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Peoples Trust raises 1 year GIC to 2.4%
July 25, 2014
6:34 am
Brimleychen
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Peoples Trust raises 1 year GIC to 2.4%sf-laugh
http://www.peoplestrust.com/GIC_gr/

July 25, 2014
8:27 am
Bill
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Anybody know how they can be so much higher than everybody else's 1-year money? Makes me wonder what they need all this money for - is the big earthquake happening out there soon???

July 25, 2014
8:55 am
kanaka
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Hubert's promo is offering 2.35. Is it just competition?

https://www.happysavings.ca/11new-page.aspx

July 25, 2014
1:02 pm
Brimleychen
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The easy money (high-yield credit markets) were sold off this month. The market will force Bank of Canada to raise her rate no matter what...
http://www.zerohedge.com/news/.....lows-surge
...As we have been highlighting for a few weeks, something is rotten in high-yield credit markets. This week, the mainstream media is starting to catch on as major divergences in performance (high-yield bond spreads are 30-40bps off their cycle tights from just prior to MH17 even as stocks rally to new record highs) and technicals weaken. However, as BofA warns, flows follow returns and this week saw the biggest outflows from high-yield funds in more than a year. Investment grade bonds saw notable inflows as investors chose up-in-quality, rather than reach-for-yield, for the first time in years: equity investors, pay attention.
...

July 25, 2014
1:09 pm
Brimleychen
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Guess why TD,RY,BMO,CM all are targeting retail customers for cheque/saving a/c by free tablets, ipads, $300, $400 etc...

The money from market is tight, because most of free money are chasing TSX / Dow / S&P now.sf-laugh

July 25, 2014
1:47 pm
NorthernRaven
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Brian said
It is based on RISK principle.

Smaller and niche banks/trusts must pay more interest to attract funds. Large established banks dont need to pay as they provide a much higher level of security for your funds.

The risk factor in HISA rates is probably overstated. If depositors were perfectly rational agents it would be more important, but there's a fairly major "retail" factor involved. If "HighEndRetailer" charges more for the same items than Walmart, it doesn't mean that Walmart is perceived as a "riskier" place to buy them, just that convenience, familiarity and whatnot allow for a range of prices. Similarly, the Big Banks have large customer bases and offer a range of products, and smaller institutions have to find a way to pry a customer base away from them. Especially with CDIC insurance in place, people aren't actually evaluating "risk", so much as "unfamiliarity", inertia, etc.

The Manitoba credit unions are a somewhat special case. As best as I can tell, they've spent the last 10-15 years competing with each other, using reducing overhead to compensate for the slightly higher cost of funds from higher interest rates. Having the ability to pay those rates enabled them to make a play for online deposits (I'm also curious as to whether other provinces would let their CUs sign up out-of-province customers even if they wanted to). The 100% deposit guarantee is common in provincial CU systems - presumably they don't as a rule have the sorts of distorting humongous corporate and high-end deposits a national commercial bank might.

July 25, 2014
2:10 pm
kanaka
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Credit unions can go national, if they elect to do so. http://www.canadianbusiness.co.....-national/

July 25, 2014
2:55 pm
NorthernRaven
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kanaka said

Credit unions can go national, if they elect to do so. http://www.canadianbusiness.co.....-national/

It isn't just a matter of opening up branches outside their province. They would have to transfer to the federal regulatory system (and I'm not sure if all provinces have provisions in place for a CU to continue outside the jurisdiction). That means coming under OSFI oversight, CDIC insurance, etc. There's also the federal prohibition against combined banking and insurance - some of the prairie CUs that have interests in insurance firms might have to separate things out. I think the main interest is from a few of the big behemoths in BC and Ontario.

July 28, 2014
9:26 am
Loonie
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Peoples has been offering 3% on TFSA savings accounts for years now, and has not gone belly-up yet. Hubert's 1 year GIC with laddered rate actually comes out to 2.37% because it is compounded quarterly, which is almost the same as Peoples 1yr GIC. Peoples has been chasing what I consider to be the younger investor all along, people with shorter horizons, so I think this is consistent with their strategy. Their rates on other invesetments are not as competitive.
Neither of these spend anywhere near as much in advertising as do the banks that pay less interest to GICs.

August 5, 2014
4:30 pm
Jack Manning
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Loonie, their 3.00% savings account rate for TFSA's sounds good but the problem is how long can they keep this up.

Also, TFSA's currently are at a $31,000 maximum unused contribution limit which is not bad but it is not like years of money put in RRSP's and cash accounts that could have $80,000 or more balances.

I guess it is better than nothing.

August 5, 2014
5:01 pm
NorthernRaven
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Jack Manning said
Loonie, their 3.00% savings account rate for TFSA's sounds good but the problem is how long can they keep this up.

If only there was site that tracked HISA rates, with history. Oh, wait, there is... :)
Peter's comparison chart shows Peoples TFSA rate at 3% back in Feb 2009, and as far as I know it has remained there the whole time. As Jack Manning noted, TFSA limits would have kept these accounts relatively small over the years, and the extra interest costs acts as a good promotional tool to attract customers. Also, even a TFSA savings account is almost as "sticky" as a short-term GIC, since you either have to do official TFSA transfers, or lose the TFSA room on withdrawal until the next year.

At some point they'll probably decide the extra interest on a growing deposit base isn't worth the cost, and probably drop the base rate and do seasonal promotions for new money. Checking OFSI reports, here's Peoples TFSA demand (savings account) deposits against their total demand deposits (TFSA + regular unregistered HISA), in $millions.

May 2014 - $160 of $460 = 35%
May 2013 - $75 of $370 = 20%
May 2012 - $30 of $290 = 10%
May 2011 - $13 of $253 = 5%

As you can see, the TFSA HISA totals have gone up fairly sharply, and they may be getting to the point where paying 3% for close to $200 million of funding makes less sense. I'd imagine they could make a one-time drop to, say, 2.5% (saving almost $1 million) and not lose a lot of people. But there's no real way to tell how they evaluate things.

August 5, 2014
5:29 pm
Jack Manning
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They will cut rates when they have too much money. All other financial institutions do it. The real question is, what will be the new rate and will someone buy them out which will make things worse.

Ally was paying 4.00% 5 year GIC's when others were paying 3.00% to 3.25%. Royal bought them and are crappy GIC payers now.

August 5, 2014
7:08 pm
Loonie
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Right now, Peoples has the highest rate for any kind of account on my radar with its daily TFSA. I don't know if that has happened before, but it could be a sign that the rate won't hold.
On the other hand, if they are doing longterm thinking and want to grow and sustain that growth, they may have figured out that this is their market niche as it will probably appeal to a younger population, both as TFSA and as online banking. If they can still balance their books, it could turn out to be a smart strategy. They are still a small bank and could plan to stick around and grow. But I know nothing about bank takeovers (except that it never benefits the consumer as far as I've seen so far).
I thought a year ago, when I first heard of Peoples, "how long can it last?", but they're still doing it as of today. They also have the highest 1 yr GIC rate, which has not been so actively questioned as far as I know.

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