'We're a bit stuck': CEO of Alberta bank expects province's economic struggles to continue
Woes continue for energy and construction sectors, while manufacturing and logistics industries grow
Alberta's sputtering economy has slowed in the last year and any growth over the next 18 months will be minimal, predicts the chief executive of ATB Financial, an Alberta bank owned by the provincial government.
While the economy is "stuck," Curtis Stange said he doesn't think the province will fall back into recession, something the Conference Board of Canada has forecast in successive reports about Alberta's economic outlook.
Stange said the province's economy was growing at upward of two per cent in 2018, but the growth has slowed to less than one per cent this year. Any momentum the economy was showing, he said, has been lost.
"We're a bit stuck," Stange said in an interview at an ATB branch in downtown Calgary. "It's stuck because of stubbornly high unemployment rates. It's stuck because we've seen now three continuous years of flat capital expenditures in the province. Those are two pretty big, major indicators of what the economy is all about and those are stuck."
A lack of national infrastructure is one reason for the challenges the province faces, he said, including delays to building oil and gas export pipelines.
This week, the Federal Court of Appeal agreed to hear appeals of the federal government's approval of the Trans Mountain pipeline expansion. While the court's announcement won't halt construction, it is another legal hurdle for the long-delayed project that would transport oil from Alberta to B.C.'s coast.
Prolonged economic pain
The provincial economy has struggled since the price of oil collapsed in 2014, which has contributed to high unemployment, stagnant wages, and a downtown office vacancy rate in Calgary of more than 20 per cent.
About 2,425 oil and gas wells are expected to be drilled this year in Alberta, down from an initial projection of 3,532 from the Petroleum Services Association of Canada.
The woes are expected to continue.
"We think 2020 will also be a challenging year," said Stange. "We're looking out about 18 months right now and say it's going to be stuck under one per cent GDP growth."
WATCH: ATB Financial CEO Curtis Stange assess the state of Alberta's economy.
The economic challenges of small businesses aren't confined to certain geographic areas of the province, said Stange, but rather specific industries.
The oilfield services and oil producing sectors are struggling, in addition to the construction industry, rural hotels and retail. Meanwhile, manufacturing, logistics, life sciences and some agricultural sectors are "doing quite well."
ATB's balance sheet
ATB Financial itself hasn't been immune from the province's struggles. Its recent financial results have been mixed, according to analyst Adam Hardi with credit rating agency Moody's. Overall, Hardi said he's cautiously optimistic about the bank's performance, although its loan loss provisions to the energy sector are "sizeable."
The provisions relate to money set aside for uncollected loans.
"We expected quicker improvement from ATB Financial over the last few years. That hasn't happened yet," he said.
Over the past five years, ATB Financial has continued to see a growing gap between its amount of total loans and deposits. The bank reported $36.1 billion in deposits compared to $46.5 billion in loans, according to its most recent financial update.
Stange, who became CEO just over a year ago, isn't concerned about the gap. He said the bank's financial situation is as strong as ever, with record revenue.
ATB was created during the Great Depression, when other banks had stopped offering credit in the province, and has continued to play a similar role when Alberta's economy has struggled.
Over the past five years, the provincial government increased ATB's credit line so the bank didn't have to pull back on lending, especially to the oil and gas sector.
"We have very effective oversight and measurements about the strength of the balance sheet," Stange said. "We look at liquidity and we would be comparable to our industry peers and standards of a healthy, safe liquidity ratio."