Desjardins Group declared surplus earnings before patronage dividends to members of $190 million for the second quarter ended June 30, compared to $295 million for the second quarter of 2005.

Desjardins says this difference is primarily attributable to the narrowing of the spread and to higher operating expenses. After accounting for the portion of interest income from trading and investment activities, the net profit margin faced significant pressures resulting in a sharp decrease compared to second quarter 2005, which enjoyed a robust increase in income from the change in fair value of derivative products.

At the close of the first six months ending June 30, , Desjardins posted combined surplus earnings before patronage dividends to members of $376 million, down $153 million from the year-earlier period.

The reduced profitability stems primarily from lower financial results in the personal and commercial segment. The end result was a $150 million or 40.1% decrease in the Personal and Commercial segment’s surplus earnings, which amounted to $224 million, compared to $374 million for the same period in 2005.

At the close of the first six months of 2006, return on equity (surplus earnings before patronage dividends over average equity) was 9.5% compared to 14.5% one year earlier. The decrease in this ratio largely owes to the increase in the Tier I capital base, combined with the above-mentioned factors.

Desjardins Financial Security, the life and health insurance subsidiary, posted a slight decline in profitability in the first six months of 2006 with earnings of $68 million compared to earnings of $79 million for the first six months of 2005, which included the approximate $9 million gain from the sale of the Imperial Life division in the Bahamas carried out in first quarter 2005.

In the first six months of 2006, Desjardins General Insurance Group, the general insurance subsidiary, posted earnings of $60 million, slightly stronger results than the $58 million generated in the first six months of 2005.

Desjardins Asset Management and Desjardins Venture Capital generated net earnings of $14.6 million and $1 million respectively. As for the Desjardins Securities subsidiary, it incurred a net loss of $2.2 million in the first six months of 2006 compared to $6.4 million last year.

The provision for patronage dividends to caisse member-owners, recorded for the first six months of 2006, totalled $201 million, as against $172 million one year earlier.

As at June 30, Desjardins Group’s Tier I capital ratio stood at 13.65%, one of the best in the industry, while the total capital ratio settled at 13.73%.

Total assets stood at $129.8 billion, an increase of 14.1% or $16 billion from the same date last year.

Commenting on the sixth-month results, Alban D’Amours, president and CEO of Desjardins Group, said: “We observed several positive signs such as the increase in our business volumes, exceptional sales of off-balance sheet savings products, and growth in financing activities, notably in the area of mortgage loans, where caisses continued to make major inroads.”