Desjardins Group today announced reduced surplus earnings for the fourth quarter ended Dec. 31, 2007.

Canada’s largest integrated cooperative financial group in Canada, reported $273 million in surplus earnings before member dividends, compared to $284 million for the same quarter in 2006.

Desjardins Group revaluated its non-bank ABCP holdings as at December 31, 2007 and took a write-down of $116 million ($79 million after taxes) in the fourth quarter in addition to the one announced at the end of the third quarter.

Thus, Desjardins recorded a $273 million ($186 million after taxes) or a decline of approximately 16% in the value of its ABCP holdings in the second half of 2007. At year-end, the total non-bank ABCP held directly by Desjardins Group stood at $1.7 billion, excluding securities held as part of investments associated with certain capital guaranteed savings products.



Return on equity (surplus earnings before member dividends over average equity) stood at 11.8%, against 13.3% in the same quarter of the previous year.

“Despite the slight decrease and in light of the problems on the financial market, we are very satisfied with these fourth quarter results. The caisse network made a tremendous contribution to the Group’s profitability with an increase in earnings of approximately 17% over the same quarter of the previous year. Our life and health insurance subsidiary also played a big role in our combined results with a jump in earnings of approximately 38%,” stated Alban D’Amours, president and chief executive officer of Desjardins Group.

However, these solid gains were offset by a reduction in the fair value of investments due to the combination adjustments presented in the “Other” segment.

The provision for member dividends was up 31.1% to $177 million in the fourth quarter, compared with $135 million in the same year-earlier period.

Net interest income amounted to $821 million, an increase of $21 million or 2.6% over the same quarter in 2006, fuelled by volume growth.

Insurance and annuity premiums rose $74 million (or 8.3%) and $16 million (or 21.3%) respectively, pushing total net insurance premiums up by $90 million or 9.7% over the fourth quarter of 2006. As a result of two non-recurring gains described further on, other income rose due to the $15 million or 9.4% increase in income from brokerage, mutual fund and trust services, the $12 million or 13.2% growth in income from lending fees and credit card service revenues and the $118 million increase in investment income due to a gain in the fair value of investments.

Desjardins Group’s total income advanced $170 million or 6.8% to $2,687 million in the last quarter of 2007, compared to the same quarter of the previous year.

The provision for credit losses was $65 million in the fourth quarter of 2007, versus $45 million for the same quarter in 2006.

For the year ended Dec. 31, 2007, Desjardins Group announced $1,101 million in combined surplus earnings before member dividends, a $113 million or 11.4% increase over the $988 million recorded in 2006.

Return on equity reached 12.3%, versus 12.1% for the previous year. Excluding the impact of non-recurring items and non-recurring gains in the fourth quarter, surplus earnings before member dividends were up 20% to $1,186 million and return on equity stood at 13.3%.

The provision for member dividends was $592 million, versus $483 million for the previous year, a sharp increase of 22.6%.