Export Development Canada (EDC) announced it extended a record $57.4 billion in trade finance and risk management services in 2005, a 4.6% increase over 2004. Exports and investments in emerging markets totaled $13.3 billion, a 14.6% increase.
"This has been a very successful year for EDC thanks to the strong performance of Canadian exporters and investors in 2005, with emerging markets being more important than ever," said President and CEO Rob Wright. "EDC provided commercial solutions for 6,828 Canadian exporters and investors in 171 markets, with 91% of them being small- and medium-sized enterprises (SME). In addition, our Customer Value Index, the measure of overall customer satisfaction registered its highest level ever."
The business volume facilitated by EDC for SMEs has continued to increase year over year, and in 2005 reached $15.5 billion, a substantial 31.3% increase from the previous record of $11.8 billion in 2004. The SME segment represented 27% of EDC's total business volume in 2005.
EDC participated in approximately 12% of Canada's exports in goods, services and investments last year. That participation rate climbed to more than 30% of Canadian exports in goods, services and investments to emerging markets. In particular, EDC-supported trade with China increased by 35.6% in 2005.
The $57.4 billion in transactions facilitated by EDC in 2005 are estimated to have supported $37.4 billion of Canada's GDP or 3.2 to 3.4% of the total. This export and investment activity was also associated with sustaining more than 457,000 jobs, approximately 2.8% of national employment.
In 2005, EDC's operating income declined by 7.1% to $822 million (a reduction of $63 million). Excluding the impact of sovereign loan prepayments, the decline was actually 17.7%. The decrease is primarily due to an overall reduction of interest earning assets, higher funding costs and a stronger Canadian dollar. Slowdowns in the forestry, automotive and aircraft production sectors led to lower financing volumes in these key portfolios. As well, the buoyant domestic and global credit conditions in 2005 meant that Canadian exporters and investors enjoyed greater access to private financing and therefore EDC's available lending portfolio was not fully utilized. This in turn led to a reduction in the provisions that EDC sets aside to cover potential loan losses as well as unexpected prepayments on existing loans.
EDC's net income rose to $1.29 billion compared with $1.24 billion in 2004. Of the 2005 net income, $513 million resulted from a release of provisions for credit losses compared to a $214 million release of provisions in 2004. Provision requirements decreased as a result of the reduced loans portfolio, improving credit conditions, unexpected prepayments on existing loans, and the purchase of risk mitigation insurance on a portion of the aerospace portfolio. Despite lowering provisions significantly, EDC remained appropriately provisioned to manage the portfolio. Net income also included $94 million resulting from an unprecedented amount of sovereign loan prepayments in 2005.
"Strong credit conditions have left us with a very healthy balance sheet, but economic conditions are cyclical and EDC expects a more challenging financing environment in 2006 for Canadian exporters and investors," continued Mr. Wright. "Looking ahead, EDC's capital strength leaves us well-positioned to facilitate more exports and investments and use our balance sheet to meet the stronger demand we anticipate from Canadian business in 2006."
Mr. Wright also stated that EDC will find new ways to connect to existing and new customers, including SMEs, with new products and services that meet industry-specific needs and by taking on greater levels of risk, particularly in emerging markets. The corporation will also continue to advance integrative trade by developing commercial solutions related to Canadian direct investment abroad and equity investments, which will assist Canadian
