Need to remove B2B Bank from the HISA chart | Page 2 | B2B Bank | Discussion forum

Taxpayer717 said

I am just wondering if announcing this thing about 1.25% would indicate that they have enough money to afford reduction of the 3.3% rate?   

No, it's not really about needing deposits in the case of Laurentian Bank so much as it is about growing market share and building a customer base, particularly outside of Quebec, on which to market additional products. (They need to up their game in credit cards and discount brokerage, particularly, if they aim to cross-sell.)

Most likely, the reason for these caps is to limit the amount they have to pay to each customer and broaden their depositor base. If they're paying $30,000 in interest expense to a depositor with $1 million in deposits, on an annualized basis, versus $15,000 for $500,000 deposits, they can attract a much larger base of customers paying the same in interest expense.

It's why Motive Financial can afford to keep offering 2.8% on their HISA when they (a) only have ~$500 million in total deposits, half of which is in term deposits and a good portion of the remainder being in chequing accounts and (b) they cap the 2.8% rate at $1 million across all the depositors' Savvy Savings and Savings accounts, which MapleOne, Norman, others, and I noted elsewhere.

Cheers,
Doug

Bill said
Taxpayer717, to avoid disappointment I'd operate on the expectation the 3.3% won't last long, it's so out of line with everybody else and that rate appears to have been chosen flippantly. And who would they lose if they dropped it to 2.85%?  

True, Bill, but I tend to think this rate will last at least till the summer, especially now that they've capped it. I could see them further lowering the cap to $100,000 and have $100,000.01+ earn 1.50% and they'd still lead Motive Financial. This allows them to pay a high rate and grow their customer base, while capping the outsized deposit interest they're paying to each customer.

And, if you want to buy the dogs of the Canadian banking sector, CIBC and Laurentian Bank would be the way to do it. I don't necessarily think they'll be the best performing bank stocks this year, but they will outperform the likes of National and Scotia over the next 5-10 years. I don't understand Scotia's strategy—exiting business lines and most of its overseas operations whilst wildly overpaying for declining wealth management assets.

Cheers,
Doug

Full and Fair Disclosure: I own BNS, CM (CIBC), HSBC, and TD, directly in non-registered accounts. I may own other Canadian and U.S. banks indirectly through my holding XIC and XSP.