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EQ Bank, Too good too be true?
December 21, 2017
10:28 am
Doug
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Bill said
Help me understand: If they can't "profitably pay" an interest rate using the $300,000 I deposited with them how can they make a profit when they pay the same rate on the $100,000 (limit) I deposit with them?

Not relevant. I'm not saying it is anymore profitable to limit the balance to $100,000 per customer. sf-cool

Another advantage of account limits I see is EQ can accept 3 $100K balance customers instead of one $300K customer which gives you more people to sell your other products & services to.

Yes, that is what I am saying. Conversely, that's also an easy way to piss off more customers, more quickly. On the last point, that's irrelevant as EQ Bank has a single direct-to-consumer product, no registered accounts, no terms/GICs, nothing. They do sell mortgages and GICs but through brokers and in nominee form only.

Also there's a difference between using a HISA as a regular account or for high interest savings only. In my case I don't care about all, or even any, of the features, I use my TD chequing account for day-to-day banking and my other 15 or so HISA accounts are there to keep my HISA money at the ones paying the best rate at any time. You're very likely going to need to compromise on rate if you're looking for the HISA that also has the features you need for daily transactions.

That's actually the one "saving grace" to EQ Bank's HISA, its other features and benefits that make it potentially compelling as a day-to-day banking account as well, minus the ability to make ABM cash withdrawals or Interac point-of-sale purchases. However, for someone who does all their banking online, such as bill payments and Interac e-Transfers, and makes all their purchases via credit card, it's quite compelling.sf-cool

Cheers,
Doug

December 21, 2017
10:34 am
Doug
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Loonie said
I can see the point about building a larger customer base, except that EQ doesn't offer anything else except the HISA. Nor have they tried to sell me anything from parent company.

It may be true that other banks don't operate this way, but it would be wrong to assume therefore that what they are doing makes no sense. If it didn't make some kind of sense, they wouldn't be in business. We just don't know what kind of sense. Perhaps a shareholder can enlighten us after raising this at AGM.  

Loonie, I agree with you on the first part. That's part of my argument. sf-cool

On the second point, companies have flawed business strategies all the time. They will keep doing the same thing, time after time. And, because EQ Bank's deposits are a "low base," it's not material to their bottom line so they can "afford" to lose money on that small aspect of their business. As to the shareholder comment, Canada's, and the world's, corporate governance laws are heavily skewed in favour of issuers (i.e., companies) and it would take a huge groundswell of support from many large, institutional shareholders to effect any change. 🙁

That said, I like that EQ Bank launched a direct-to-consumer banking operation in record low time...but I can't help but feel that it's sort of "fizzled out". They seem to just be maintaining it with no plans to grow or expand. 🙁

Cheers,
Doug

December 21, 2017
10:41 am
Doug
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User230 said
I did read someone once that said they knew someone from inside the company. They said something like once interest rates rise they will drop out of the HISA business as they cant keep competeing at a high rate.

I found this to be wrong though. They are developing the quality of their account. Even if it were like 1.8% like most of the other HISA right now I'd stay with them. Just based on their strong no fee attitude. They have advanced features like linking 10 external accounts (the most I know of), payee options for a savings account, extremely simple interface, they don't bother me or if they do it's to tell me I transferred money (so something I actually care about).

They don't have bells and whistles like TFSAs or other stuff. But if you do one thing very well, people will start noticing.  

The first part is quite telling and probably true. sf-cool

I think, once deposit account interest rates rise, they won't be able to afford to raise rates at the same rate as the other competitors, who have a lot more "room to run," coming from lower rates. They would have to consistently offer 0.75-1% above the highest HISA rates in Canada and, in a rising rate environment, it's generally tougher to get people to switch. If they want to survive, they'll have to start offering GICs, registered plans and mortgages on a direct-to-consumer (i.e., non-broker) channel basis. Adding functionality (i.e., debit cards) and also lifting the maximum balance per customer are ways to achieve that end successfully. sf-cool

In the end, as deposit interest rate spreads start to compress against peers, I think you'll see EQ Bank's interest rate "settle out" in or around the WealthONE(s), the Manitoba CUs and the Alterna Bank(s). They may not cut the rate but, simply speaking, this will be achieved by not raising the rate or not raising it as much/as quickly as those competitors so the net effect is the same.

Cheers,
Doug

December 22, 2017
1:16 am
Loonie
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I don't know how it is done exactly, but it's not impossible to get heard at an AGM - or at least it didn't use to be. Some of the churches and church-affiliated organizations used to do this in the past, concerning unethical corporate policies. They only had to buy one share. It raised quite a stink at the time. But all we want is an explanation.

I don't know if EQ has a secret strategy to get out of HISAs. I sort of doubt this as they've obviously put a lot of money and effort into getting this going, and they seem to have a strategy about how they want to position themselves with it - appealing to the young and mobile.

That said, as far as I can see, all FIs have as a goal to eventually, to get their hands on your l10onger term savings, registered accounts, mortgages, credit cards, etc., as that's where the bigger profits seem to be for them.

I would agree that all they have to do to lower rates is sit still and let the sea rise around them.

December 22, 2017
12:34 pm
Doug
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Loonie said
I don't know how it is done exactly, but it's not impossible to get heard at an AGM - or at least it didn't use to be. Some of the churches and church-affiliated organizations used to do this in the past, concerning unethical corporate policies. They only had to buy one share. It raised quite a stink at the time. But all we want is an explanation.

I don't know if EQ has a secret strategy to get out of HISAs. I sort of doubt this as they've obviously put a lot of money and effort into getting this going, and they seem to have a strategy about how they want to position themselves with it - appealing to the young and mobile.

Quick comment on the first part: yes, you can be heard but getting action, or even a response, so it's more likely to be sent to the "round file," after being posted in an obligatory transcript/webcast of the AGM. 🙂

I don't think they'll get out of HISAs given the investment, either, but seeing as there's been no attempt to cross-sell other products & services by adding other direct-to-consumer products & services, adding debit cards, a chequing option, etc., it's not an unreasonable hypothesis to suggest they may be reevaluating their strategy. This happens often. Case in point: HSBC Direct, which used to have a market leading Direct Savings Account that could be accessed fee-free via online/telephone banking, EFT transfers and ABM deposits/withdrawals until it ceased to exist. Same with Citizens Bank of Canada ending their equally market leading no fee chequing account and decent HISA, thinking there was no growth opportunity when, in reality, they just exited too soon. Peter was even a happy Citizens Bank of Canada customer some of us "early forum members" will remember. sf-cool

Cheers,
Doug

December 22, 2017
8:01 pm
Loonie
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My "best guess" is that EQ might be hoping to be bought up by, say, TD, or merge somehow, to become their online banking presence (as Tang is to Scotia, etc.). For that purpose, I imagine it's the number and quality of clients that counts more than the dollars each one has put in, although obviously the total also matters. If EQ is succeeding at accessing the well-employed youth market and in making their technology efficient, they should be very attractive as an acquisition, I would think. I don't think they're there yet though.

December 23, 2017
11:25 am
Doug
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Loonie said
My "best guess" is that EQ might be hoping to be bought up by, say, TD, or merge somehow, to become their online banking presence (as Tang is to Scotia, etc.). For that purpose, I imagine it's the number and quality of clients that counts more than the dollars each one has put in, although obviously the total also matters. If EQ is succeeding at accessing the well-employed youth market and in making their technology efficient, they should be very attractive as an acquisition, I would think. I don't think they're there yet though.  

Possibly. I would buy that rationale more than the earlier rationale of you and others. The problem is, we don't know how successful that is going as they don't break out numbers of clients. And still, I'm not sure that makes them particularly attractive to one of the other "Big 5" banks - they seem to be a bit intransigent at launching virtual banking flanker "brands". BMO Bank of Montreal briefly had the BMO/IGA and BMO/Sobeys Air Miles no-fee banking partnership that it swiftly disbanded a few years ago. RBC has something that is somewhat resembling such with its MultiProduct rebate that sees someone holding an RBC Direct Investing account with at least $15,000 in assets in it and an active credit card have their monthly fee rebated/waived on their chequing account; however, TD Canada Trust and HSBC Bank Canada are going in the exact opposite direction, the former "doubling down" on its branch channels whilst removing standalone ATMs and the latter closing branches & ending non-face-to-face new-to-bank account opening. 🙁

I actually wouldn't be surprised to see a recapitalized Home Capital Group buy EQ Bank in a year or two to merge the two brands under the Oaken brand but utilize EQ Bank's superior in-house banking platform. Stranger things have happened! 😉

Cheers,
Doug

December 23, 2017
11:55 am
NorthernRaven
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Equitable is an alt-mortgage company, not a line that the Big 5 have shown much interest in. If TD wanted the EQBank customers and systems, it would have to launch an offer for a publicly traded company, well north of $1 billion, then extract the EQ retail banking bit and find someone else who actually wants the core company.
Not very plausible - TD could set up their own little boutique with less hassle. When Scotia bought Tangerine, it wanted it as a whole. RBC bought Ally for the auto loans - it actually shut down the retail deposit stuff completely.

December 24, 2017
11:41 pm
Loonie
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It may depend on how successful EQ is at what it is trying to do. As I suggested, I think its market is the young well-employed who are smart enough to realize they can do better than what they get at any of the BigBanks. The hitch perhaps is that they still need a bank such as BigFive through which to do greater variety of things, and for that they are faced with fees usually. For us old folks, this is often less of an issue. Come the next stock market bust, they could be very attractive indeed, as the sheep will be moving their money out of the market in droves.

It could be great for us if Home Capital took them on. Could mean THREE separate insured entities at Oaken.sf-smilesf-smile

Funny you should mention TD's inertia. In my area, they are closing/consolidating branches and making the remaining ones larger with more stuffed large furniture and plate glass. Neither of the two staff people I spoke to last week at a branch that is closing in February are losing their jobs - both are being moved to the beefed-up one a mile away. The person i spoke to on the "investment" side seemed very surprised when I explained to him that TD had lost a substantial amount of my money and offered nothing that I needed in order to get it back. For once, he didn't dispute what I needed. It's usually very hard to get them to understand that I don't need any more money and don't need to take any more risks, however small they may be deemed to be; I just want to maintain my purchasing power. I think it may have dawned on him that TD had nothing to offer at this time.

December 25, 2017
8:04 am
NorthernRaven
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Doug said

Possibly. I would buy that rationale more than the earlier rationale of you and others. The problem is, we don't know how successful that is going as they don't break out numbers of clients.

From a November FP story: "The company says it is Canada’s ninth largest independent schedule I bank, running branchless operations including its EQ Bank digital banking arm which provides services to more than 43,000 Canadians."
They had 17,000 after the first three months of operations through March 2016, I think.

Their Q3 financial update had the EQ deposits at $1.6 billion (the OSFI demand number is $2.6 billion, but that would include the brokerage ISA business). It also mentioned that they will be adding GICs to the EQ platform "in the coming months", and that they have applied to incorporate a trust subsidiary, so they can do a second CDIC issuer like Home (Oaken) does.

December 26, 2017
5:05 am
Koogie
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NorthernRaven said
Their Q3 financial update had the EQ deposits at $1.6 billion (the OSFI demand number is $2.6 billion, but that would include the brokerage ISA business). It also mentioned that they will be adding GICs to the EQ platform "in the coming months", and that they have applied to incorporate a trust subsidiary, so they can do a second CDIC issuer like Home (Oaken) does.  

That would be very welcome news (both the GICs and extra CDIC coverage). I have been with EQ for a year now. Wouldn't hesitate to do more (insured) business with them.

December 26, 2017
10:35 pm
Loonie
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WE STILL NEED JOINT ACCOUNTS. (Hoping they might notice if in caps! lol) Personally, I need JOINT ACCOUNTS more than GICs from them at this time.

December 27, 2017
12:49 pm
Norman1
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Loonie said
My "best guess" is that EQ might be hoping to be bought up by, say, TD, or merge somehow, to become their online banking presence (as Tang is to Scotia, etc.). For that purpose, I imagine it's the number and quality of clients that counts more than the dollars each one has put in, although obviously the total also matters. … 

Equitable Group didn't start up EQ Bank to attract a buyout.

In their Q4 2015 earnings conference call of March 2016 (around 00:20:15), they said the reason was a plan, since 2013, to diversify their funding. With the consolidation in the wealth management business, they were worried about the shrinking "shelf space" from advisors for their Equitable Bank HISA (EQB100 and EQB200) offered over FundSERV.

EQ Bank gives them another channel, an online direct-to-consumer channel, to raise deposits.

January 1, 2018
11:25 pm
Vatox
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Loonie said
WE STILL NEED JOINT ACCOUNTS. (Hoping they might notice if in caps! lol) Personally, I need JOINT ACCOUNTS more than GICs from them at this time.  

GICs and a TFSA would be great!

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