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Need to remove B2B Bank from the HISA chart
January 7, 2020
8:31 am
mustang
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January 7, 2020
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Just noticed on b2bbank site (and same on laurentian digital) that they are now capping the 3.3% rate at 500K. After that, it is 1.25%

January 7, 2020
1:45 pm
picassocat
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mustang said
Just noticed on b2bbank site (and same on laurentian digital) that they are now capping the 3.3% rate at 500K. After that, it is 1.25%  

Up to 500,000 it's 3.30 % and over that amount it's 3.30% + 1.25% = 4.55% !!

January 7, 2020
2:41 pm
Canadianbull
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@picassocat please read below. Only 1.25% interest rate applies to deposits above $500,000.

Capture.PNG

January 7, 2020
6:43 pm
picassocat
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You are correct, I misinterpreted the following:
$500,000.01 +
I thought it was 3,30 PLUS 1,25
I am wrong.

January 7, 2020
7:17 pm
Canadianbull
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It's Ok. We all make mistakes sf-cool

January 8, 2020
4:55 am
Taxpayer717
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picassocat said
You are correct, I misinterpreted the following:
$500,000.01 +
I thought it was 3,30 PLUS 1,25
I am wrong.  

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? sf-surprised

January 8, 2020
9:20 am
Doug
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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? sf-surprised  

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. sf-cool

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

January 8, 2020
10:54 am
picassocat
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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? sf-surprised  

Makes me wonder if their «regular rate» should be 1.25% and the 3.30% is but a «temporary special»?

January 9, 2020
5:45 am
savemoresaveoften
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capping deposit amount at promo rate is normal practice at most banks. $100k, $500k or $1MM is the current bar on most if not all.

January 9, 2020
5:56 am
Bill
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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%?

January 9, 2020
8:29 am
Doug
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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.

January 9, 2020
10:54 pm
picassocat
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Doug said

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.  

I only have limited exposure to banks, but my ZPR (preferred share) has many Canadian banks and XLB is a bond fund which includes the Scotia. So I lend to banks with interest and get dividends from them at the same time ! sf-laugh

(ps Doug: if you like tech funds, look into XIT, HQU & TLF ! Cheers)

January 10, 2020
6:04 am
Bill
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I hope you're correct, Doug, about the rate staying for a while. I'll tell them to consult with you first if they ever get the notion to lower the rate!

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