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LBC reduces its HISA rate to 1.5%
September 15, 2020
1:02 pm
Alexandre
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Effective as of close of business on September 15, 2020, the annual interest rate for the LBC Digital High Interest Savings Account (HISA) on deposits up to and including $500,000 will change from 1.65% to 1.50%. The annual interest rate on deposits over $500,000 will change from 0.65% to 0.50%.

September 15, 2020
1:33 pm
AltaRed
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Looks like everyone will most likely be headed to 1.3-1.5% yet this month

September 15, 2020
1:48 pm
picassocat
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My money is already on its way to Peoples Bank.

September 15, 2020
2:53 pm
AltaRed
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picassocat said
My money is already on its way to Peoples Bank.  

Could you explain how that is relevant to this LBC Digital thread? Are you transferring from LBC Digital?

September 15, 2020
3:10 pm
Jon
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AltaRed said

Could you explain how that is relevant to this LBC Digital thread? Are you transferring from LBC Digital?  

I think that's exactly what she/he meant. (transferring money out of LBC)
And my money is now on its way to WealthOne bank.

September 15, 2020
3:26 pm
KamWest
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Moved mine out of Laurentian and B2B to Motive

1.75% and no limit on how much you can deposit.

So no tiers like in Laurentian or B2B.

September 15, 2020
4:26 pm
AltaRed
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I can't imagine worrying about a $500k tier but to each their own.

September 16, 2020
9:57 am
picassocat
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AltaRed said
I can't imagine worrying about a $500k tier but to each their own.  

Could you explain how that is relevant to this LBC Digital thread?

September 16, 2020
10:01 am
KamWest
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picassocat said

Could you explain how that is relevant to this LBC Digital thread?  

I can answer that

LBC has a tired interest rate above 500k

That is what he was referring to because I said Motive does not have this tiered rate.

September 16, 2020
10:33 am
Bill
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It's more than tired, about $500k it's pretty much dead.

September 17, 2020
8:08 am
Jon
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I always believe I have offended someone on this forum, henceforth the aggressive response, it turns of he/she is just someone that is aggressive and abrasive for some reason.

It is best not to judge other people's financial decision, they may have a several million dollars of liquid assets, which means keeping half a million of cash around may not be unreasonable (although it is too conservative in my opinion).

September 17, 2020
9:31 am
AltaRed
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Fair enough, but the bigger issue is why someone would expose more (or much more) than CDIC coverage in a BBB rated institution anyway. Laurentian is in the same league as Equitable Group, albeit both are better than Home Capital which is just on the threshold (I believe) of re-gaining investment grade status.

The latest from S&P on Laurentian

S&P Global Ratings affirmed its BBB rating on Laurentian Bank of Canada, on expectations that its capital ratios will provide enough cushion to offset the abrupt downturn caused by the COVID-19 pandemic.

The outlook remains negative, reflecting the possibility for "substantially lower" profitability.

The rating agency noted that the bank's allowance ratio of 0.44% is weaker than the average 0.78% for domestic systemically important banks, which could lead to further credit loss provisions and weaker profitability in 2020.

September 17, 2020
9:58 am
canadian.100
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AltaRed said

The latest from S&P on Laurentian

S&P Global Ratings affirmed its BBB rating on Laurentian Bank of Canada, on expectations that its capital ratios will provide enough cushion to offset the abrupt downturn caused by the COVID-19 pandemic.

The outlook remains negative, reflecting the possibility for "substantially lower" profitability.

The rating agency noted that the bank's allowance ratio of 0.44% is weaker than the average 0.78% for domestic systemically important banks, which could lead to further credit loss provisions and weaker profitability in 2020.

  

Re BBB rating on Laurentian and Equitable/EQ. How does that compare to ratings on Motive/CWB and Peoples?

September 17, 2020
10:58 am
Norman1
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Canadian Western Bank is about the same as Laurentian Bank of Canada. DBRS currently rates them both A(low) with negative trend.

Equitable Bank is rated two notches lower, at BBB with negative trend, by DBRS.

Peoples Trust Company is unrated.

September 17, 2020
11:32 am
AltaRed
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Rating agencies do have some differences for various institutions, e.g. DBRS vs Moodys vs S&P.

I suspect companies like Peoples Trust are not rated because they don't issue bonds or debentures or preferred shares in the open market, nor have common equity traded on the stock market. They also primarily operate in the consumer and small business markets. The only way to know how healthy they may be is from their financial reports and the trends thereof.

It is also a reason why the brokerages typically will generally not carry their GICs in their product mix. When I go to buy a GIC at a discount brokerage like Scotia iTrade, they generally list the credit ratings of the issuer. In a few cases, they might carry a few "not rated" issuers like Home Equity or Canadian Tire Bank, the latter of which might be because CT Financial Services is a sub of CT which IS credit rated.

Generally speaking, I will only buy GICs from issuers with a published credit rating of BBB or higher. I have stooped to as low as Home Trust which I think is still at BB+ (non-investment grade) and I broke this rule just this past week by buying a GIC from Home Equity (no credit rating) but is CDIC insured.

Added: I agree that Deposit Insurance coverage is the primary indicator for the retail consumer to use to commit their money to GICs and HISAs. Most do not understand the implications of credit ratings or that they can change in short order (e.g. Home Capital in 2017), nor can they interpret financial reports that well. Thus reliance on Deposit Insurance AND generally keeping within Deposit Insurance limits in most cases.

I acknowledge my response above regarding LBC's second tier threshold was crass or blunt. I need to temper my responses. I just couldn't imagine why anyone would have that much money committed to a low credit rated financial institution. Royal Bank - no question. LBC or EQ Bank.... not a chance.

September 17, 2020
11:55 am
topgun
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AltaRed said
Rating agencies do have some differences for various institutions, e.g. DBRS vs Moodys vs S&P.

I suspect companies like Peoples Trust are not rated because they don't issue bonds or debentures or preferred shares in the open market, nor have common equity traded on the stock market. They also primarily operate in the consumer and small business markets. The only way to know how healthy they may be is from their financial reports and the trends thereof.

It is also a reason why the brokerages typically will generally not carry their GICs in their product mix. When I go to buy a GIC at a discount brokerage like Scotia iTrade, they generally list the credit ratings of the issuer. In a few cases, they might carry a few "not rated" issuers like Home Equity or Canadian Tire Bank, the latter of which might be because CT Financial Services is a sub of CT which IS credit rated.

Generally speaking, I will only buy GICs from issuers with a published credit rating of BBB or higher. I have stooped to as low as Home Trust which I think is still at BB+ (non-investment grade) and I broke this rule just this past week by buying a GIC from Home Equity (no credit rating) but is CDIC insured.  

Two years ago I became interested in buying GIC's after investing in stock market for years. I deal with iTrade as well. My only concern was are they insured by CDIC. I picked the highest rates for some 2,3,4 and 5 year GIC's. They were competitive rates. Today I do not consider them competitive for 5 year rates. When a couple GIC's mature next month I plan on moving money elsewhere. .50% more at a MB CU makes sense to me. iTrade charges .9% for the GIC's issued by third parties. I do not pay this but it shows on my annual fee and performance statement at yearend.

Have a Great Day

September 17, 2020
12:28 pm
Norman1
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topgun said

… I deal with iTrade as well. My only concern was are they insured by CDIC. I picked the highest rates for some 2,3,4 and 5 year GIC's. They were competitive rates. Today I do not consider them competitive for 5 year rates. When a couple GIC's mature next month I plan on moving money elsewhere. .50% more at a MB CU makes sense to me. iTrade charges .9% for the GIC's issued by third parties. I do not pay this but it shows on my annual fee and performance statement at yearend.

I'm curious, is that 0.9% in total or 0.9% per annum?

That's quite hefty if it is 0.9% per year of the GIC. The customary GIC brokerage commission is ¼% for each year of the GIC's term. For a five year GIC, the customary brokerage commission would be 1¼%.

September 17, 2020
12:41 pm
Norman1
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Anyone willing to pay the rating fees and provide the non-public financial information can obtain a debt rating from DBRS, Fitch, or S&P.

Vancouver City Savings Credit Union has a DBRS short-term debit rating of R-1(low). Same as Affinity Credit Union in Saskatchewan. The estimated risk is about that of R-1(low) rated Province of Newfoundland and Labrador.

First West Credit Union in BC has a DBRS rating of BBB (high).

Some don't want to pay the fees. Some won't go through the process because they know they won't qualify for an investment grade rating. There is little benefit is obtaining a junk bond rating of BB, for example.

In contrast, there is a big payoff in obtaining an investment grade rating of A or AA which allows one to borrow at provincial bond rates. Such a good rating also opens the way for deposits that are too big for deposit insurance.

September 17, 2020
1:20 pm
topgun
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Norman1 said

topgun said

… I deal with iTrade as well. My only concern was are they insured by CDIC. I picked the highest rates for some 2,3,4 and 5 year GIC's. They were competitive rates. Today I do not consider them competitive for 5 year rates. When a couple GIC's mature next month I plan on moving money elsewhere. .50% more at a MB CU makes sense to me. iTrade charges .9% for the GIC's issued by third parties. I do not pay this but it shows on my annual fee and performance statement at yearend.

I'm curious, is that 0.9% in total or 0.9% per annum?

That's quite hefty if it is 0.9% per year of the GIC. The customary GIC brokerage commission is ¼% for each year of the GIC's term. For a five year GIC, the customary brokerage commission would be 1¼%.  

That is a one time charge. You purchase a 2 to 5 year GIC at iTrade. iTrade charges the third party .9%. Invest $1,000 iTrade charges the issuer $9. iTrade sells GIC's for 2-5 years. It is not worth selling 1 year GIC since the fee to issuer would be too high.

Have a Great Day

September 17, 2020
1:26 pm
AltaRed
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The GIC rates posted by brokerages is the rate the investor gets. The 'commission' charged by the brokerage is a third party cost back to the issuer... unseen by the investor. Aany such fees received by investment firms must now be disclosed via CRM2 requirements, including for example, the 25bp trailer fee paid to brokerages on ISAs (HISAs to the crowd here).

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