Crown bank takes risks others won’t: CEO

Daniel
Daniel MacEachern
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Jean-René Halde, president and CEO of the Business Development Bank of Canada, says it’s his bank’s role to find financing for entrepreneurs having difficulty getting it   from chartered institutions. — Photo by Daniel MacEachern/The Telegram

The president and CEO of the Business Development Bank of Canada (BDC) says the importance of entrepreneurship is “bigger than most people realize.”

Jean-René Halde, in Newfoundland and Labrador for a luncheon address to the St. John’s Board of Trade on Thursday, told The Telegram that Canada is well-suited to foster growth, innovation and productivity, all of which he said are crucial.

“I think we’ve got all the right macro-fundamentals,” he said Thursday morning at the Crown corporation’s Water Street office. “We’ve got low interest rates. We’ve got universities that do a lot of research. We’ve got a good banking system — the fundamentals are strong. But at the end of the day, success comes from an entrepreneur deciding to buy a piece of equipment, deciding to hire people, deciding to export to a different market, and our prosperity, in many ways our country, is dependent on those thousands and thousands of decisions made by entrepreneurs.”

That’s where the bank comes in, says Halde, who notes that it’s Canada’s only bank dedicated strictly to entrepreneurs, and the country underinvests — compared with the United States — in machinery and equipment, as well as in information communication technology.

“We’re just prepared to take a bit of extra risk, maybe, that the typical financial institution won’t take,” he said. “Our risk appetite is a bit higher, so that’s the way we can help — making (entrepreneurs) a bit more informed through our consulting group, and hopefully enabling them to access financing.”

Halde acknowledged the criticism that a higher “risk appetite” is problematic when it’s taxpayers taking the risk, but he points out that the bank has made money every year since 1997. For the fiscal year ending March 31, the bank’s net income was $441.5 million, down from $504.7 million the year before.

“We were not a cost to taxpayers. As a matter of fact, every year we send a cheque to Ottawa. We have a dividend payout ratio of 15 per cent, so every year 15 per cent of our profit is sent in the form of a dividend to Ottawa, so we’re not a cost to the taxpayer. Quite the opposite.”

Bill Mahoney, owner and operator of the Murray Premises Hotel, said the BDC has been instrumental in financing since his purchase of the premises in 1996 and subsequent renovations to make it a boutique hotel.

“The Canadian chartered banks have a very low tolerance level for certain sectors in business, and hospitality is one of them,” he said. “They’ve been very helpful along the way and accommodating, so my experience has been very positive.”

The bank has been a strong financial partner in his business, he said.

“We’ve actually done three phases now — I did the initial phase back in the year 2000, opened the hotel, 28 rooms, and BDC (was) my financial partner there. Subsequently, in 2006, I added an additional 20 rooms, and again in 2009

I added another 20 rooms, and BDC (has) been part of that all along.”

The bank’s role is to make sure an entrepreneur has the financing they need, said Halde, adding that the financing is “appropriately priced for risk.”

“If it’s riskier, it’s going to be pricier, and I think that’s obviously quite normal,” he said, adding that he tries to stress the word “development” instead of the word “bank” in BDC’s name.

“This is about helping Canadian companies becoming more competitive, better at what they do, helping them out, supporting

them when they’re going through tough times — that’s very key,” he said.

 

dmaceachern@thetelegram.com

Twitter: @TelegramDaniel

Organizations: BDC, Business Development Bank of Canada, Board of Trade The Telegram Murray Premises Hotel

Geographic location: Canada, Newfoundland and Labrador, Water Street Ottawa United States

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  • Joe
    September 06, 2013 - 07:11

    The macro-fundamentals - oil, oil and more oil! This is not new a banker who is clueless.