Second Quarter Results
For the quarter ended September 30, 2003
Message
to Stakeholders
ATB
Earnings Exceed $46 Million
Edmonton – November
18, 2003 – ATB
Financial reported second quarter earnings of $46.2 million
for the period ending September 30, 2003, compared to $50.5 million for the same
period last year, a decrease of 8.56 per cent.
The
second quarter results increased ATB's equity to $862.1 million as at September
30, 2003, up by $182.4 million from one year ago.
"ATB Financial continues to build on its track
record of sustained earnings and increased market share," said Bob Normand,
President and CEO of ATB Financial. "A key factor in our ongoing success is
our commitment to our customers to provide personal service across our three key
lines of business – retail and business, energy and commercial, and investor
services."
Financial
Highlights
- Total assets of $13.8 billion is an increase of 8.16 per cent over last
year.
- Total loans at $11.9 billion is an increase of 9.40 per cent over last
year.
- Total deposits of $12.6 billion is an increase of 7.51 per cent over last
year.
- The allowance for credit losses, including specific and general loan loss
allowance, exceeds gross impaired loans by $57.3 million. Net impaired loans
represent a negative 0.48 per cent of total loans at September 30, 2003,
which is a decrease from a negative 0.71 per cent a year ago.
- Net interest income of $99.4 million is an increase of 6.25 per cent from
$93.5 million for the same quarter last year.
- Non-interest expenses of $79.1 million is an increase of 6.55 per cent
from $74.3 million for the same quarter last year.
- ATB Financial's efficiency ratio (non-interest expenses as a percentage of
operating revenues) has improved to 61.42 per cent, compared to 61.87 per
cent for the same three-month period last year.
BSE
update
ATB Financial continues taking proactive steps towards the changing
circumstances surrounding the May 20, 2003 discovery of a single case of Bovine
Spongiform Encephalopathy (BSE), in a cow from an Alberta farm. Since ATB's
first quarter financial report, there have been encouraging developments with
respect to the U.S. border re-opening and fortunately, to date, ATB customers
have experienced no substantive defaults or business failures. Accordingly, ATB
has not increased its loan loss provisions.
The fallout from the BSE issue is still unfolding and will not likely be
fully known for some time. However, the level of optimism is comparatively
higher since ATB's first quarter report. In the meantime, ATB continues to work
with its clients one-on-one to determine the best solution to address their
needs as a result of the BSE situation. Whenever possible, ATB associates are
proactively making every effort to visit customer premises or make telephone
contact to fully understand each customer's circumstances.
ATB
Investor Services
In spite of weak second quarter investment industry sales of $245 million
(net sales total for Canada, as per Investment Funds Institute of Canada), ATB
Investor Services had very strong net sales of $53 million. ATB Investor
Services also grew by 1,000 customers during ATB's second quarter.
ATB's Compass Portfolio Series continued its strong growth, adding $30
million in assets during the quarter.
Marketing
In the second quarter ATB Financial introduced new initiatives and products,
including a Home Equity Line of Credit special offer allowing customers to
leverage the growing equity in their home. In September ATB introduced its 65th
anniversary GIC. This two-year, flexible product offered a rate of 3.1%.
The Canadian Federation of Independent Business (CFIB) released the results
of its most recent member survey and ATB Financial maintained its Alberta market
leader status for meeting the needs of small business.
ATB sponsored an extensive "attitude and usage study" involving a
telephone survey to 1200 Alberta farmers. The study results confirm that ATB
continues to lead the market in meeting the needs of agri-industry and almost
one out of every two Alberta farm families have a primary or secondary
relationship with ATB.
ATB in the Community
ATB Financial celebrated its 65th anniversary on September 29th, 2003. The
occasion was marked by a reception featuring Premier Ralph Klein in Rocky
Mountain House, the first ATB Financial branch to open. During the week of
September 29th ATB branches and agencies hosted customer appreciation activities
including the collection of memorabilia for a time capsule.
For the third consecutive year ATB raised funds for STARS through an
in-branch campaign and a corporate golf tournament. These initiatives raised a
total of $60,000 for STARS. ATB Financial has now donated more than $225,000 to
STARS since 1998.
During the summer months, ATB sponsored the Calgary Stampede, Edmonton
Klondike Days, the Street Performers Festival in Grande Prairie, the ATB
Financial Lethbridge International Airshow, and the Alberta Seniors Games in
Fort McMurray. ATB was instrumental in bringing the inaugural CentreFest (a
street performer festival) to the City of Red Deer. The ATB parade floats
visited 36 community parades throughout the province.
For over 60 years, ATB has supported youth and agriculture through 4-H. This
summer, ATB sponsored the Provincial 4-H Beef Heifer Show in Bashaw and the
Provincial 4-H Judging Competition in Olds.
Branch Relocations
ATB
Financial held September sod turning events in Medicine Hat and Grande Prairie
for upcoming branch relocations. Both facilities will provide ATB customers with
improved access, better parking and more amenities like drive-through ABMs.
Economic Outlook
The outlook for the Alberta economy today is more positive than the first
quarter report. Agricultural exports have fallen by almost 30 per cent during
the first half of the 2003 calendar year, chiefly as a result of the BSE
discovery. At the present time, observers are cautiously optimistic that the
United States, Alberta's principal trading partner, will gradually re-open the
border to live cattle over the coming months. Nevertheless, the loss of
Alberta's largest cattle export market underlines rural Alberta's vulnerability
to market closures.
Energy prices remain high and augurs well for a record drilling season. With
interest rates falling over the past quarter, Alberta's housing markets remain
strong, particularly in the Edmonton region. Due to the outbreak of SARS,
tourism, especially in the mountain parks, has suffered. However, with these
shocks out of the system and strong U.S. growth, ATB forecasts economic growth
picking up over the next three quarters. A key risk to the forecast would be a
continued rapid rise of the Canadian dollar relative to the U.S. dollar that
would harm the export sector.
Ron
P. Triffo Bob Normand
Chairman of the Board President & CEO
November 2003
top of page...
top of page...
Management's Discussion and Analysis (unaudited)
Net Income
ATB
reported net income of $46.2 million for the second quarter ended
September 30, 2003 compared to $25.0 million for the first quarter ended
June 30, 2003 and $50.5 million in the second quarter last year. Second
quarter net income exceeded the previous quarter's net income by 84.63
per cent and was lower than last year's second quarter net income by
8.56 per cent. The significant increase over the previous quarter is due
to lower loan loss provisions recorded this quarter. Net income is $71.2
million for the six months ended September 30, 2003, a decrease of $16.5
million or 18.79 per cent over net income for the same period last year.
This decrease is due to higher loan loss provisions this year.
Net Interest Income
Net interest income for the second quarter ended September 30, 2003
is $99.4 million, down $1.1 million or 1.14 per cent from the first
quarter and an increase of $5.8 million or 6.25 per cent from the second
quarter last year. The decrease this quarter reflects a decrease in the
prime-lending rate of 50 basis points, which puts downward pressure on
interest margins. Net interest margin decreased 10 basis points from the
previous quarter.
For the six months ended September 30, 2003, net interest income is
$199.9 million, an increase of $17.9 million or 9.81 per cent over the
same period last year. This increase from last year is due to the
average prime lending rate increasing by 60 basis points and average
earning assets increasing by $1.1 billion over the past twelve months.
The net interest margin increased to 2.93 per cent for the six months
ended September 30, 2003 from 2.90 per cent for the same period last
year.
Loan
Quality
Gross
impaired loans (before deducting the allowance for credit losses) at the
end of the quarter are $148.2 million, compared to $91.0 million a year
ago. The allowance for
credit losses exceeds the gross amount of impaired loans by $57.3
million at September 30, 2003 compared to $78.2 million a year earlier. The impact on the income statement for the second quarter ended
September 30, 2003 was an expense of $3.5 million, compared to a expense
of $23.1 million in the previous quarter and a recovery of $4.7 million
in the second quarter of last year.
The
ratio of credit losses to average loans is 0.45 per cent at September
30, 2003 compared to a negative 0.06 per cent a year earlier. This
increase reflects a provision for credit losses of $29.4 million for
potential losses related to the border closure to our cattle industry.
Other
Income
Other income for
the second quarter ended September 30, 2003 is $29.5 million, an
increase of $0.5 million or 1.64 per cent from the first quarter and
$3.0 million or 11.15 per cent from the second quarter last year. For
the six-months ended September 30, 2003, other income is $58.5 million
up $5.9 million or 11.25 per cent from last year. The increase is
attributable to credit fees, primarily due to customers renegotiating
their fixed-term loans to lock in the low interest rates. Service
charges also increased due to growth in retail products.
Non-Interest
Expenses
Non-interest
expenses are $79.1 million for the second quarter ended September 30,
2003, a decrease of $2.2 million or 2.76 per cent compared to
non-interest expenses last quarter and a $4.9 million or a 6.55 per cent
increase compared to non-interest expenses for the second quarter last
year. For the six months ended September 30, 2003, non-interest expenses
increased $10.2 million or 6.78 per cent compared to the same period
last year. This increase in non-interest expenses is primarily due to
increased salaries and employee benefit costs and higher transaction
volumes.
The
efficiency ratio, expressed as a percentage of non-interest expenses to
operating revenue (net interest income plus other income) is 62.13 per
cent for the six months ended September 30, 2003, compared to 64.08 per
cent for the same period last year. This improvement is largely due to
increases in net interest income of 9.81 per cent and other income of
11.25 per cent while holding expense increases to 6.78 per cent.
Balance
Sheet
ATB's total assets are $13.8 billion at September 30, 2003, an
increase of 0.89 per cent from June 30, 2003. Total loans grew by 1.72
per cent this quarter and deposits by 0.43 per cent. In comparison, the
second quarter of last year saw total assets growth of 1.00 per cent,
total loan growth of 2.49 per cent and deposit growth of 0.68 per cent.
Over the twelve-month period, total loans grew by 9.40 per cent
compared to 8.68 per cent for the same period the previous year. Deposit
growth over the past year is 7.51 per cent compared to 1.82 per cent the
year before.
The total equity as at September 30, 2003 is $862.1 million, up by
$46.2 million from June 30 and $182.4 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.
top of
page...
|
Highlights