Buildings in financial district in downtown Toronto, Canada
© Roxana Gonzalez Leyva / 123RF Stock Photo

As a result of the pandemic, most Canadian corporations saw their income decline in the second quarter. The financial sector, however, was an exception.

Corporations reported an 8% decline in net income before taxes in Q2, a decrease of $4.5 billion, to $52.3 billion, StatsCan said in a report on Tuesday. Operating revenue declined 11.6%, to $940 billion during the quarter. (Figures are seasonally adjusted.)

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For the financial sector, net income before taxes increased by more than 6% (+$1.6 billion) to $27.7 billion in the quarter, StatsCan said.

Despite that increase, net income declined in the banking and depository credit intermediation industry (this includes firms that accept deposits and issue funds).

Due to large loan loss provisions and decreased revenues, the banking and depository industry’s net income before taxes declined 42% (−$4.2 billion) to $5.8 billion in the second quarter, StatsCan said.

“The provision for losses on distressed loans continued to increase during the quarter due to, among other things, Covid 19, along with continued pressures on oil prices and a lengthy period of low interest rates,” the agency said.

Income increases in insurance and in the commodity and securities-related industries offset the declines in banking, StatsCan said.

Income in other sectors

In the non-financial sector, net income before taxes declined 20% (or −$6.1 billion) to $24.6 billion in the second quarter, with revenue decreasing in several key industries.

Transportation, postal and couriers services and transportation support activities were hit hard, seeing a 243.5% drop (or −$3.9 billion) in net income before taxes. StatsCan said the decrease was attributable to the sharp drop in revenues for air transportation as Covid-19 resulted in border restrictions and quarantines.

Oil and gas extraction and support activities posted a loss of $9.2 billion in net income before taxes in the second quarter. This followed a loss of $24.4 billion in the first quarter.

“Operating revenues in the industry continue to be affected by decreased production and lower oil prices,” StatsCan said.

In retail trade, online sales didn’t make up for losses in brick-and-mortar stores. The sector’s net income before taxes declined $4 billion (−67.7%) in the quarter.

Within retail trade, motor vehicle and parts dealers had the biggest loss (−$2.2 billion or −21.7%), partly attributable to lower motor vehicle sales.

In manufacturing, net income before taxes decreased $1.3 billion (−19.3%) as plants operated at reduced capacity or ceased operations.

The arts, entertainment and recreation, and accommodation and food services industry recorded a decline of 173.9% in net income before taxes, falling from a net income of $2.2 billion in the first quarter to a loss of $1.6 billion in the second.

“Travel restrictions and physical distancing measures directly impacted the financial health of enterprises within this industry,” StatsCan said.

As the economy reopens, businesses in arts/entertainment/food services will likely continue to experience downward pressure on their incomes because of changes in consumer behaviour, StatsCan said.

A previous survey by the agency showed that two-thirds of respondents (66%) were “very concerned” about the health risks associated with attending shows, festivals, movies or sporting events, and 38% were “very concerned” about going to restaurants or bars.