Vancouver-based CAI Capital beats target by 25% to raise $125 million for latest fund

Despite the global pandemic bearing down on businesses around the world, Vancouver-based private equity firm CAI Capital Partners exceeded a $100-million target for its latest fund by more than 25 per cent.

More than 80 returning investors, and some new ones, pumped $125 million — the hard cap — into CAI’s Fund VI.

The investment firm, which targets the “lower middle” segment of the market, has continued to invest throughout the economic turmoil caused by government-mandated efforts to try to slow the spread of COVID-19.

For example, in August, CAI invested in RebalanceMD Canada, a Victoria, B.C.-based operator of medical clinics that provide musculoskeletal care including a full range of orthopaedic surgical and non-surgical services. And on Sept. 30, the fund announced an investment in CMT Engineering Laboratories, a Utah-based civil and geotechnical engineering services provider.

“The pandemic certainly made raising the fund more complicated,” said Curtis Johansson, a partner at the firm. “But it doesn’t negate the underlying premise upon which CAI is built: the lower middle-market is a compelling place to invest.”

Investors in CAI’s latest fund include financial institutions, family offices, institutional investors, funds of funds and individuals.

Over the past three decades CAI, which was originally based in New York, has invested more than $1.5 billion of equity capital in companies across North America. One of its funds, launched in 2008, topped a list of more than 100 global buyout funds of that vintage based on the return on each dollar invested, or net multiple, according to Preqin, a London-based data firm that tracks private capital and the hedge fund industry.

CAI primarily focuses on investing in founder-owned companies, often in sectors that serve industries where services are required by regulation or government.

“As we always have, we are targeting businesses that demonstrate a track-record of cash-flow generation and unrealized growth opportunities,” said Johansson. “In particular, we think there are currently compelling opportunities to partner with companies that provide services to industrial, utility and government clients.”

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The Bank of Nova Scotia and Bank of Montreal ended their 2020 fiscal years on a relative high note, as both lenders reported on Tuesday fourth-quarter earnings that were better than expected, albeit still buffeted by the coronavirus pandemic.

Toronto-based Scotiabank reported a profit of nearly $1.9 billion for the three-month period ended Oct. 31, a decrease of 18 per cent for the same quarter a year earlier. When adjusted for acquisition and divestiture-related costs, Scotiabank’s net income of the fourth quarter was about $1.94 billion and its earnings per share were $1.45, down from $1.82 a year ago.

BMO reported net income of approximately $1.58 billion for its fourth quarter, up 33 per cent from a year ago. When adjusted for certain costs, the bank’s net income was $1.6 billion and its earnings per share were $2.41, down two cents from the previous year’s quarter.

Although a decline from their 2019 fourth quarters, the banks’ adjusted earnings per share beat analysts’ expectations. The consensus estimate for Scotiabank had been $1.22 in adjusted EPS, while BMO’s was $1.91.

Moreover, credit costs eased for both BMO and Scotiabank in the fourth quarter when compared to the third, helping to improve earnings on a quarter-over-quarter basis. Scotiabank’s fourth-quarter profit was up 46 per cent from the third quarter, and BMO’s was up 28 per cent.

“The bank delivered improved earnings in the fourth quarter with strong operating results to end a year marked by high loan loss provisions driven by the global pandemic,” said Brian Porter, president and CEO of Scotiabank, in a press release. “We are encouraged by progress towards a vaccine and we remain cautiously optimistic about the year ahead.”

Tuesday’s results begin another earnings season for Canada’s six largest banks. And as has been the case since the pandemic hit, the driving force behind the financial results at Scotiabank and BMO — the country’s third and fourth-biggest banks, respectively —  was COVID-19.

For instance, both lenders reported that full-year profits were down from 2019. Scotiabank’s 2020 net income was approximately $6.85 billion, down from nearly $8.8 billion for the previous fiscal year. BMO said its full-year profit dipped to just shy of $5.1 billion, compared to about $5.76 billion for 2019.

Those lower profits are due in large part to the banks having to increase their loan-loss reserves in the face of the pandemic and its related economic effects, both of which have weighed on borrowers. They have also weighed on lenders, which use economic forecasts in determining how much money to set aside for possible loan losses.

Scotiabank’s provisions for credit losses were $1.13 billion for the fourth quarter, compared to $2.18 billion in the third quarter and $753 million a year ago. The bank said that the sequential improvement was driven by lower provisions on performing loans, or those still being paid back, because of an improving macroeconomic forecast and credit quality.

Total provisions for credit losses at BMO were $432 million in the fourth quarter, up from $253 million a year earlier, but down from $1.05 billion it set aside in the third quarter.

“The prior quarter provision for credit losses was largely due to the impact of the extraordinary and highly uncertain environment on credit conditions, the economy and scenario weights, while the current quarter provision for credit losses was primarily due to a more severe adverse scenario, partially offset by an improving economic outlook and reduced balances,” BMO said in its fourth-quarter report.

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TORONTO — Bank of Nova Scotia beat analysts’ estimates for fourth-quarter profit on Tuesday, helped by income growth in its capital markets business, even as loan loss provisions rose and earnings in its international division slumped 61 per cent.

While earnings at Canada’s third-biggest bank improved from the previous quarter, when it was hit by the impact of the coronavirus pandemic in some of its Latin American markets, it remained below the levels seen a year earlier.

Loan loss provisions jumped 50 per cent to $1.13 billion, driven by increases in its international and Canadian banking divisions.

· Bank of Montreal profit jumps 33%

Scotiabank said adjusted net income attributable to shareholders fell to $1.8 billion, or $1.45 a share, in the three months through Oct. 31, compared with analysts’ expectations of $1.22 a share.

While earnings recovered 34 per cent from the prior quarter, they fell from $1.82 a share a year earlier.

Its international business profit tumbled to $283 million from $725 million a year ago.

© Thomson Reuters 2020

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Bank of Montreal reported a 33 per cent rise in quarterly profit on Tuesday, as strength in its wealth management and capital markets businesses helped offset higher loan-loss provisions due to the COVID-19 pandemic.

Net income attributable to equity holders of the bank rose to $1.58 billion, or $2.37 per share, in the fourth quarter, from $1.19 billion, or $1.78 per share, a year earlier.

More to come …

© Thomson Reuters 2020