Family in garden

2021 Economic Environment

While the COVID-19 pandemic presented many challenges to the global economy, there has been a significant economic recovery in 2021. Global GDP is estimated to increase 5.9% for the year, returning to growth following 2020’s contraction of 3.1%.1

The Canadian economy grew 4.7% in 2021, slightly below the 5.0% average for advanced economies.2 As the economic recovery progressed throughout the year, the Bank of Canada tapered and eventually ended its quantitative easing program in October, before moving into the reinvestment phase by keeping its bond holdings roughly constant. Additionally, with economic slack now deemed to have been absorbed, and inflationary pressures persisting at elevated levels longer than anticipated, the Bank of Canada has removed its exceptional forward guidance on its policy interest rate and announced a 25 basis point rate increase in March 2022 after holding overnight lending rates constant in 2021. Additional rate increases are expected throughout the remainder of 2022. The Bank of Canada estimates 4.7% inflation for 2021, above its control range of 1.0% - 3.0%.2

BC’s economic recovery suffered a setback in 2021 as wide-scale flooding disrupted transportation, agriculture, and forestry.3 Despite this, the provincial economy continues to recover, with many of BC’s sectors returning to, or surpassing, pre-pandemic levels of activity.4 This includes the housing market, which grew substantially in 2021. Residential unit sales and average residential prices increased 32.8% and 18.7% year-over-year respectively.5

2021 Financial Performance

BlueShore delivered exceptional results in 2021’s uncertain and volatile environment. We maintained excellent client service and minimized service disruptions while taking effective safety precautions to protect our clients and staff.

Total Assets Under Administration grew $380.2 million or 5.8% to reach $6.9 billion. The growth was primarily driven by a $337.0 million increase in wealth assets under administration and strong loan growth of $238.4 million.

Our loan portfolio increased by $235.7 million to $4.41 billion, up from $4.18 billion at the end of 2020. This growth reflected the strong Greater Vancouver real estate market throughout the year, after considerable pandemic-related uncertainty limited loan growth in 2020. BlueShore’s loan growth in 2021 was funded entirely by our deposit growth.

Net operating income increased to $42.0 million (2020, $32.0 million), primarily due to improved net interest income and releases of provisions for credit losses as the economic and credit outlook improved. Return on retained earnings was 17.8% (2020, 15.5%).

Net interest income increased $18.3 million, or 22.7%, to $98.8 million from $80.5 million. Although they started to rise towards the end of the year, interest rates remained low throughout most of 2021, driving significantly lower loan and investment yields as well as average deposit and borrowing costs.

Macroeconomic forecasts, notably BC GDP and BC Unemployment, and the credit outlook improved significantly in 2021, resulting in a release of our provision for credit losses of $2.7 million or 0.06%.

Non-interest expenses grew $10.0 million or 13.6% in 2021. Higher commission expenses reflect the growth in revenue from our Wealth business. BlueShore also reaffirmed its commitment to delivering exceptional client service by continuing to invest significantly in the business. This included increasing staffing levels and investing in technology to enhance our digital client experience, and to meet the ambitious targets in our long-term strategic plan.

DBRS Morningstar has confirmed BlueShore’s Long-Term Issuer Rating of BBB (high) and Short-Term Issuer Rating of R-1 (low). The issuer ratings are reflective of BlueShore’s strong franchise position, asset quality, risk profile and prudent levels of liquidity and capital.

2022 Economic Outlook

At the time of writing, the unprovoked military invasion by Russia on Ukraine remains an evolving situation with highly unpredictable outcomes that could significantly disrupt the post-pandemic global economic recovery. Our thoughts are with the people of Ukraine and all those affected. To lend our support, BlueShore Financial has donated to the Canada Ukraine Foundation’s Ukraine Humanitarian Appeal to assist with humanitarian aid including food packages, medicine and shelter. Additionally, the global economy entered 2022 in a weaker position than previously anticipated due to persistent supply chain disruptions and inflationary pressures related to the emergence of the Omicron COVID-19 variant. Despite this uncertainty, the Canadian economy has strong momentum as it enters 2022 with 4.0% forecasted GDP growth.2

BC GDP is forecasted to grow in line with the national average of 4.0%. The forecast anticipates a continued recovery from short-term, flood-related economic setbacks. BC’s labour market is forecast to outperform the national average, with unemployment rates continuing to trend favourably to 4.7%. As the province continues to ease restrictions, service-based industries are also expected to benefit from renewed business investment. Significant publically funded capital projects, including reconstruction initiatives, are also expected to contribute to the forecasted economic improvements.3

Greater Vancouver real estate had a record year in 2021, with the buoyant market conditions continuing into early 2022. Despite sales forecasted to decrease 15.8% in 2022, average prices are expected to increase 8.1%.Limited housing supply may continue to support record prices, but affordability erosion could constrain price growth as mortgage rates are projected to increase.

Against this improving but still challenging economic backdrop, BlueShore will continue to seek prudent opportunities to grow our highly-secured, high quality asset portfolio, while maintaining appropriate credit quality, liquidity, and capital. With the pandemic accelerating digital transformation across all industries, Management will continue to focus on investing in technology solutions to enhance our staff and client experience.

[1] International Monetary Fund World Economic Outlook (February 2022)
[2] Bank of Canada Monetary Policy Report (January 2022)
[3] TD Provincial Economic Forecast (December 2021)
[4] RBC Provincial Economic Forecast (December 2021)
[5] British Columbia Real Estate Association Housing Forecast Update (January 2022)