Desjardins Group, the largest integrated cooperative financial group in Canada, today announced surplus earnings before patronage dividends to members of $186 million for the first quarter compared to $234 million a year ago.

Desjardins Group’s financial performance in the first quarter was mainly affected by lower profitability in the Personal and Commercial segment. The sharp growth in this segment’s overall business volume, notably in terms of financing activity and investment fund sales, was offset by the narrowing of the spread, lower income from trading and investing activity, and higher operating expenses, including an additional expense related to employee future benefit plans. As a result, its surplus earnings slipped by $40 million.

The insurance subsidiaries also experienced a slight decrease in profitability in the quarter. It should be noted, however, that in first quarter 2005, an approximate gain of $9 million from the disposal of a division of the life and health insurance subsidiary had been recorded. For their part, Desjardins Venture Capital and Desjardins Securities respectively achieved net earnings of $5 million and $0.7 million.

The provision for patronage dividends to caisse member-owners recorded for the first three months of 2006 totalled $90 million compared to $93 million one year earlier.

Return on equity (surplus earnings before patronage dividends to members on average equity) was 9.5% at the close of first quarter 2006 compared to 13.2% in the year-earlier period. This decrease is largely attributable to the increase in the Tier 1 capital base and to the above-mentioned factors.

As at March 31, 2006, Desjardin Group’s Tier 1 capital ratio was 13.83%, one of the industry’s best ratios, while its total capital ratio was 14%.

As at March 31, Desjardins Group’s total assets stood at $124.3 billion compared to $110.2 billion one year earlier, which corresponds to an increase of 12.8% (or $14.1 billion). The sustained growth shown by the group owes to a number of factors, a main one being the robust demand for credit, notably in the area of residential mortgage loans. It should be pointed out that, at the end of March 2006, assets included an amount of $6 billion stemming from the application of a new accounting standard, effective January 1, 2006, regarding the holding of implicit variable interests that require investment companies to be consolidated into the Group’s Combined Financial Statements. Until December 31, 2005, these investments had been recorded net of their fair value.

“This first quarter marks the launch of our 2006-2008 Strategic Plan, and I am thrilled with the excellent performance demonstrated by the caisses, notably in the area of mortgage loans and personal savings recruitment, in which they recorded growth that surpassed even our expectations. This start of the year, however, has been accompanied by the decline in profitability that we had anticipated,” said Alban D’Amours, president and CEO, in a release.