Low interest rates continued to fuel higher volumes of consumer lending in Canada last year, particularly in mortgages and credit cards, according to a report released by Statistics Canada today.

As a result, deposit-accepting intermediaries (chartered banks, trust companies, caisses populaires and credit unions) recorded their largest rate of growth in services in four years, StatsCan said

The value of services produced by the sector jumped 4.9% to $55.2 billion in 2003, the largest rate of growth since 2000 when services increased 11.8% from 1999.

Overall, net interest income fell 0.7% to $29.9 billion due to lower interest rate spreads. Nevertheless, the weakness in net interest income was offset by a strong 12.2% gain in non-interest income, which rose to $25.4 billion. Improved self-directed brokerage and asset management business along with robust growth in electronic financial services contributed to this performance.

During the year, the industry dramatically reduced provisions for credit losses by 22.3% to $3.1 billion. This drop follows especially high provisions for credit losses in 2002 that were related to losses in the telecommunications sector.

The value of services produced in retail banking increased 4.1% to $35.4 billion. Retail banking services accounted for 64.1% of the value of services produced, the largest income-generating activity for deposit-accepting intermediaries.

The value of treasury and investment banking services declined 1.3% to $10.1 billion last year, the second consecutive decrease. However, the decline was not as dramatic as the 3.3% drop in 2002.

“A weak first half of the year in equity markets was offset by a stronger performance towards the end of the year, especially in investment fund businesses. Both self-directed brokerage and asset management business also contributed to this growth, reversing the downturn after 2000,” StatsCan said.

StatsCan noted that growth accelerated in the electronic financial sector, which produced services worth $4.2 billion, a 24.3% increase.

After a setback in 2002, the value of fiduciary services climbed 16.6% to $1.8 billion in 2003.

“Wealth management and retirement and estate planning needs of an aging population are expected to drive more and more clients to professional managers. Nevertheless, the weak RRSP season early in 2003 limited the year’s growth in fee-based revenues,” StatsCan said.