spokeswoman for the Canadian Bankers Association acknowledges.

Linked to Nationalism

Analysts add that Desjardins has a significant advantage over banks when it comes to doing business in Quebec, largely because of its extensive grass-roots network and its skill in turning French Canadian nationalist sentiment to its own advantage.

Alongside a buildup in non-banking activities, Desjardins is expanding its retail network to other French-speaking enclaves in Canada.

The group brought 153 French Canadian credit unions in New Brunswick, Manitoba, and Ontario into its own network last year and is hoping to expand alliances with credit unions in other provinces.

Outside Canada, Desjardins is discussing possibilities for either acquiring a Florida thrift or opening a federally licensed agency. It is strengthening alliances with big cooperative banks in Europe, Japan, and Australia, such as Credit Mutuel de France and Japan's Norinchukin Bank. …