Despite a boost in operating revenue, ATB Financial experienced a hefty drop in profit in its second fiscal quarter thanks to higher provision for potential losses from ABCP, the company announced on Friday.

Edmonton-based ATB reported profit of $5.7 million in the quarter ended Sept. 30, down from $8.5 million in the same period last year.

Included in the net income is a $55.5-million increase in ATB’s provision for potential losses on holdings of asset-backed commercial paper, largely due to higher credit spreads. The increase adds to ATB’s 2007-08 year-end ABCP provision of $253.1 million.

But excluding the impact of the ABCP, ATB’s net income for the second quarter is still down 28.9% from last year, due to lower margins.

“Times are getting tougher, even in resilient economies such as Alberta’s, and interest rate conditions and uncertainty in the marketplace continue to impact our business,” said Dave Mowat, ATB’s president and CEO.

Still, the company reported operating revenue of $169.6 million, up from $137.6 million in the second quarter of 2007.

The revenue growth included an increased of $5.6 million, or 3.7%, over the same quarter last year in the company’s Personal and Business Financial Services department. During the quarter, the company opened new branches in Camrose, Fort McMurray, Edmonton, and Calgary.

ATB’s Corporate Financial Services division saw revenue growth of $3.8 million, or 15.4% during the quarter.

The company also experienced growth in assets, which grew to a record high of $25.2 billion, up 12.2% from the same period last year. Net loans grew to $20.5 billion, up 12.9%.

At ATB’s Investor Services division, client assets under management and administration were $4 billion, down $63.6 million from the second quarter last year.

Mowat said the institution’s criteria for loans and mortgages have not changed.

“The conventional wisdom is that credit for individuals and businesses is harder to come by these days, but we are sticking by Albertans, just as we have for 70 years,” he said.

ATB’s $1.14-billion principal investment in ABCP will be converted to longer-term notes that reach maturity in six to nine years. ATB will revalue the restructured ABCP investment upon closing.