ATB forecasts loss due to beef ban

Government-owned ATB Financial is booking a $29.4-million provision for credit losses related to a ban on Canadian beef exports, warning that the fallout on its Alberta loan portfolio will be widespread.

ATB, a provincial Crown corporation based in Edmonton, said yesterday that its forecast for credit losses is based on the Canada-U.S. border being fully reopened to Canadian beef by the end of September.

A ban on Canadian beef shipments into the United States took effect May 20, after a cow in Alberta tested positive for brain-wasting bovine spongiform encephalopathy, or mad-cow disease.

Yesterday, the U.S. Department of Agriculture announced a partial lifting of the ban, allowing in some meat products while keeping out live cattle.

ATB disclosed its first-quarter provision as it announced a 33-per-cent drop in quarterly profit. The financial institution posted a $25-million profit, compared with $37.2-million for the three months ended June 30, 2002. Total deposits in the fiscal first quarter climbed 8 per cent to $12.6-billion.

Having beef exports halted is sending a chill across Alberta, affecting everyone from cattle ranchers and feed suppliers to car dealers and grocers.

"For some people, they're not in a dire circumstance yet, but the longer the border is closed, certain farm families may be getting close to unfavourable conditions," said ATB spokesman Brian Countryman. "We know it's going to be tough on a lot of families, and we're doing everything we can to find terms and conditions that can allow them to get through this."

He said financial aid programs from various levels of government will help, but there remains much uncertainty over when all beef exports could resume. It's expected that some beef could flow south in September.

The agriculture sector currently accounts for 10 per cent of ATB's $11.7-billion loan portfolio.

The Canadian Bankers Association, whose members include chartered banks but not ATB, said yesterday that it recognizes the extraordinary circumstances that have led to problem loans in the agriculture industry.

"Our members will not act in haste. They are continuing to work with farmers and agriculture-based businesses on an individual basis," said association spokesman Shawn Murray.

Canada's big banks lend billions of dollars a year to the farming sector, but it's too early to determine whether large provisions will be required by individual banks, Mr. Murray said.

ATB's image in Alberta is linked to its past as a lending institution that courts the farming community. One in four farmers in Alberta currently does business with ATB, which was created in 1938 by the Social Credit government of William Aberhart.

As part of rural Alberta's social fabric, ATB is still viewed as much more than a lender in rural communities because it backed farmers after eastern banks left the province in its time of need toward the end of the Great Depression.

Bob Normand, ATB's president, said the economic impact of mad-cow disease will hurt his company's bottom line this summer and beyond.