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Moody's downgrades ING Bank of Canada, cites increased competition & questions business model
June 16, 2012
10:43 am
Doug
British Columbia, Canada
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In a particularly scathing rebuke, for a credit ratings agency and arguably the more conservative of the "Big Three" (S&P, Moody's and Fitch Ratings), Moody's announced yesterday that they are formally downgrading ING Bank of Canada's "senior deposit ratings", "deposit ratings" and "subordinated bonds" by four notches while maintaining a "negative outlook" or "negative bias". They further said this concludes the exhaustive review that they first announced in mid-February 2012.

Among the downgrades, the "senior deposit ratings" (presumably that's like their issued GICs, term deposits and maybe debentures and bankers acceptances?) from A2 to Baa1. Its "deposit ratings" go from Prime-1 to Prime-2. Further, its "subordinated bonds", which are "unconditionally guaranteed" by parent ING Groep NV, received a downgrade from A1 to Baaa2. ING Bank of Canada's "bank financial strength rating" with Moody's went from C/a3 to C-1, which doesn't appear to be good. ING Groep received separate downgrades from Moody's.

Further and more importantly, Moody's writes: "The downgrade of ING Bank of Canada's BFSR follows a reassessment of the transition risk associated with its narrow business model in the context of an increasingly competitive operating environment. Relative to peers, ING Bank of Canada has elevated interest rate risk because of its reliance on interest revenues and the product options embedded in the core Canadian residential mortgage product. Moody's believes that ING Bank of Canada manages these exposures carefully, but in a stress environment they could still result in material losses.

The negative outlook on ING Bank of Canada's BFSR reflects Moody's expectation that low rates and intensifying competition will put pressure on the bank's net interest margin. A slowdown in consumer credit growth has led to aggressive mortgage pricing by Canadian banks, and the advent of Basel III liquidity rules is likely to lead to continued pressure on deposit rates. The outlook is also in line with the negative outlook assigned to ING Bank N.V.'s ratings. A further downgrade of the parent would lead to downward pressure on ING Bank of Canada's ratings because of the indirect exposures resulting from the use of a shared brand."

The one bright spot, according to Moody's: "Notwithstanding these challenges, ING Bank of Canada's ratings are supported by its franchise strengths, including healthy efficiency metrics, strong capital, and excellent asset quality."

Separately, I also find this interesting article in a May issue of Maclean's titled, "ING Direct scrambles to reinvent itself: The company is caught between growing competition in internet banking and the power of the big six". It does call ING Canada's seventh-largest bank, which used to be HSBC, but that's probably more to do with HSBC's weakness and shedding of market share than ING's growth, which is flat to nil.

Finally, I would also point you to this Canadian Press article that summarizes the Moody's ratings actions in plain language: "TORONTO - Moody's Investors Service downgraded ING Bank of Canada on Friday after a two-notch downgrade of its Dutch corporate parent ING Bank N.V.

The debt rating agency cut its senior deposit ratings of ING Bank of Canada to Baa1 from A2 on Friday after a two-notch downgrade of Dutch parent ING Bank N.V.'s financial strength rating to C-.

``Today's actions reflect the potential adverse effects of ING Bank N.V.'s lower capacity to support its Canadian subsidiary, as captured by its lower standalone credit assessment,'' Moody's said.

``Moody's expectation of the willingness or likelihood that ING would provide support to ING Bank of Canada if needed has not changed.''

The agency also raised concerns about ING's narrow business model in Canada in an increasingly more competitive market.

ING offers basic banking services in Canada including high-interest savings and no-fee chequing accounts as well as mutual funds and mortgage lending.

``Relative to peers, ING Bank of Canada has elevated interest rate risk because of its reliance on interest revenues and the product options embedded in the core Canadian residential mortgage product,'' Moody's said.

``Moody's believes that ING Bank of Canada manages these exposures carefully, but in a stress environment they could still result in material losses.''

Moody's cut the Canadian banks' standalone bank financial strength rating to C- and its short-term deposit ratings were downgraded to Prime-2 from Prime-1.

ING Bank of Canada's outstanding subordinated bonds, which are unconditionally and irrevocably guaranteed by ING Bank N.V., were downgraded by four notches to Baa2 from A1.

All the ratings carried a negative outlook."

Sorry to be the bearer of such depressing news! :)

Cheers,
Doug

June 16, 2012
4:03 pm
Cents111
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Thanks Doug for letting us know. With ING's low interest rates, I have long since moved my accounts to Accelerate, People's Trust, Canadian Direct Financial. I would be surprised if anyone who follows this site still has anything with ING. (Possibly for the banking on-line functionality which is right up there with Ally). I haven't found the rest to be anywhere as good.

June 16, 2012
9:20 pm
msl
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Not a good news for ING!

But oops, they have another contest actually:

Basically you just have to use their online bill payment system
and you can join their contest. check more details about their contest by (visit) ingdirect.ca/thriveforfive. But i would just suggest you buy lottery tickets than
joining their contest.

June 17, 2012
11:19 am
Doug
British Columbia, Canada
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Cents111 said:

Thanks Doug for letting us know. With ING's low interest rates, I have long since moved my accounts to Accelerate, People's Trust, Canadian Direct Financial. I would be surprised if anyone who follows this site still has anything with ING. (Possibly for the banking on-line functionality which is right up there with Ally). I haven't found the rest to be anywhere as good.

Agreed with you on the online banking functionality, ING and Ally are tops, though Canadian Direct Financial does have a good system, based on msl's screenshots and review on this site.

I have an ING THRiVE Chequing account and Investment Savings Account but you still can't access the ISA-type account via your ING debit card so that, combined with low rates, are forcing me to consider closing it and streamlining things and just maintaining the ING THRiVE Chequing as a 'backup' account.

Cheers,
Doug

June 17, 2012
11:20 am
Doug
British Columbia, Canada
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msl said:

Not a good news for ING!

But oops, they have another contest actually:

Basically you just have to use their online bill payment system
and you can join their contest. check more details about their contest by (visit) ingdirect.ca/thriveforfive. But i would just suggest you buy lottery tickets than
joining their contest.

LOL, msl. ;)

Cheers,
Doug

June 17, 2012
5:11 pm
Yatti420
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Bad news for ING.. I think it was due to come though.. You can definately feel rate squeeze.. Doug have you tried editing the accounts linked to your card? I believe you can have Chequing/savings assigned.. I don't have an ISA to test with however..

June 17, 2012
8:31 pm
Doug
British Columbia, Canada
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Yes, you can edit the linked accounts to your bank card, Yatti, but unfortunately the ISA can't be linked. :(

Cheers,
Doug

June 20, 2012
2:29 pm
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ING Direct was the first into the internet savings bank game in Canada. I got my start with them back in the late 1990s and I guess I have to credit them for getting me "hooked" on the idea of using money to make more money. I've gone onto bigger and better things (stocks, bonds, ETFs, etc.. etc...) and I haven't kept any cash with ING for quite some time (my emergency stash is currently with Ally). From where I sit, it looks like INGs competitors have left ING in the dust in just about every respect. ING has placed way too much emphasis on its brand as a source of revenue... websites like this one are a testement to the fact that people don't care about branding... they just want to know where they can get the most interest for their savings. I think ING is dying a slow death.

June 21, 2012
10:35 am
NorthernRaven
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Just to keep things in perspective, here's the total of un-registered demand deposits (so excluding GICs, TFSA, RRSP) for a few institutions:

ING Bank of Canada: $15.1 billion
ResMor Trust (Ally): $1.5 billion
Canadian Tire Bank: $630 million
Peoples Trust Company: $250 million
Bridgewater Bank: $5 million

By comparison, Big5 bank demand deposits each run in the $60-100+ billion range. ING is going to be looking at growing by trying to recruit more of those customers, not the relatively tiny "highest interest rate" segment.

June 27, 2012
8:05 am
Stephane
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Big 6 banks now have a +-60% canadian market share of premium savings account. I would venture to say that ease of transfer to main operating account and getting a "decent" rate seems to be main attraction, at least for physical branch network. When it comes to online offerings there seems to be 2 different types of customers, those simply seeking best rates and those that feel comfortable with their main institutions online offering. Would you agree?

July 2, 2012
8:27 pm
Cents111
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I would definitely agree. Always weighing the rate vs the ease and timing of transfer from these institutions to my TD chequing account. Right now interest rates are winning as I am with Accelerate, CDF and Peoples Trust. I use Ally to flow funds through to Accelerate and CDF. I just leave whatever I have in Peoples Trust alone as the rates have remained steady and I know it will be a PITA to transfer money out of Peoples. However I see there is a post regarding Peoples Trust which I haven't read. I live in hope that they will at least provideon-line balances. Is it cheaper to hire staff to send out statements vs a one time cost to have balances provided online?

July 3, 2012
8:39 pm
Doug
British Columbia, Canada
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I don't buy the argument that online banking is too expensive. They could actually turf paper statements altogether - even charge for them - if they had online banking an e-Statements. They're just (a) lazy and (b) want to make it hard for you to transfer money out of Peoples Trust. I'm convinced of that.

What I could do, though, is link your Peoples Trust account to Ally and then use Ally as a way of doing two-way transfers (since they only place two-day EFT holds once funds arrive). :)

Cheers,
Doug

July 4, 2012
9:06 pm
Cents111
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Thanks for that Doug,
I didn't realize I could link my Peoples Trust to Ally like the rest of my online accounts. I will call them tomorrow to ask them for whatever I need to set them up in Ally.
Cheers
Steve

July 5, 2012
12:03 am
Doug
British Columbia, Canada
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Hi Steve,

You could link it from the Peoples Trust side, but I'd link it from the Ally side. All you'd need is three things (actually four, if you include your name). I can likely provide all of that, except for your name and account number with Peoples Trust.

The cool thing is, Ally allows online account verification and "linkage" by sending two small, "test deposits" (less than $1.00 each) to your linked external accounts and, as far as I can tell, there are no limits to your linked external accounts (apparently ING has a limit, which is small and uber-lame).

As per Canadian Payments Association 'Branch Directory', 'Trust & Loan Companies' file (http://www.cdnpay.ca/imis15/pd.....RTRSTN.pdf)

PEOPLES TRUST COMPANY - CPA Institution # 621
Routing Numbers
- Electronic:
062116001
- Paper(MICR-encoded): 16001-621
Postal Address: 1400-888 Dunsmuir Street, Vancouver, BC V6C 3K4

That was easy, they have only one transit number. The transit number is always the first five digits of the paper(MICR-encoded) line. You can find any transit and institution number, and branch address, on the CPA website, which is the 'overseer' of Canada's EFT and cheque clearing system (actual clearing is done at various data centres around Canada by Symcor, INTRIA Items and the Credit Union Centrals, where applicable).

Hope this helps,
Doug

July 5, 2012
12:06 am
Doug
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haha, just noticed this - Peoples Trust's institution number is 621 and Ally's is 620. Cool.

Cheers,
Doug

July 5, 2012
7:57 am
Jules
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Can I link my a Peoples Trust savings account to my TD checking account for easy depositing --- like you say, from the TD side?
Which is the easiest On line bank to access that gives decent interest?

July 5, 2012
8:54 am
Yatti420
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Jules it would probably require verification.. & TD doesn't support it currently.. I know you can setup personal payees (parents etc) (instead of a cheque) in easyweb just cant be done by the customer have to call in..

July 5, 2012
9:18 pm
Cents111
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Thanks Doug,
I have been tied up all day, so haven't had a chance to contact Peoples Trust. I will look to set this up tomorrow with your guidance and a call to PT if need be. I would also love to move between TD and externals directly but have been using Ally as a conduit (since ING and Pres Choice are at the bottom of the heep).

Regards,
Steve

July 12, 2012
6:04 pm
Cents111
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Guests

Thanks again Doug,
This worked like a charm. The girl at Peoples was on the ball and knew about the two small deposits from Ally. I suspect we are one of many. Now both my wife and I are set to go. I have yet to set up Can. Dir. Financial. I will try them next.
Thanks,
Steve

July 16, 2012
3:20 pm
RetirEd
Guest
Guests

I just got my TFSA to Peoples today and will move some other cash to their savings account too. I've been sticking with ING because service is fantastic, they don't lie or cheat or nickel-and-dime, and I had deposits paying 4.65% there until Friday. Still have a tiny leftover bit of RRSP to cash when it matures next spring, and a TF-GIC of similar vintage.

I will be adding EFT from my main hub account because PT has no 24-hour telephone service.

As far as the downgrade of ING, we don't have to worry as long as we have our deposit insurance and stay under its limit. Remember, it was their stressed acquisition of some troubled European banks at the peak of the meltdown that got us those great rates when they needed to cover that spending!

Higher risk means higher return – but still no risk if insured.

RetirEd

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