Should the province privatize ATB Financial?
Is it time to liquidate another taxpayer-built institution?
by Max Fawcett
At Issue: At the Premier’s Economic Summit in February, AltaCorp Capital chairman and CEO George Gosbee made a provocative suggestion: The province should privatize ATB Financial and use the proceeds to help plug the budget deficit. It’s not a particularly surprising idea coming from a prominent investment banker (whose firm has a “strategic relationship” with ATB Financial), much less an outspoken one like Gosbee. After all, it’s certainly not the first time the idea has been raised, and given this province’s penchant for privatizing public assets – and the mostly successful transitions they’ve made to private businesses – it’s a wonder it hasn’t happened already. But should it?
ATB Financial has a long and proud history in the province of Alberta. But, then again, so did the Alberta Government Telephones Commission, which was privatized in 1990 and quickly evolved into Telus. The same could be said for the Alberta Energy Company, which began as a 50-50 partnership between the government of Alberta and private shareholders and eventually grew, after the Government divested its stake in1993 and it merged with Pan Canadian Energy, in 2002, into natural gas giant Encana. It isn’t difficult to imagine ATB turning into a similar success story if it was put in play.
It would also be good for ATB itself. Because of its charter, it can’t do business outside the province. That means, Gosbee says, that it (and the taxpayers of Alberta, by extension) is over-exposed to both the energy sector and retail banking in the province. Privatizing it would allow it to grow and diversify in the same way Telus and Encana did.
More to the point, perhaps, the timing couldn’t be better. Financial institutions around the world are still viewed with deep skepticism by most investors, but that’s not true of the Canadian banks. Combine that with Alberta’s robust economic growth forecast and it’s not hard to imagine ATB fetching a premium valuation on the open market, erasing the province’s budget deficit in the process.
Only a fool sells furniture to pay the rent. By the same token, the Government of Alberta shouldn’t be contemplating privatizing ATB Financial to fill a short-term hole in its operating budget. After all, ATB is already making a contribution to the province’s bottom line through the annual dividend that it contributes, which amounted to $58.3 million last year and $59.3 million the year before.
More important, perhaps, is the fact that ATB understands the nature of business in Alberta. Our economy tends to run in cycles that are often out of step with those in, say, Ontario, and if ATB were privatized Alberta businesses would lose the lifeline they’ve had access to in the past, the one that lends when others won’t because ATB can see the bigger picture, in large part because they’ve seen it so many times before. Albertans would also lose an institution that has a vested interest in the rural parts of this province that are, at best, poorly serviced by other banks – hardly an inconsequential outcome when so many of this province’s resources lie outside the major centres.
And finally, have we already forgotten the lessons from the financial crisis of 2008-09? Yes, Canadian banks held up better than most, but banking is an inherently risky enterprise. Having a financial institution in this province that doesn’t adhere to that model is an asset Albertans should keep on their collective balance sheet.
The Results Are In
Last month in this space we asked you whether or not you thought Alberta ought to pursue its independence from Canada. Here’s what you said: