Canada's Export Development Canada (EDC) recorded a net loss in the first half of this year (H1) as a result of an increased allowance for claims on insurance and higher claim payments. This has resulted in a net loss of C$147mn for the first half of 2009 compared to a net income of C$202mn for the same period in 2008.
As a result of the global economic environment, the risk in EDC’s loans and insurance portfolios has increased. Accordingly, EDC has set aside more provisions for credit losses and claims-related expenses for the first half of 2009 compared to the same period in 2008.
EDC’s provision charge increased to C$264mn for the first half of 2009 from C$94mn for the same period in 2008. Claims related expenses of C$202mn were C$175mn higher than the first six months of 2008.
Despite the loss, the agency’s business volume in the first half of this year reached C$38.2bn, an increase of C$2.5bn over the same period in 2008.
The increase in volume, which can be attributed to the impact of a weakening Canadian dollar, was achieved despite a 24% drop in Canadian export trade in the first six months of 2009. The Canadian dollar averaged 83 cents against the US dollar for the first six months of 2009, compared to 99 cents for the same period last year.
“EDC has faced an unprecedented demand for our products and services, which began in mid-2008 and carried through this year,” says Eric Siegel, president and CEO of EDC. “Our volume demonstrates that we are continuing to ensure Canadian exporters and investors have access to credit through challenging credit conditions.”
More than 7,530 exporters and investors used EDC’s products or services through June 30, 2009, compared to 8,300 in all of 2008.
At mid-year, EDC’s cumulative export trade business volume in emerging markets reached C$8.4bn, including C$885mn in India; C$707mn in China; C$661bn in Brazil; C$443mn in Mexico; and C$230mn in Russia and the Commonwealth of Independent States (CIS).
Companies in Western Canada accounted for C$14bn of EDC’s total business volume, or 37%, followed by Quebec at C$11.7bn (31%); Ontario at C$11.3bn (30%); and Atlantic Canada at C$835mn (2%).
Other key financial results include:
• Total assets at June 2009 were C$33.9bn, a 31% increase from the same point in 2008. The majority of this growth can be attributed to the growth in EDC’s loans portfolio and to the weakening Canadian dollar (the vast majority of EDC’s transactions are in US dollars);
• Total paid-in capital, retained earnings, and allowances at June 30, 2009 were C$9.8bn;
• The total allowance for loan-related losses and insurance claims at June 30, 2009 was C$3.6bn;
• Impaired loans increased to C$1,014mn at June 30, 2009 compared to C$759mn a year ago. As a percentage of gross loans receivable, impaired loans remained constant at 3.4%; and
• The number of insurance claims paid increased by 79% in the first six months of 2009, to 1,246 from 696. The dollar value of those claims was C$76mn, compared to C$33mn for the same period last year.
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