Top Companies Paint a Picture of Prosperity

Finance Minister Jim Flaherty traveled New York recently to tout the Canadian economy to potential investors.

As the recovery rolls forward, Canada's surging dollar and its comparatively low debt-to-GDP ratio, has given the country a "competitive advantage," Flaherty boasted to guests at a luncheon hosted by the Canadian Association of New York.

"The fact that we weathered the storm without having to put any taxpayers' money into the financial system or any of our financial institutions impresses a lot of people," he said.

The Canadian government's conservative management and policies have spared it from the types of recessionary damage that hit Europe and the United States. And as a result, Canada's economy has become a model for other countries, and a success story that Flaherty enjoys telling over and over.

Canadian businesses also have been generating plenty of good stories for Flaherty to spread. The five companies that head up Forbes' list of Canada's Top 40 have been awash in good news and numbers since the start of the year.

BIG BANKS THRIVING

The Royal Bank of Canada, which has the No. 1 spot on the Forbes list; and the Bank of Nova Scotia and Toronto-Dominion Bank, which are third and fourth, posted steep profit increases for the first quarter.

Royal Bank reported a profit of $1.5 billion, up $387 million or 35 percent from last year. It was the second highest quarterly profit in the bank's 146-year history. Much of the credit goes to the bank's business and consumer lending departments which generated much of the growth.

"These results reflect the strength of our Canadian businesses and demonstrate the value of our diversified business model," said Gordon Nixon, president and CEO.

It also puts the bank in the lead in terms of growth potential. With the Federal Deposit Insurance Corporation shutting down U.S. banks every week, Royal Bank has expressed an interest in acquiring several ailing U.S. institutions. In 2001, Royal Bank bought Centura Bank in Georgia, and in 2006, it took over FlagFinancial in Atlanta. Two years ago, the bank bought AmSouth Bancorp's 39 branches in Alabama. This time, however, the Royal Bank is holding back, waiting to see if U.S. lawmakers make good on a promise to tighten regulations and limit investment opportunities for lenders, a change Royal Bank managers oppose.

Scotia Bank's first quarter profits also added to Canada's overall picture of economic health. The bank reported a profit of $988 million, up $146 million or 17 percent from last year.

"We are still in the early days of the recovery, and we continue to carefully manage our businesses in order to achieve solid earnings and maintain a strong return on equity," said President and CEO Rick Waugh who added that Scotia Bank's greatest growth was in Canada and international retail and small business portfolios. Scotia Bank has been able to focus on strategic acquisitions while still delivering dividends, said Waugh.

The story is even more impressive at Toronto-Dominion Bank, which posted a record profit of $1.3 billion for the first quarter, nearly doubling last year's earnings. Canadian personal and commercial banking through TD Canada Trust jumped 23 percent while U.S. personal and commercial Banking rose five percent.

"These results display the earnings power of our Canadian retail business," said Ed Clark, President and CEO. "The record performance at TDCT shows that this incredibly resilient franchise is thriving despite the headwinds that continue to linger in the economy."

OTHER INDUSTRY LEADERS

The banks weren't the only businesses to do well in the first quarter. Manulife Financial Corp., North America's largest insurer, posted profits of $868 million and investors earned 51 cents on shares of company stock.

Although those figures were on the lower end of Manulife's forecast, they were in range, and more importantly, they were in black. In 2008, Manulife lost $1.8 billion, mainly with the U.S. arm of its insurance business.

"We have improved margins, balanced our product portfolio and demonstrated good investment results in the face of challenging market conditions," said CEO Donald Guloien. Manulife is now building its Asian market to ensure long-term growth.

EnCana, the largest producer of North American natural gas and the fifth company on Forbes Top 40 list, earned $1.8 billion in profits in 2009 despite the fact that natural gas prices were stuck at a seven-year low.

In November 2009, the company was split into two separate businesses: EnCana, which has announced plans to double natural gas production over the next five years; and Cenovus Energy, an integrated oil production company.

"While we recognize that the abundance of North American natural gas likely heralds a future of lower and less volatile gas prices, our operating practices, technologies and increasing efficiencies position us to continue to capture strong margins and to thrive in a competitive price environment," said Randy Eresman, president and CEO.

Meanwhile, Finance Minister Flaherty will head next to London to try and drum up investment capital for Canada. Despite his boundless confidence in the country's economy, he acknowledged there are challenges ahead. Unemployment is stuck at 8.2 percent and the national debt now stands at about $55 billion. Still, with Canada's wealth of resources, its banks and its businesses, Flaherty predicted a return to a balanced budget by 2015. "I don't like running deficits," he said.

Barb Taormina is an editor for Business Review Canada, a pioneering digital media site exploring energy issues and opportunities facing top executives, with revealing, intelligent news delivered daily. Among Business Review Canada's suite of media brands is the Business Review Canada magazine, an all digital publication that busy, on-the-go executives turn to for their monthly dose of thought-provoking, rich and meaningful reading.