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Hubert - merger with Access CU (Accelerate Financial)
January 22, 2022
9:39 am
cgouimet
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Norman1 said

cgouimet said

I'm a Hubert member/client, not Accelerate. How do the two compare online banking wise?

One can have a look around at AcceleRate Financial.

If my Hubert Happy High-Interest Savings account does become an AcceleRate Savings account after the merger, I'll close it. Rate would be lower. Fees would be higher with only one free withdrawal per month.

Hard to justify keeping an Accelerate Savings account when I have an EQ Bank HISA with higher interest and more free transactions.  

Yes I can look around their web site but unless I open an account I can't evaluate their online banking ...

CGO
January 22, 2022
9:49 am
christinad
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Hopefully! Hubert usually gives notice of rate increases, right?

January 22, 2022
9:55 am
Norman1
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Loonie said

The CEO who remains will likely expect higher pay due to running a larger company, so I don't think there will be savings there.
When the organization gets bigger, it doesn't necessarily result in lower costs. It could be even more complicated and expensive to run, with a need for a larger bureaucracy which may be more sluggish.…

But the basic point is that we have not been given any information on any of these things, so how would we know?

Remaining CEO compensation will increase. But, it won't end up being the same as the current three CEO's combined. If it does, then they would have bungled the merger.

Ditto with those two busy adjacent branches that would become Access CU branches. The two branches should be merged to a bigger one. I don't believe the malarkey. Keeping them would be as stupid as splitting a family across two nearby two-bedroom houses instead of finding one bigger four-bedroom one!

TD Bank had situations like that when they bought Canada Trust years ago. Same when Royal Bank bought Royal Trust. Both merged adjacent branches.

There will be reductions in existing positions. For example, not all the accounts payable staff will be needed as the bills consolidate. I expect three separate telephone bills will eventually consolidate to one bigger bill. Eventually, three separate office supply bills will consolidate as well.

January 22, 2022
10:53 am
savemoresaveoften
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Loonie said

The CEO who remains will likely expect higher pay due to running a larger company, so I don't think there will be savings there.
When the organization gets bigger, it doesn't necessarily result in lower costs. It could be even more complicated and expensive to run, with a need for a larger bureaucracy which may be more sluggish. Everyone working at the highest levels will expect more pay due to larger size that they are responsible for.
I don't see board maintenance as a big expense, unless members are paid, which I doubt they are.
They plan on doing more in terms of community contributions, which might cost more overall. Meridian spends tons of money on concert venues, for example but I have yet to see any analysis that shows this to be useful to Meridian.
Et cetera.

But the basic point is that we have not been given any information on any of these things, so how would we know?  

my understanding is board members are not volunteers, at least not at publicly listed companies (board memebers get paid a few $$$ every meeting they attend, maybe CU is different.) So there will be at the minimum total overall savings in salaries) from the very top (board members, CEO) to the very bottom (foot soldiers at branches). Not demeaning tellers, just that they are the lowest paid in the food chain which I always kind of disagree... Add to that less branches overall to serve the combined customer base, the savings are definitely real.

January 22, 2022
11:01 am
Doug
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Loonie said
I "attended", by Zoom, the meeting where the proposal was discussed last evening.

Here are the main points I got out of it:
The emphasis is on 'efficiencies' not growth.
Unclear what those efficiencies are exactly as they have no plans to close branches where they exist and no intention of reducing staff. All staff have been guaranteed jobs.
Unsurprisingly, they want to beef up their 'wealth management' offerings etc.
They claim that any changes will be made slowly and thoughtfully, attempting to utilize the best practices of each entity. (How do you define what's "best"?)
They are aware that Hubert is known for its great customer service.
The woman who seems to run Hubert is called Tara.
The CEO of Hubert's parent Sunova is named Ed and is going to retire this year after 40 years. I think he is to be replaced by Larry.
Someone asked about the apparent impact of CU mergers being that deposit rates go down, but this was essentially denied; they claim that rates have to be competitive for the FI to survive. Try telling that to RBC etc!sf-laugh
This merger will make Access the biggest CU in MB.
Questions that would have required a detailed answer were avoided and were said to be inappropriate for this forum.
The transition will happen officially on July 1, 2022.
Acceptance requires a 2/3 majority of those who vote in each CU. In order for it to go through, at least 2 CUs must approve and one of those must be Access.
There is no guarantee that fees will not be introduced.
They want to introduce patronage dividends.
If Sunova members turn this down, Sunova admin will look for other merger possibilities, so we'll never be rid of this boondoggle. This may in fact be the best of possible options.
They do not feel pressured to do this by the banks. Rather, it is the fintechs that are creating the pressure on both the banks and the CUs. (Hence, Concentra/Neo/)
They are quite interested in possibly going Federal. (That has never turned into anything useful from Coast Capital as far as I know.)

My impression was that they are trying hard to proceed with caution and with regard for the strengths of Hubert, but I don't trust that exemplary rates will be the result. The only promise that mattered to me was that no employees would lose their jobs. From my perspective, everything else that mattered was still up in the air and would not be decided until some time after the merger was complete.

I will probably vote against it. I must protest the lack of detail on plans and rationale and the implication that we should just trust them to do what is best for us, and this is the only mechanism I have. I'm pretty sure it will pass without me.
For a CU to become the largest in MB does not bode well. Look at the deposit rates in the other largest CUs in the country and you do not see the best rates there; and even worse at the largest banks.
However, I can understand why people might support the merger, as the alternatives of not merging are equally unclear.  

Thanks, Loonie. Yes, Tara has been the supervisor of the Hubert Financial virtual branch of Sunova since inception. It's not a large team, then and even now. I suspect it's still not in excess of 10-15 full-time equivalent employees.

This seems to confirm what I've said in the past. I get the sense that, ultimately, one virtual division will survive the merger, and I suspect that surviving division will indeed be the stronger, larger Hubert Financial. AcceleRate Financial will likely be the one that is folded into a merged Hubert Financial division. sf-cool

That only 2/3 credit unions are required to approve the merger is a bit surprising and not surprising at the same time. Does this mean that only two credit unions (one being Access) need to approve the merger between the three credit unions and the three-way merger will still proceed (a bit surprising), or does it simply mean any credit union not approving the merger would then be opted out of the three-way merger and the two credit unions approving would be merged (not surprising)?

Cheers,
Doug

January 22, 2022
11:17 am
Doug
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Norman1 said
Hubert web site will be gone after migrating Hubert clients to the Accelerate one. Efficiency gains also from reducing the rates on the former Hubert accounts to the Accelerate ones. sf-surprised  

I agree that only one core banking system and likely only one online banking platform will survive, but I would just make a clarifying point. Access and Noventis use the same online banking platform (MemberDirect). MemberDirect is on the way out, and the take up by Central 1's proposed replacement (Forge) has been tepid, at best. Credit unions seem not to be impressed, either in tech in or in costs, and many are taking this opportunity to do full on RFQs and RFPs and adopt new online banking platforms (Concentra, for one example; Coast Capital Savings, for another). As well, Central 1 has been mired in Forge project turmoil, with notable senior executive and management team departures and departures of replacements. I think it's slightly more likely that Access will choose to adopt a new online banking platform, or invest and build on Sunova's in-house online banking platform, and adopt that across their network.

In terms of brand affinity and cachet, Hubert is known for their legendary customer service excellent and it's a fun brand, built over many, many years. AcceleRate Financial is hardly a known quantity, its customer service noteworthiness is "meh," and it's far more likely that brand will be phased out.

I also see Access management as wanting to maintain the virtual division at one of the regional headquarters, such as Selkirk, of the combined entity, where Hubert already has a noteworthy contact centre and back office team, rather than a few cubicles and an office cobbled together at the Winnipeg headquarters in the case of AcceleRate.

Cheers,
Doug

January 22, 2022
11:23 am
Doug
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Norman1 said
If my Hubert Happy High-Interest Savings account does become an AcceleRate Savings account after the merger, I'll close it. Rate would be lower. Fees would be higher with only one free withdrawal per month.

Hard to justify keeping an Accelerate Savings account when I have an EQ Bank HISA with higher interest and more free transactions.  

Most likely your AcceleRate HISA will become a second Happy Savings Account under your combined Hubert Financial profile (on whatever merged online banking platform they choose to adopt). I really don't see the AcceleRate brand being maintained over Hubert. That would rank as probably one of the stupidest rebranding mistakes ever.

However, they may, and likely will, utilize Access' treasury team for the purposes of determining Hubert Financial GIC and HISA rates. So, what I'm saying is, yes, you could well see Hubert Financial rates mirror those of current AcceleRate rates, but they'll keep the Hubert brand and market those rates utilizing Hubert's more successful strategies.

Cheers,
Doug

January 22, 2022
3:19 pm
Loonie
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In truth, we don't know what they are going to do.
And, according to them, neither do they.
But, somehow, according to them, it's going to be better for all concerned.
So, according to them, no worries!
It's a wonderful Life!

If they drop that one year GIC and charge transfer fees, I think it will be toast for Hubert membership.

January 23, 2022
7:28 am
cgouimet
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christinad said
Hopefully! Hubert usually gives notice of rate increases, right?  

A little. At 21:52 on Dec 14, I received an email re the Dec 15 changes.

CGO
January 23, 2022
9:11 am
Norman1
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Loonie said
In truth, we don't know what they are going to do.
And, according to them, neither do they.
But, somehow, according to them, it's going to be better for all concerned.
So, according to them, no worries!
It's a wonderful Life!

I think they know enough that it will be better for the organizations, the credit unions, at least.

For example, the costs of implementing consumer-directed finance (formerly known as open banking) and the Payments Canada modernizations, like the Real-Time Rail (under one minute irrevocable settlement), would be spread over a larger member and asset base.

It won't necessarily be better for every member though. Lower rates benefit members who borrow. Not so much the members who are saving substantial amounts of funds.

It likely hasn't been decided yet. So, they aren't going to cause panic and share the possibility that once it becomes the largest credit union in the province, like VanCity in BC, deposit rates would drop.

Yes, Hubert could eventually be toast. My guess is that if the merged credit unions find that they can now attract enough HISA deposits with a brick-and-mortar branch HISA paying 0.05%, like VanCity's savings account, then there would be no need to have an online-only HISA that pays 1¼%.

January 23, 2022
9:27 am
Dean
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.
There's a whole lot of speculation & hand-wringing going on here. When other than to be informed as best we can and then vote, there's really nothing much we can do about this.

Let the chips fall where they may, and then deal with the outcome(s) when presented to us. Life is too short to do otherwise.

    Dean

sf-cool " Live Long And Prosper " sf-cool

January 23, 2022
9:44 am
gicjunkie
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FYI: I don't know if I am using the correct site for this information, but according to the one I checked out (below), as of quarter #2, Access is the #12 credit union in Canada, except for Quebec (based on total assets), Sunova (Hubert) is #26 and Noventis is #41. It would seem to me that Access would be the resulting entity or dominant partner, not Sunova as others have suggested.

https://ccua.com/app/uploads/private-files/top100-2Q21_15-Sep-21-1.pdf

January 23, 2022
9:50 am
Loonie
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Norman1 said

I think they know enough that it will be better for the organizations, the credit unions, at least.

For example, the costs of implementing consumer-directed finance (formerly known as open banking) and the Payments Canada modernizations, like the Real-Time Rail (under one minute irrevocable settlement), would be spread over a larger member and asset base.

It won't necessarily be better for every member though. Lower rates benefit members who borrow. Not so much the members who are saving substantial amounts of funds.

It likely hasn't been decided yet. So, they aren't going to cause panic and share the possibility that once it becomes the largest credit union in the province, like VanCity in BC, deposit rates would drop.

Yes, Hubert could eventually be toast. My guess is that if the merged credit unions find that they can now attract enough HISA deposits with a brick-and-mortar branch HISA paying 0.05%, like VanCity's savings account, then there would be no need to have an online-only HISA that pays 1¼%.  

I'm not opposed to doing what's best for the organization. It's a credit union, not a bank. What's good for the organization is good for me inasmuch as I'm a co-owner.

If this merger is necessary in order for the Sunova organization to thrive, so be it. The problem is that I don't really know if it's necessary and they have not shown me that it is. Potentially, if the merger fails, things might be much worse for Sunova/Hubert members. I don't discount this possibility at all. There is no point in retaining the 1.25 HISA if it turns out to be the last gasp of the FI, but neither is there any point in yet another FI that pays .1% or .05%

January 23, 2022
10:09 am
Norman1
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gicjunkie said
FYI: I don't know if I am using the correct site for this information, but according to the one I checked out (below), as of quarter #2, Access is the #12 credit union in Canada, except for Quebec (based on total assets), Sunova (Hubert) is #26 and Noventis is #41. It would seem to me that Access would be the resulting entity or dominant partner, not Sunova as others have suggested.

That is correct.

Access is the dominant participant in the merger. That was shared in the merger info. It is not a merger of equals:

  Combined Access Noventis Sunova
Balance sheet assets $9.49B $6.03B $1.14 B $2.32B
Assets under management $10.07B $6.36B $1.23B $2.48B
Members 169,700 92,000 28,000 49,700
Employees 796 FTE 396 FTE 150 FTE 250 FTE
Branches 52 26     12   14
Efficiency 66.04% 63.05% 72.55% 68.16%
Equity 6.28% 6.47% 5.71% 6.09%
Loan portfolio $7.67B $4.79B $867M $2.01B
Capital adequacy 12.86% 12.55% 13.50% 13.52%

The merged credit unions will carry on with the Access name:

Have you decided what the name of the new credit union would be?

All three credit unions are well-respected and well-known organizations in their operating areas. After much discussion, all three boards identified the strength of the Access name and the applicability and relevance of their brand when reflecting on the mission, purpose, and shared values for all organizations. …

… And, while we will adopt the Access name, we are confident that many attributes of the Sunova and Noventis brands will integrate well into the brand for the ‘new’ Access, and the best elements of our respective cultures will live on as part of the new organization.

January 23, 2022
11:57 am
savemoresaveoften
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anyone think of any reason at all why a new member like me should not invest in a 1y GIC with Hubert, knowing Hubert name prob be gone next 6-12months ? Obv not in terms of potential acct migration headache (new userid req etc etc) but in terms of financial implications.

January 23, 2022
12:25 pm
cgouimet
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savemoresaveoften said
anyone think of any reason at all why a new member like me should not invest in a 1y GIC with Hubert, knowing Hubert name prob be gone next 6-12months ? Obv not in terms of potential acct migration headache (new userid req etc etc) but in terms of financial implications.  

No reason not to. While it is possible that post merger, their name and/or product portfolio may change, they will meet existing obligations.

CGO
January 23, 2022
12:28 pm
Loonie
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Thanks for the helpful chart, Norman.
Can you explain what is meant by 'efficiency' in this context? Is there a desirable number of benchmark for this?
Looks like Noventis is the weakest partner - and Access may be the meanest!

January 23, 2022
12:36 pm
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cgouimet said

No reason not to. While it is possible that post merger, their name and/or product portfolio may change, they will meet existing obligations.  

Agreed. It's actually a great time to buy those one year GICs.
I doubt that they will be discontinued within the year, but, if they are, there could potentially be a problem if you wanted to cash them at a quarterly anniversary and wanted to reinvest in a new one at a better prevailing rate; this kind of GIC might not be available to reinvest in and you might have to accept a conventional GIC or move elsewhere.

January 23, 2022
2:29 pm
Norman1
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Loonie said

Can you explain what is meant by 'efficiency' in this context? Is there a desirable number of benchmark for this?
Looks like Noventis is the weakest partner - and Access may be the meanest!

Efficiency is the percentage that overhead costs is of the financial institution's operating income.

One definition is

Non-interest Expenses / (Operating Income – Loan Loss Provision)

Another excludes loan loss provisions:

Non-interest Expenses / Revenue

Idea is the same.

It looks like 50% is considered optimal. But, I think there is room for variation. I don't think anything is seriously wrong if efficiency was 55.2% instead of 50%.

For a credit union, I would question it if it had a 50% efficiency ratio. That means it is earning profits that are double what is needed to run it. That would look like a for-profit organization and not a non-profit one.

January 23, 2022
5:46 pm
Loonie
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I think some of this is over my head, but what is 'operating income', then? Is this what they get from fees and spreads?

Hubert has higher number than Access for Efficiency. Does that mean it is considered less efficient?

I'm happy for it to be less efficient if it continues to give good service and has enough capital reserves and can meet necessary expenses. That is, ideally, the whole point of a credit union, seems to me.

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