Bank posts solid results as credit losses decrease
MONTREAL, Aug. 23, 2012 /CNW Telbec/ - While the availability of credit has improved for Canadian businesses over the past year, there is, nevertheless, a consistent demand for Business Development Bank of Canada (BDC) financing and services. During fiscal 2012 ending March 31st, BDC's clients borrowed a total of $3.8 billion in loans and subordinate financing. BDC also authorized $126.8 million in venture capital investments and undertook 2,236 consulting mandates.
"BDC clients have shown resilience through difficult economic times and, as a whole, improved their financial positions. The fundamental good news is that our clients, the entrepreneurs who are creating and growing businesses in Canada, are doing well," said Jean-René Halde, BDC's President and Chief Executive Officer.
As clients' financial health strengthened during fiscal 2012, BDC's consolidated net income totalled $533.4 million. The overall profitability was a result of a decrease in the allowance for credit losses and higher net interest income resulting from the growth of its loan portfolio.
BDC has paid a dividend of $68.6 million to its sole shareholder, the Government of Canada. It has also returned an additional $656 million in capital by repurchasing all of its outstanding preferred shares and some of its common shares.
"We have a responsibility to manage our finances prudently, while fulfilling our mandate to provide much needed financing to entrepreneurs to help them grow, innovate and increase business productivity," added Mr. Halde.
Helping entrepreneurs boost business innovation and productivity
Despite its relatively enviable economic position, Canada still faces fundamental long-term challenges. The level of investment in productivity and innovation that Canadian businesses undertake continues to be an ongoing concern. A proven way for SMEs to increase their level of innovation and productivity is by increasing the use of information and communications technology (ICT).
During fiscal year 2012, BDC launched its strategy to help entrepreneurs better utilize ICT. The cornerstone of this new initiative is a $200 million facility earmarked to provide financial support and consulting advice (i.e. website assessments, diagnostics) to assist entrepreneurs with investments in ICT.
"Last year, the government asked BDC to help entrepreneurs use ICT in their businesses," explained John A. MacNaughton, Chairman, BDC. "I am pleased at how BDC quickly innovated to answer this request, helping more than 16,000 entrepreneurs benefit from these new, specialized services."
Fiscal 2012 highlights
BDC reports on five business lines: Financing, Subordinate Financing, Venture Capital, Consulting and Securitization.
BDC Financing clients accepted $3.6 billion in new loans through 6,926 transactions. Income totalled $504.7 million in fiscal 2012, compared to $305.6 million in fiscal 2011. This significant increase in profitability was mainly due to a decrease of the allowance for credit losses and higher net interest income resulting from the growth of the portfolio. The closing portfolio, before allowance for credit losses, rose to $15.3 billion from $14.5 billion, an increase of $0.8 billion, or 5.8%, over 2011.
BDC Subordinate Financing clients accepted a total of $163.8 million in financing, involving 137 transactions. Income totalled $36.2 million, $15.8 million higher than reported in the prior year. The BDC Subordinate Financing portfolio reached $457.4 million as at March 31, 2012.
BDC Venture Capital, with total authorizations of $126.8 million in fiscal 2012, remained a major investor in Canada despite the challenging investment climate. BDC supports 22 private funds and 77 companies. While investment levels have increased and the industry is showing signs of improvement, market conditions continue to be difficult. BDC's results mirror those of other participants involved in this market. In fiscal 2012, BDC Venture Capital recorded a loss of $42.7 million, compared to a $20.8 million loss in the prior year. During fiscal 2012, BDC participated in some of the most successful exits of the year, generating excellent returns on some of its investments.
BDC Consulting started 2,236 consulting mandates in fiscal 2012 in order to help entrepreneurs become more competitive. While economic conditions improved, entrepreneurs remain prudent, limiting discretionary spending on items such as consulting. As a result, consulting revenues of $22.4 million were down this year by $2.2 million from the $24.6 million recorded in the prior year.
BDC Securitization authorized a total of $290 million in new investments under the Multi Seller Platform for Small Originators (MSPSO), which is designed to expand financing options for small and medium-sized Canadian auto and equipment finance and leasing companies. It also authorized $30 million in investments under the Life Insurance Company Investment Program (LifeCo Program), a bulk leasing financing program in which BDC is participating with a major insurance company, SunLife. BDC Securitization recorded an income of $46.2 million for the year; $24 million lower than in the prior year, mainly due to lower net interest income as a result of the decline of the portfolio because of prepayments. As at March 31, 2012, total asset-backed securities stood at $763.2 million compared to $3.1 billion in fiscal 2011.
Canada's business development bank, BDC, puts entrepreneurs first. With almost 2,000 employees and more than 100 business centres across the country, BDC offers financing, subordinate financing, venture capital, securitization and consulting services to more than 28,000 small and medium-sized companies. Their success is vital to Canada's economic prosperity. Visit www.bdc.ca for more information.
SOURCE: BUSINESS DEVELOPMENT BANK OF CANADA
For further information:
Manager, Public Relations