Canada’s deposit-accepting intermediaries produced services worth $52.7 billion in 2002, up slightly from $51.8 billion in 2001, according to a report release by Statistics Canada.

The sector includes chartered banks, trust companies, caisses populaires and credit unions. While overall the sector grew, the rate of growth slowed in 2002 to 1.7%, compared with an average rate of 4.9% per year from 1997 to 2002.

Higher credit losses in 2001 and 2002, which originated from volatility in the telecommunications, energy and aerospace sectors, paralleled a decline in consumer participation in relatively higher risk equity markets and lead to the weakened growth, StatsCan said. “Meanwhile, the low interest rate environment continued to fuel higher volumes of consumer lending, particularly in mortgages and credit cards. This helped to shore up the overall results, as the growth came from net interest income.”

Net interest income increased 8.9% from $27.6 billion to $30.1 billion. Electronic financial services provided the largest proportionate growth in net interest income, benefiting from wider industry participation and enhanced online services.

However, the overall gains were dampened by non-interest income, which fell 6.5% to $22.6 billion in 2002. Lingering weakness in capital markets from the latter part of 2001 led to lower trading volumes and reductions in corporate lending in 2002.

The growth in retail banking was a result of an 8% advance in net interest income to $25.6 billion. Growth was spurred by the low interest rate environment and continued high demand for residential mortgages and personal loans. Personal deposits also rose, as uncertainty in capital markets prompted safety-seeking investors to move their savings to interest-bearing deposit accounts despite low returns, it says.

Treasury and investment banking remained the second highest revenue generator for deposit-accepting intermediaries. However, the value of these services declined 3.3% to $10.2 billion. In 2002, they accounted for 19.4% of the total value of services, compared with 20.4% in 2001. “This decline occurred in the wake of weaker equity markets and the ensuing decrease in the volume of investment transactions compared with 2001,” it says.

Overall, the value of services produced by corporate and institutional finance activities slipped 4.3% to $3.5 billion in 2002. Consequently, the corporate and institutional finance segment accounted for 6.7% of the total value of services produced in 2002, down from 7.1%.

Electronic financial services produced services worth $3.4 billion in 2002, an increase of 8.9%, which reversed the retreat of the previous two years. While volumes have grown, this rapidly-evolving segment remained volatile. It accounted for 6.4% of the total value of services produced in 2002, up slightly from 6.0%.

The value of fiduciary services plunged 45.4% to $1.5 billion in 2002, the biggest drop among the major services, and the first in this portfolio since 1996. Fiduciary services accounted for 2.9% of the value of all services produced in 2002, down from 5.3% in 2001. Income from this primarily fee-based activity fell because of narrower interest margins, as well as declines in revenues from estate planning, trusts and private investment counselling.