Alberta Treasury Branches (ATB) reported strong earnings in the second quarter,
with net income of $44.1 million for the period ending September 30, 2001,
compared to $43.3 million reported for the same period last year. This
quarter's results increased ATB's equity to $519.1 million, as at September 30,
2001.
"ATB continues to strengthen its position in the Alberta marketplace,
through sustained earnings and solid market share," said Bob Normand,
President and CEO of ATB. "While the Alberta economy remains strong, we
continue to take a conservative approach in establishing adequate provisions
for credit losses."
Financial Highlights
Total assets of $12.4 billion is an increase of 10.89 percent over last
year.
Total loans at $10.0 billion is an increase of 6.13 percent over last
year.
Customer deposits of $11.5 billion is an increase of 9.17 percent over
last year.
Net interest income of $94.9 million is an increase of 5.07 percent from
$90.3 million for the same quarter last year.
Non-interest expenses of $68.5 million is an increase of 10.80 percent
from $61.8 million for the same quarter last year.
ATB's efficiency ratio, non-interest expenses as a percentage of operating
revenues, is 58.52 percent compared to 57.41 percent for the same six-month
period last year.
The allowance for credit losses, including specific and general loan loss
allowance, exceed gross impaired loans by $79.6 million. Net impaired loans
represent a negative 0.79 percent of total loans at September 30, 2001,
compared to a negative 0.51 percent at September 30, 2000.
Products and Services
Retail deposits continue to show solid growth, both in deposit accounts and
retail investment products.
The Century Guaranteed Investment Certificate (GIC) was by far our most
popular investment product last year. Introduced to commemorate Alberta's
centennial in 2005, the 2001 Redeemable Century GIC is the second of six annual
Century GICs that will be available for a limited time in October each year.
Purchasers of the 5-year redeemable Century GIC will also qualify for a $100,000
draw in December 2005.
Mortgage product sales continued to show good growth during the second
quarter. The 30-month mortgage promotion was positively received by our
customers and based on that demand the promotion has been extended into the
fall.
A promotional campaign for the Cost Cutter Crop Input Loan program was also
introduced. This loan program is designed specifically for the agriculture
industry, providing a repayment schedule for up to18 months after the loan is
advanced.
The Canadian Federation of Independent Business released a survey earlier
this year, where ATB was acknowledged for having the highest retention rate of
small business clients. During the past three years, ATB has retained 96.4
percent of its small business clients, which reflects the satisfaction our
business customers have with the service provided by ATB.
Community Involvement
An ATB community promotion to support the IAAF World Championships in
Athletics in Edmonton during August provided 225 pairs of free tickets for a
contribution to the Edmonton Food Bank. Hundreds of people took advantage of the
offer, within 45 minutes all tickets were awarded, and more than 1,000 kg of
food was donated.
Ten central Alberta branches participated in an ATB/STARS fundraiser between
August 20th and September 8th. Through the corporate promotion and various
in-branch promotions, the campaign netted $26,755.69 for the Alberta Shock
Trauma Air Rescue Society (STARS).
Economic Outlook
In the current global economic climate, uncertainty has become the watchword,
making investors and consumers more cautious. Over the next two quarters Alberta
Finance expects Alberta's economic growth to slow down, although it will outpace
economic growth in the rest of Canada.
The North American slowdown, higher oil and gas inventory levels, and
weakened performance in Asia and Europe has caused the price of oil and natural
gas to decrease. As a result, ATB expects drilling to modestly decrease over the
winter season.
Forestry products have also seen price declines reflecting a softening in the
U.S. housing and newsprint markets. Provincially, housing remains strong, as
Alberta, with the lowest unemployment rate in Canada, is attracting new
migrants. Alberta's livestock industry continues its strong growth more than
offsetting the decline in grain production.
Looking forward, the pace of economic growth in Alberta is expected to
moderate to around two percent. Given the already tight supply of labour and
capital at the present time, this slowdown may reduce inflationary pressures.
Announcements
Bob Normand was appointed President and Chief Executive Officer effective
November 1, 2001 and will report on ATB's progress over the remainder of the
year. On behalf of the Board of Directors and ATB Associates we would like to
thank Paul Haggis for his leadership over the past five years as President and
Chief Executive Officer of ATB.
ATB reported net income of $44.1 million for the second quarter
ended September 30, 2001 compared to $41.0 million for the first
quarter ended June 30, 2001 and $43.3 million in the second quarter
last year. Second quarter net income exceeded last quarter's net
income by 7.59 percent and last year's second quarter net income by
1.72 percent. Net income is $85.0 million for the six months ended
September 30, 2001, an increase of $3.1 million or 3.78 percent over
net income for the same period last year.
Net Interest Income
Net interest income for the second quarter ended September 30,
2001, is $94.9 million, up $2.3 million or 2.46 percent from the first
quarter and $4.6 million or 5.07 percent from the second quarter last
year.
For the six months ended September 30, 2001, net interest income is
$187.5 million, an increase of $10.0 million or 5.62 percent over the
same period last year. The increase in net interest income over the
past year is due to growth in average assets of 11.62 percent. As
expected, the net interest margin decreased to 3.11 percent for the
six months ended September 30, 2001 from 3.29 percent for the same
period last year. The lower net interest margin is primarily
attributable to the continued declining interest rate environment. ATB
has been able to reduce the negative impact of this decline by
entering into interest rate swap agreements.
Other Income
Other income for the second quarter ended September 30, 2001 is
$23.9 million, an increase of $0.5 million or 2.22 percent from the
first quarter and $2.9 million or 13.98 percent from the second
quarter last year. The increase in this year's second quarter other
income compared to last year continues to be related to fees, other
charges and card fee revenue. The increase in card fee revenue is
primarily attributable to continued positive customer reaction to the
introduction of new MasterCard products in 1999.
Non-interest Expenses
Non-interest expenses are $68.5 million for the second quarter
ended September 30, 2001, a decrease of 0.46 percent compared to
non-interest expenses last quarter
and a 10.80 percent increase compared to non-interest expenses for the
second quarter last year. For the six months ended September 30, 2001,
non-interest expenses increased 8.28 percent compared to the same
period last year. This increase in non-interest expenses is primarily
due to increased salaries and related payroll costs. Also, the deposit
guarantee fee payable to the Province of Alberta increased due to
strong deposit growth over the year as well as a scheduled rate
increase.
The efficiency ratio, expressed as a percentage of non-interest
expenses to operating revenue (net interest income plus other income)
is 58.52 percent for the six months ended September 30, 2001, compared
to 57.41 percent for the same period last year. Consistent with ATB's
projection for fiscal 2002, this increase is related to increased
compensation and benefit costs as well as investments in technology
and risk management processes.
Loan Quality
The quality of ATB's loan portfolio continued to improve over the
past year. Gross impaired loans (before deducting the allowance for
credit losses) at the end of the quarter is $100.2 million, compared
to $125.4 million a year ago. The allowance for credit losses exceeds
the gross amount of impaired loans by $79.6 million at September 30,
2001 compared to $48.5 million a year earlier. The ratio of credit
losses to average loans improved to 0.25 percent at September 30, 2001
compared to 0.26 percent a year earlier.
Balance Sheet
ATB's total assets are $12.4 billion at September 30, 2001, an
increase of 6.37 percent from March 31, 2001 and an increase of 10.89
percent from September 30, 2000. Loans are up 6.13 percent from a year
ago due to moderate growth in all customer segments. In the past year,
loans to individuals increased by $407.3 million or 7.63 percent,
agriculture loans increased by $67.4 million or 5.81 percent, and
independent business and commercial loans increased by $115.0 million
or 3.83 percent (excluding general allowance for credit losses).
Deposits grew by $968.4 million or 9.17 percent over the past twelve
months. This quarter's earnings increased ATB's equity to $519.1
million at September 30, 2001.
Caution Regarding Forward Looking Statements
This report includes forward looking statements. ATB from time to
time may make forward looking statements in other written or verbal
communications. These statements include objectives for the short and
medium term and strategies to achieve those objectives. ATB cautions
readers not to place undue reliance on the forward looking statements as
actual results may differ materially from plans, objectives and
expectations.
By their very nature forward looking statements involve
uncertainties and can change due to a variety of reasons including
legislative or regulatory changes, competition, technological changes,
and changes in interest rates and general economic conditions. The
foregoing list is not exhaustive and when relying on forward looking
statements these factors as well as other factors should be considered.
