• RBC is the share growth leader in everyday banking over the last 12 months with a commanding 54BP growth.  It is likely that RBC benefits more than other banks from cannibalization of money market mutual funds switching to ROD, however, RBC’s high rate savings account is the only major bank high rate savings account that offers the high rate savings rate on the full balance.  Other banks pay the rate on balances over $5K.
• TDCT grew ROD share by 49BP over the last 3 months.  There is no obvious cause for this change in share growth.  It may relate to increased participation in the deposit broker channel or an internal shift away from money market mutual funds to high rate savings.
• Notable is the significant share declines at CIBC despite being advantaged over other banks with PC Financial.
• ING Direct appears to be shifting focus to driving share of term investments at the expense of retail operating deposits.

• McVay and Associates is introducing a new report starting this month called Everyday Banking Strategic Assessment.  The report looks at the structural attractiveness of the Everyday Banking line of business, they key buyer purchase criteria concerning selection of everyday banking providers, an assessment of competitor capabilities to deliver on buyer purchase criteria (summarized above), a look at individual competitor performance in the line of business and an evaluation of the key issues facing competitors going forward.
• The above table is a summary of our assessment of relative competitive capabilities in everyday banking.  We see TDCT as the best positioned in the line of business with a strong and convenience advantaged distribution system and a brand differentiated on the basis of convenience and service.
• For more information on our Everyday Banking Strategic Assessment, please write at the email address below.

• High Rate Savings Accounts cannibalizing short term deposits with much higher pricing for liquid investments.
• Historically low longer term rates keeping investors on the sidelines waiting for rates to rise.

 

Term Investments Market - Jan 2012
Competitor	Share	1 Yr Change in Share	5 Year Change
Chartered Banks	67.4%	-0.71%	-3.19%
Trust and Mortgage Loan Companies	3.9%	-0.07%	1.25%
Credit Unions	28.7%	0.78%	1.94%
Total	100%	0.00%	0.00%

• Increased rate competition in the broker channel, particularly for 5 year GICs.  We expect consumers to increasingly lock in their mortgage rates for 5 years spurred on by aggressive mortgage pricing and concerns about rates rising.  Competitors will be anxious to attract 5 year deposit funding to match the term of their loan book.
• Product innovation.  The challenge for larger competitors is to attract growth at the margin without re-pricing their current book.  This will lead to a new round of product innovation to offer GICs not matching the terms of their rollover book such as rate riser GICs or aggressive pricing on odd terms.
• Channel dominance.  Expect banks to better leverage their large full service broker and financial planner networks to offer specially priced term investments available only through their own network.  This will increase customer loyalty by extending unique benefits as well as to effectively capture term investment share at the expense of FIs who offer investments broadly across the broker channel.
• Reward Programs.  Expect banks to offer rewards to customers who purchase selected term investments (like 4,5 or 10 year deposits).

• After failing to find a buyer for their sub-prime consumer finance business (another indication of the market retrenching lending), they have decided to run off the business as current loans are paid down.

• TDCT announced plans to replace their current free banking for seniors benefit with a far less lucrative discount on their line-up of plans.  Existing senior plan customer arrangements are “grandfathered”.  It probably makes sense to cut back on seniors benefits given the demographic and economic profile of the baby boomer generation now in and approaching their 60s.  We however, think TDCT may attract a lot of negative publicity taking a leadership position on this issue given the likely public debate on government pension cutbacks.

• The new account is priced similarly to their branch offering (versus free banking offered by BMO/Sobeys and CIBC/Presidents Choice Financial).  It should appeal to avid Optimum point collectors who are looking to increase their points collection.  50,000 points ($85 value) are rewarded at account opening.  Customers also get 10 points for every $1 spent (through the account) at Shoppers Drug Mart and 1 point for every $1 spent elsewhere.