Desjardins Group recorded higher profitability in the first quarter of 2007, with combined surplus earnings before patronage dividends to members of $265 million, up $79 million or 42.5% compared to the same quarter in 2006.

The strong financial performance for the quarter was primarily due to the significantly improved financial results of the personal and commercial segment, which benefited from an increase in all revenue categories.

In addition, the insurance subsidiaries also posted higher profitability as a result of improved claims experience.

The return on equity (surplus earnings before patronage dividends to members divided by average equity) stood at 12.3%, compared to 9.5% for the first quarter of 2006.

The provision for patronage dividends to members recorded for the first quarter of 2007 totalled $111 million, up from $90 million for the same quarter of 2006.

Total income, which comprises net interest income, net insurance premiums and other income, was $2,364 million for the first three months of 2007, up $43 million or 1.9% compared to the first quarter of 2006. Net interest income increased by $38 million or 5.2%, driven by higher business volume. Insurance premiums were up $58 million or 7.0% during the quarter. Annuity premiums were down by $75 million due to increased consumer interest in the life and health insurance subsidiary’s segregated fund products and to the fact that the subsidiary had posted significant sales of group retirement annuities in 2006. Other income benefited from a $25 million (or 17.5%) increase in income from brokerage services, investment funds and trust funds and from a $13 million (or 18.1%) increase in income from lending fees and credit cards. However, the increase in other income was offset by a $56 million decrease in investment income, primarily from insurance companies.

The provisions for credit losses expense charged to income during the first quarter of 2007 amounted to $44 million, up from $31 million one year earlier. The quality of Desjardins’ loan portfolio remained excellent.

Expenses related to claims, benefits, annuities and changes in insurance provisions totalled $790 million for the first three months of 2007, down $98 million or 11% compared to the same period last year. A portion of this decrease stemmed from an equivalent decline in the life and health insurance subsidiary’s annuity products.

Non-interest expenses totalled $1,157 million during the first quarter of 2007, representing a slight increase of $19 million or 1.7% compared to the same period last year. This increase reflected the effectiveness of the operating expense controls implemented during the first three months of the year, in keeping with the actions taken in the last half of 2006.

The productivity ratio (Desjardins Group’s non-interest expenses divided by its total income, net of expenses related to claims and insurance benefits) stood at 73.5% during the first three months of 2007 compared to 79.4% in the first quarter of 2006.

Desjardins still ranks among the best-capitalized financial institutions in Canada, with a Tier 1 capital ratio of 14.18% as at March 31, 2007. This level exceeded Desjardins Group’s capitalization target and was one of the best in the industry. The total capital ratio stood at 14.13% as at the same date.

“These results are better than satisfactory. They also testify to the effectiveness of the efforts undertaken last year to improve our overall profitability. Indeed, those efforts will be continuing,” said Alban D’Amours, president and CEO of Desjardins Group. “For one thing, we are controlling our expenses more effectively. In addition, our business volumes are up in most segments. For example, off-balance sheet savings products such as investment funds and securities posted a net improvement, while financing activities, particularly in the mortgage field, are also expanding. And our subsidiaries, particularly those operating in the areas of life and health insurance and general insurance, also delivered an excellent performance during the first quarter.”

Desjardins Funds’ net sales were up 84% in the first quarter of 2007.