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First month's worth of financial data in for Motus Bank

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  • Jun 26th, 2019 9:20 pm
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First month's worth of financial data in for Motus Bank

The first month's balance sheet data for Motus Bank are in, following OSFI's publication of the April 30, 2019, financial data returns. And, they seem to be likely in a bit behind of their internal targets and well behind with what I'd expected when Motus had provided some early guidance in terms of total new applications processed back in approximately late April.

Unfortunately, OSFI financial data returns do not break down term deposit maturity profile, nor do they break down their effective average interest rate paid and thus their interest expense; however, this is how things shaped up:

Demand deposits (i.e., chequing and savings accounts and those savings accounts in RRSPs and TFSAs)
Non-registered: $4.483 million
Tax-sheltered (i.e., RRSP, TFSA, and, possibly, RRIFs if any managed to get transferred in with the first month, which seems unlikely as @Loonie can no doubt firmly attest!): $1.591 million

Term deposits
Non-registered: $1.744 million
Tax-sheltered: $373 thousand

For comparison, Motus Bank had ~$50 thousand on deposit prior to their April 2, 2019, launch date.

Loans and Mortgages
Real estate secured lending-revolving (i.e., HELOCs): $268 thousand
Real estate secured lending-non-revolving (i.e., mortgages): $545 thousand (all uninsured mortgages, which means none are so-called high-ratio CMHC, Genworth, or Canada Guarantee mortgage insured)
Unsecured lending (i.e., lines of credit and demand loans): $236 thousand

Note the above lending data includes limits authorized but which are necessarily undrawn.

As to required regulatory bank risk capital, Motus Bank has on deposit and in short-term treasury bills, approximately $54 million that was transferred from parent company Meridian Credit Union's cash assets.

Turning to profitability, which is only available quarterly so this will be heavily focused in the loss column as it would be for the quarter ended March 31, 2019:

Net loss of $1 thousand for the quarter, though I note they have no staffing expenses and no interest expense that had yet to be paid (if interest is paid on the 30th or 31st, it likely would show up on the following month's return, that is to say, in May). Seems like Meridian Credit Union may be subsidizing the cost of the staffing of Motus Bank, at least initially, which will mean Motus will be somewhat of a drag on Meridian's profitability and net income for the foreseeable future.

In short, Motus may well be opening up several thousand new accounts per month, but they seem to be predominantly low value transactional accounts. Meridian are astute managers - I think they'll give this a couple years, but if they don't start seeing lending growth and assuming they have no need for the deposits, Motus will start to be a real drag for them.

Thoughts, @titaniumtux, @Shawguy, and/or @Bull Dog?

Cheers,
Doug
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dmehus wrote: Real estate secured lending-revolving (i.e., HELOCs): $268 thousand
Real estate secured lending-non-revolving (i.e., mortgages): $545 thousand (all uninsured mortgages, which means none are so-called high-ratio CMHC, Genworth, or Canada Guarantee mortgage insured)
Unsecured lending (i.e., lines of credit and demand loans): $236 thousand
So they funded 1 mortgage, and that same person got a HELOC while they were there? Grinning Face With Smiling EyesFace With Tears Of Joy
Joking aside, thanks for the post. Interesting info!
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dmehus wrote: The first month's balance sheet data for Motus Bank are in, following OSFI's publication of the April 30, 2019, financial data returns. And, they seem to be likely in a bit behind of their internal targets and well behind with what I'd expected when Motus had provided some early guidance in terms of total new applications processed back in approximately late April.

Unfortunately, OSFI financial data returns do not break down term deposit maturity profile, nor do they break down their effective average interest rate paid and thus their interest expense; however, this is how things shaped up:

Demand deposits (i.e., chequing and savings accounts and those savings accounts in RRSPs and TFSAs)
Non-registered: $4.483 million
Tax-sheltered (i.e., RRSP, TFSA, and, possibly, RRIFs if any managed to get transferred in with the first month, which seems unlikely as @Loonie can no doubt firmly attest!): $1.591 million

Term deposits
Non-registered: $1.744 million
Tax-sheltered: $373 thousand

For comparison, Motus Bank had ~$50 thousand on deposit prior to their April 2, 2019, launch date.

Loans and Mortgages
Real estate secured lending-revolving (i.e., HELOCs): $268 thousand
Real estate secured lending-non-revolving (i.e., mortgages): $545 thousand (all uninsured mortgages, which means none are so-called high-ratio CMHC, Genworth, or Canada Guarantee mortgage insured)
Unsecured lending (i.e., lines of credit and demand loans): $236 thousand

Note the above lending data includes limits authorized but which are necessarily undrawn.

As to required regulatory bank risk capital, Motus Bank has on deposit and in short-term treasury bills, approximately $54 million that was transferred from parent company Meridian Credit Union's cash assets.

Turning to profitability, which is only available quarterly so this will be heavily focused in the loss column as it would be for the quarter ended March 31, 2019:

Net loss of $1 thousand for the quarter, though I note they have no staffing expenses and no interest expense that had yet to be paid (if interest is paid on the 30th or 31st, it likely would show up on the following month's return, that is to say, in May). Seems like Meridian Credit Union may be subsidizing the cost of the staffing of Motus Bank, at least initially, which will mean Motus will be somewhat of a drag on Meridian's profitability and net income for the foreseeable future.

In short, Motus may well be opening up several thousand new accounts per month, but they seem to be predominantly low value transactional accounts. Meridian are astute managers - I think they'll give this a couple years, but if they don't start seeing lending growth and assuming they have no need for the deposits, Motus will start to be a real drag for them.

Thoughts, @titaniumtux, @Shawguy, and/or @Bull Dog?

Cheers,
Doug
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dmehus wrote: The first month's balance sheet data for Motus Bank are in, following OSFI's publication of the April 30, 2019, financial data returns. And, they seem to be likely in a bit behind of their internal targets and well behind with what I'd expected when Motus had provided some early guidance in terms of total new applications processed back in approximately late April.

Unfortunately, OSFI financial data returns do not break down term deposit maturity profile, nor do they break down their effective average interest rate paid and thus their interest expense; however, this is how things shaped up:

Demand deposits (i.e., chequing and savings accounts and those savings accounts in RRSPs and TFSAs)
Non-registered: $4.483 million
Tax-sheltered (i.e., RRSP, TFSA, and, possibly, RRIFs if any managed to get transferred in with the first month, which seems unlikely as @Loonie can no doubt firmly attest!): $1.591 million

Term deposits
Non-registered: $1.744 million
Tax-sheltered: $373 thousand

For comparison, Motus Bank had ~$50 thousand on deposit prior to their April 2, 2019, launch date.

Loans and Mortgages
Real estate secured lending-revolving (i.e., HELOCs): $268 thousand
Real estate secured lending-non-revolving (i.e., mortgages): $545 thousand (all uninsured mortgages, which means none are so-called high-ratio CMHC, Genworth, or Canada Guarantee mortgage insured)
Unsecured lending (i.e., lines of credit and demand loans): $236 thousand

Note the above lending data includes limits authorized but which are necessarily undrawn.

As to required regulatory bank risk capital, Motus Bank has on deposit and in short-term treasury bills, approximately $54 million that was transferred from parent company Meridian Credit Union's cash assets.

Turning to profitability, which is only available quarterly so this will be heavily focused in the loss column as it would be for the quarter ended March 31, 2019:

Net loss of $1 thousand for the quarter, though I note they have no staffing expenses and no interest expense that had yet to be paid (if interest is paid on the 30th or 31st, it likely would show up on the following month's return, that is to say, in May). Seems like Meridian Credit Union may be subsidizing the cost of the staffing of Motus Bank, at least initially, which will mean Motus will be somewhat of a drag on Meridian's profitability and net income for the foreseeable future.

In short, Motus may well be opening up several thousand new accounts per month, but they seem to be predominantly low value transactional accounts. Meridian are astute managers - I think they'll give this a couple years, but if they don't start seeing lending growth and assuming they have no need for the deposits, Motus will start to be a real drag for them.

Thoughts, @titaniumtux, @Shawguy, and/or @Bull Dog?

Cheers,
Doug
Do you have a link to the report?

C
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vkizzle wrote: All accounts holders are RFD members.
GCR and HighInterestSavings sign up bonuses.
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@dmehus it's real hard to compete for no-fee daily banking, as there's not much money to be made with it.

Meridian will probably keep it for shelf space, even as a loss leader.
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Well they would need to advertise it. Other than from RFD and to a lesser extent GCR, how could someone have heard about them?

I think even if they struggle financially to a point they will keep it, because banks are all worried of losing Millennials. This is why they launch these labels even if they look like they might make them lose money from account fees. Millennials are very much at ease with doing everything online, and in fact want to be left alone and don't want to have to go in-branch and be upsold by someone. To keep them as customers, you have to look congenial and easy to use, and reach them in their smartphone. If you can get them to engage them in your smartphone app, you win them as customers.

This is why these "hip" banking sub-labels exist. Even in the wording from the welcoming letter from Motus or just the ATM card letter, everything is made to appeal to Millennials.
Last edited by Poutinesauce on Jun 19th, 2019 4:25 pm, edited 1 time in total.
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CNeufeld wrote: Do you have a link to the report?

C
OSFI doesn't provide static links to the report, but you can visit the Office of the Superintendent of Financial Institutions' website at www.osfi.gc.ca. Click on the "Financial institutions" tab --> "Financial data" and then select the "Balance sheet" radio button. From there, select the financial institution you want and the reporting period. :)

Cheers,
Doug
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sandeep8g wrote: GCR and HighInterestSavings sign up bonuses.
Yes, but they're not funding those bonuses. GCR and HighInterestSavings.ca are partnering with a third-party affinity marketing provider, which, presumably, pays a $50 commission to GCR and HighInterestsavings.ca, with each pocketing the difference between what they receive and the $35 or so that they pay out. I suspect Motus Bank has partnered with that affinity marketing provider and is paying a commission to them per sign-up. No idea why they went that route instead of just offering bonuses directly. :(

Cheers,
Doug
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dmehus wrote: OSFI doesn't provide static links to the report, but you can visit the Office of the Superintendent of Financial Institutions' website at www.osfi.gc.ca. Click on the "Financial institutions" tab --> "Financial data" and then select the "Balance sheet" radio button. From there, select the financial institution you want and the reporting period. :)

Cheers,
Doug
Interesting. I didn't know that was available online like that. I actually built the reports for CWB that feed that... :)

C
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titaniumtux wrote: @dmehus it's real hard to compete for no-fee daily banking, as there's not much money to be made with it.

Meridian will probably keep it for shelf space, even as a loss leader.
Disagree here. They'll give it two, maybe three, years but if it doesn't see any traction, they're shrewd business people who crunch the numbers and won't be afraid to take a one-time wind down charge and cut and run. Desjardins did it several years after retooling Bank West as Zag Bank and I suspect Meridian is no different. The whole impetus behind Motus Bank was primarily to lend outside of Ontario and to grow their book of business. If they just wanted additional deposits, they could have offered an online only GIC special product and a special electronic only high interest savings account under the Meridian Credit Union parent company.

I'll put a number on it - if they're not at least where Alterna Bank was (that is, $790 million in deposits) at December 31, 2018, in, say, 2-3 years time, they'll be extremely disappointed and initiate wind down and run the business of in a similar fashion to Zag.

Cheers,
Doug
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Poutinesauce wrote: Well they would need to advertise it. Other than from RFD and to a lesser extent GCR, how could someone have heard about them?

I think even if they struggle financially to a point they will keep it, because banks are all worried of losing Millennials. This is why they launch these labels even if they look like they might make them lose money from account fees. Millennials are very much at ease with doing everything online, and in fact want to be left alone and don't want to have to go in-branch and be upsold by someone. To keep them as customers, you have to look congenial and easy to use, and reach them in their smartphone. If you can get them to engage them in your smartphone app, you win them as customers.

This is why these "hip" banking sub-labels exist. Even in the wording from the welcoming letter from Motus or just the ATM card letter, everything is made to appeal to Millennials.
Right, but if all it's doing is attracting new customers with transactional accounts, this can be done without Meridian re-incorporating. They could easily migrate them, with a transit and institution number change, which they could forward temporarily for a year - maybe two - until everyone updates everything. The goal behind Motus was to grow their lending book. They're doing a bit of advertising, but as far as I can see it. it's limited to third-party affinity marketing deals and sponsored social media posts/Internet search ads.

That's not to say I don't think they might try a rebranding...we could see them operating under a very different brand in a year's time as they relaunch. Something to watch for sure!

Cheers,
Doug
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CNeufeld wrote: Interesting. I didn't know that was available online like that. I actually built the reports for CWB that feed that... :)

C
@CNeufeld As in Canadian Western Bank? You built the report software, or the software/technology that feeds into OSFI's internal financial data returns database? Sounds like you knew of the financial data returns, obviously, but didn't know OSFI made them public (albeit with a delay).

Yeah, it's pretty cool...I only found about it a few years ago. I just wish that the financial data returns provided a bit more granularity in terms of deposit and mortgage maturity profiles and differentiation between deposit types. However, for banks (like Bridgewater) that don't publish their annual reports or audited financial statements, it's very helpful.

Cheers,
Doug
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dmehus wrote: @CNeufeld As in Canadian Western Bank? You built the report software, or the software/technology that feeds into OSFI's internal financial data returns database? Sounds like you knew of the financial data returns, obviously, but didn't know OSFI made them public (albeit with a delay).

Yeah, it's pretty cool...I only found about it a few years ago. I just wish that the financial data returns provided a bit more granularity in terms of deposit and mortgage maturity profiles and differentiation between deposit types. However, for banks (like Bridgewater) that don't publish their annual reports or audited financial statements, it's very helpful.

Cheers,
Doug
I built the report that got dumped into the OSFI database (XML file), and yes, Canadian Western Bank. It was challenging to get all the accounts properly categorized, especially since there was multiple destinations (Liquidity Report, Cash Flow, etc), and the rules weren't always the same.

Ah, the good old days... Like last year, in fact. :)

C
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CNeufeld wrote: I built the report that got dumped into the OSFI database (XML file), and yes, Canadian Western Bank. It was challenging to get all the accounts properly categorized, especially since there was multiple destinations (Liquidity Report, Cash Flow, etc), and the rules weren't always the same.

Ah, the good old days... Like last year, in fact. :)

C
Very interesting! Thank you for sharing! :)

If I have any questions what something means, though you might not necessarily know that only that which destination it's categorized, I'll be sure and tag you in a post or PM you. ;)

Assume the reports you built for CWB also handled those of their CWB and Valiant Trust subsidiaries, too?

Cheers,
Doug

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