POLITICS

Business Development Bank distributes $4.3 billion to Canada companies

08/27/2013 11:36 EDT | Updated 10/27/2013 05:12 EDT
MONTREAL - The Business Development Bank of Canada distributed $4.3 billion in financing this fiscal year to help more companies, particularly small and medium-sized firms, to improve their productivity by taking advantage of favourable investment conditions.

The total payout was 15 per cent higher than last year and marked the largest distribution since 2010.

More than 60 per cent of last year's financial help went to company expansions, followed by mature corporations.

BDC Financing distributed $4.1 billion in loans to 9,195 companies over the 12 months ended March 31. That was up from $3.6 billion and nearly 7,000 recipients a year earlier.

"The overall strength of the investment climate in Canada has permitted our clients to do well financially, and ultimately this is reflected in our performance," said chief executive Jean-Rene Halde.

The agency complements access to private banks to provide companies with financing for working capital, equipment and information and communications technology.

The Crown corporation, set up primarily to provide financing and business expertise to Canadian companies, said its net income fell by more than 12 per cent to $468.3 million last year despite growing demand for loans, especially from small and medium-sized Canadian companies.

Its main financing arm generated $441.5 million, down from $504.7 million in fiscal 2012, largely due to higher losses on investments and loans.

Another lending unit, BDC Subordinate Financing, provided $189.8 million in financing, up from $163.8 million a year earlier, but it earned $35.1 million, $1.1 million less than in fiscal 2012.

More than 60 per cent of the $4.3 billion distributed by both segments went to company expansions.

The bank distributed $145.3 million in venture capital, nearly 15 per cent more than the prior year and the most in more than a decade. It included 40 direct investments and seven fund investments. The segment lost $8.1 million on those activities, much less than the $42.7-million, year-earlier loss.

The improvement was a result of the divestiture of two companies with strong results as well as a decrease in net unrealized depreciation on the existing investment portfolio.

Its consulting services lost $11.6 million while BDC Securitization, which provides funds for small- and mid-sized equipment leasing companies, had reduced net income of $11.4 million — down from $46.2 million a year earlier.

The corporation had provisions for $538.3 million of credit losses at the end of fiscal 2013, compared with $610.2 million a year earlier. There was also an improvement in impaired loans, which fell to $491.8 million from $550.8 million.

The portfolio, before allowance for credit losses, increased 6.9 per cent to $16.4 billion.

It will pay the federal government nearly $60 million this year, raising the total amount of dividends paid to its sole shareholder to $362.7 million since they were instituted in 1998.

The payout is based on the performance for the 12 months ended March 31, 2013. BDC paid Ottawa a record $68.6 million based on its fiscal 2012 results, a 38 per cent increased dividend from the prior year.

The Business Development Bank expects Canada's economic fundamentals will remain relatively stable this year while external factors in the U.S. and Europe are creating short-term uncertainty. It said business investment is strong in Canada as companies take advantage of low interest rates and a historically strong Canadian dollar — which has been weakening of later — to proceed with projects put on hold during the recession.

The bank expects its net income will reach $348 million in fiscal 2014, a 25 per cent decrease from last year. The decrease is expected to result from higher impairment losses on loans and increased pension costs.