The skyline of downtown Calgary.CHRIS BOLIN/The Globe and Mail
Banks rarely win praise for being dependent on a single market, but ATB Financial is milking its exposure to Alberta's hot economy.
Of all the provinces, Alberta has the second-lowest unemployment rate and its loan growth is booming. With agriculture, energy and forestry giants doing well, there is knock-on business for smaller suppliers, which translates into better incomes for their employees.
Because the economic prospects are so fruitful, traditional banking rules around market diversity are not as strict for ATB. National Bank of Quebec is often knocked for its heavy exposure to the slow-growth Quebec economy, but almost all banks want more access to Alberta.
ATB's results explain why. Owned by the provincial government, but operated as an independent Crown corporation, the bank posted a record profit of $276-million for the fiscal year that ended March 31. Loan growth during the year hit 14 per cent, higher than any of the Big Six banks.
Asked if there was one dominant profit driver, ATB chief executive officer Dave Mowat said his bank's success boils down to simple economics: "The work force is employed, and they're making a lot of money."
Not only are there jobs in big hubs such as Calgary and Edmonton, but smaller cities, such as Nisku, just south of Edmonton, are home to industrial companies that are winning business. The people who work at these outfits have disposable incomes they can spend on items such as plasma TVs or at the nearby Keg restaurant, Mr. Mowat said, so business confidence is booming.
Instead of beating his chest, Mr. Mowat did not suggest ATB outshines the national lenders in its home province. "We're not smarter than anybody at the other banks," he said. ATB is able to win business because it zeroes in on the province, and its staff stands out by digging deep to figure out the best ways to determine, for instance, if someone should qualify for a mortgage in a market like Fort McMurray.
ATB's record profit came in a year that included a devastating flood that insurers refer to as a catastrophic event. Miraculously, the damage did little to hurt the economy or bank profits for long – though insurers were on the hook for a lot of damage. "It was terrible for the people involved, but the province found its way through," Mr. Mowat said.
The goal now is to replicate the recent success. While ATB posted a record year, many Big Six banks also reported blockbuster profits, so the Alberta lender is not gaining much ground. "We'll never get the economies of scale of the big banks," Mr. Mowat said, but he has goals of being just as profitable.
ATB's return on equity currently hovers just south of 10 per cent, and the goal is to hit 15 per cent. The Big Six banks report equivalent returns of between 15 and 20 per cent.
ATB was founded by Alberta's Social Credit government in 1938 to serve as an alternative source of credit. Despite a slew of staggering loan losses during the 1980s, the bank has lived on and in the late nineties became a Crown corporation, appointing independent directors to oversee its growth.
Beyond Alberta's borders ATB is little known, but its branches and advertisements are seen all over the province, and it is Canada's ninth-largest bank.