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.
