First Calgary Financial profits soar in 2012
No-fee account a key factor in record year
First Calgary Financial said Thursday it recorded its best result in its 76-year history as profits increased by 40 per cent in 2012.
In the fiscal year ended Oct. 31, loans grew by $144.5 million, or six per cent, while deposits grew by $227.5 million, or about nine per cent. Adjusted net earnings from operations, before taxes, reached $15.4 million compared with $10.9 million in 2011.
First Calgary president and CEO Paul Kelly said the introduction of a new, no-fee chequing account in May helped the business.
The no-fee chequing account, the first from a full-service financial institution in Alberta, said Kelly, added more than 13,000 new accounts.
“I think that was a big driver, particularly in the deposit side. We’ve got almost nine-per-cent deposit growth and in this environment, that’s pretty good,” he said.
David Finch, assistant professor of marketing at the Bissett School of Business at Mount Royal University, said the goal of no-fee banking is to build a relationship with customers.
“It is a loss leader strategy. The strategy is to convert a positive experience with this single product into a broader and deeper higher margin relationship,” he said.
“And once this consumer is entangled in multiple financial products, they tend to be entrenched. So the real test for First Calgary will be to convert these 13,000 new accounts into deeper longer-term and highermargin relationships.”
First Calgary, with about 500 employees, has 16 branch locations and is the ninth-largest credit union in Canada.
“We’re looking at the future of how our members are going to bank. One of the decisions we’re going to have to make is do we invest more in technology or more in physical plant,” said Kelly.
“In the banking business, mobile banking is just around the corner. People are going to be using their smartphone probably within a year to start doing banking and transactions.”