Continued Growth at ATB Financial
Edmonton – August 8, 2003 – ATB Financial reported first quarter earnings of $25.0 million
for the period ending June 30, 2003, compared to $37.2 million for the same
period last year, a decrease of 32.69 per cent. Net income for the quarter includes $23.1 million in loan loss provisions
compared to $1.3 million in the first quarter of the previous year.
This
quarter’s results increased ATB’s equity to $815.9 million as at June 30,
2003, an increase of 30 per cent from last year.
"Our
growth continues and is a good indicator that ATB is very capable of providing a
competitive line-up of the financial products and services needed by our
customers," said Bob Normand, President and Chief Executive Officer of ATB
Financial. "However, despite our solid financials, the BSE issue will
undoubtedly place pressure on our bottom line in the coming financial
quarters."
Financial
Highlights
-
Total assets
of $13.7 billion is an increase of 8.28 per cent over last year.
-
Total loans
at $11.7 billion is an increase of 10.22 per cent over last year.
-
Total
deposits of $12.6 billion is an increase of 7.79 per cent over last year.
-
The
allowance for credit losses, including specific and general loan loss
allowance, exceeds gross impaired loans by $45.6 million. Net impaired loans represent a negative 0.38 per cent of total loans
at June 30, 2003, which is a decrease from a negative 0.80 per cent a year
ago.
-
Net interest
income of $100.5 million is an increase of 13.57 per cent from the same
quarter last year.
-
Non-interest
expenses of $81.4 million is an increase of 7.00 per cent from $76.1 million
for the same quarter last year.
-
ATB
Financial’s efficiency ratio (non-interest expenses as a percentage of
operating revenues) has improved to 62.84 per cent, compared to 66.40 per
cent for the same three-month period last year.
BSE
impact continues to unfold
ATB
Financial is taking a number of steps to respond to the evolving situation
surrounding the May 20 discovery of a single case of Bovine Spongiform
Encephalopathy (BSE), in a cow from an Alberta farm. ATB is committed to working
with its clients, and is doing so on an individual basis. Each customer
circumstance is being treated as a unique case requiring a unique financial
solution.
The long-term prospects for Alberta’s cattle
industry were still unknown at the close of ATB's first quarter reporting
requirements, as optimism that the Canada-U.S. border will soon be opened to
Alberta beef is waning. The impact
could be serious, and ATB Financial has made a provision for credit losses of
$29.4 million. While ATB is
optimistic that government funding and other programs will assist its clients
through this crisis, ATB also has a fiduciary responsibility to remain viable
for all its clients, its shareholder, and its staff.
The fallout from this matter will impact many
aspects of our loan portfolio, from the primary producer to those industries
that directly support the producers, all the way down to service and hospitality
industries and ultimately to the consumer level.
ATB will continue to steadfastly support our customers. However, if the trade borders remain closed, the reality is that some
less diversified or weaker businesses will likely experience a serious erosion
of equity.
ATB
Investor Services
ATB Securities was launched
in July, following approval from the Investment Dealers Association of Canada
(IDA). The
launch is a key component of ATB Investor Services' ability to offer bonds and
equity securities and, perhaps more importantly, to now provide customers with
advice on a full range of investment products.
The ability to deal in stocks and bonds is critical
to ATB’s ability to repatriate customers’ investment assets held at other
financial institutions. We will be able to transfer in and service most
investment accounts, including accounts that hold stocks and bonds.
Product
Marketing
During
the first quarter, ATB Financial introduced new products, including the
Springboard Savings Account, which offers a competitive rate for those customers
who don't need the funds today but need easy access to them, and a competitive
15-month GIC product. ATB continued
to offer the attractive Springboard GIC product and the 10-year mortgage
product, part of Alberta's best mortgage options for those customers who want to
lock in their mortgage rates while the market is so volatile.
ATB
continued to offer its popular "Real Cash, Real Profit" seminars,
aimed at independent business owners for learning about cash management and how
this can increase the profitability of their business.
ATB in the Community
The fourth annual Teddy for a Toonie fundraising campaign
took place at all ATB Financial branches and agencies during the month of May. Customers and the community at large were encouraged to donate $2 to
enter a draw for a teddy bear at each ATB location and a record $235,467 was
raised during the campaign.
In the northern half of the province $135,367 was raised
for the Stollery Children's Hospital Foundation. The money will be used for the Hematology and Thrombosis
research team that will be transferring from outside of Alberta.
The $100,100 raised in southern Alberta was raised for
the Alberta Children's Hospital Foundation. The money will be directed towards the purchase of an anesthesia patient
monitor and the Supporting Success in the Classroom program.
In
June, ATB started a campaign to bring awareness to the BSE issue and the need to
support Alberta's cattle and beef industry. Community barbecues were held in Rycroft and Mayerthorpe with many other
events planned for the remainder of the summer. The events included giving away free beef hamburgers. ATB is also providing branches and customers with customized "We
Love Alberta Beef" buttons and posters.
Branch Relocations
ATB
Financial relocated two branches: the Calgary downtown 6th Avenue
Branch was relocated about one-half of a city block west to the Monenco
Building, and the Rocky Mountain House Branch was relocated from downtown to a
prominent location off Highway #11. Both
branches feature the state-of-the-art technology that ATB customers have come to
expect.
Economic Outlook
Since the
December quarterly report, conditions in global financial markets have
stabilized and equity markets have improved. Nevertheless, uncertainty persists concerning U.S. economic growth, and
central bank lending rates have been reduced in Canada, the United States and
Europe to stimulate economic activity.
In Canada, a
dramatic rise in the value of the Canadian dollar since April resulted in a
significant tightening of monetary conditions. This sudden rise, combined with the outbreak of Severe Acute Respiratory
Syndrome (SARS) in Toronto and the discovery of one case of Bovine Spongiform
Encephalopathy (BSE) in Alberta, has clouded Canada and Alberta's economic
prospects. Nevertheless, economic
growth in Alberta is expected to come in at around three per cent this year.
Regulatory Developments
During the
quarter, amendments to the Alberta
Treasury Branches Act were proclaimed. Key amendments include the capacity to enter into certain types of
financial leasing. In addition, ATB
is now permitted, subject to prescribed conditions, to make minority investments
in eligible entities without Cabinet approval. Finally, a regime for the treatment of unclaimed deposits will be
instituted, likely in the fall, when the necessary regulations come into force.
Ron
P. Triffo Bob Normand
Chairman of the Board President & CEO
August 2003
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Management's Discussion and Analysis (unaudited)
Net Income
Net
income for the first quarter ended June 30, 2003 is $25.0 million,
compared to $21.3 million for the previous quarter, and $37.2 million
for the first quarter last year. First
quarter net income exceeded last quarter’s net income by 17.35 per
cent, and was below last year’s first quarter net income by 32.69 per
cent. This decrease from
last year is largely due to higher loan loss provisions.
Net Interest Income
Net
interest income is $100.5 million for the first quarter ended June 30,
2003, up $13.8 million or 15.90 per cent compared to last quarter and up
$12.0 million or 13.57 per cent compared to the first quarter of last
year.
The
increase in net interest income over the previous quarter is due to a
combination of growth in average assets of 5.72 per cent and increases
in the prime lending rate. The
increase in net interest income from first quarter of 2002 is due to an
increase of average prime lending rate of 93 basis points and growth in
average assets of 8.48 per cent.
Other
Income
Other income is
$29.0 million for the first quarter ended June 30, 2003, an increase of
3.29 per cent from the previous quarter, and an increase of 11.34 per
cent compared to $26.1 million for the first quarter last year. The
increase over the previous year is attributed to credit fees, primarily
in the personal and business banking segment, as a result of strong loan
growth.
Non-Interest
Expenses
Non-interest
expenses are $81.4 million for the first quarter ended June 30, 2003, a
decrease of 8.14 per cent compared to non-interest expenses last quarter
and a 7.00 per cent increase compared to non-interest expenses for the
first quarter last year.
The
increase in non-interest expenses this quarter compared to the same
quarter last year is mainly attributable to increased compensation and
employee benefits and higher transaction volume. Also, higher expenses
are due to our introducing expansions to our three lines of business: Investor Services, Energy and Commercial Banking, and Personal
and Business Banking introduced last year.
The
efficiency ratio, expressed as a percentage of non-interest expenses to
operating revenue (net interest income plus other income) improved to
62.84 per cent for the three months ended June 30, 2003, compared to
77.17 per cent for the previous quarter. For the same period of last year, the efficiency ratio was
66.40 per cent. The
improvement in the efficiency ratio is largely due to an increase in net
interest income.
Loan
Quality
Loan
loss provisions increased by $18.2 million from the previous quarter and
by $21.8 million from a year ago, mainly due to an increase in general
provisions as a result of the BSE situation. Gross impaired loans (before deducting the allowance for credit
losses) at the end of the quarter are $158.6 million compared to $87.5
million a year ago. The
allowance for credit losses exceeds the gross amount of impaired loans
by $45.6 million at June 30, 2003, compared to $86.4 million a year
earlier. The provision for
credit losses charged to the statement of income for the quarter ended
June 30, 2003 was $23.1 million, compared to $4.9 million for the
previous quarter and $1.3 million in the first quarter of last year.
Balance
Sheet
ATB’s
total assets are $13.7 billion at June 30, 2003, an increase of 3.60 per
cent from March 31, 2003. ATB loans decreased by $40.0 million or 0.34 per cent during
the quarter. Total deposits
have increased $469.4 million or 3.88 per cent in the quarter. In comparison, in the first quarter of last year, total
assets increased by 2.11 per cent, total loans grew by 1.64 per cent and
total deposits increased by 2.04 per cent.
Over
the past twelve-month period, total loans increased by 10.22 per cent
compared to a 9.30 per cent increase for the same period last year. Deposit growth over the past year was 7.79 per cent, compared to
3.11 per cent the year before.
The
total equity as at June 30, 2003 is $815.9 million, up by $25.0 million
from March 31 and up by $186.8 million from a year ago.
Caution Regarding Forward Looking Statements
This report includes forward-looking statements. ATB Financial
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.
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Highlights