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Meridian Credit Union executives appear to have discussed a future winding down of Motusbank

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  • Oct 23rd, 2019 3:15 am
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Meridian Credit Union executives appear to have discussed a future winding down of Motusbank

I've previously speculated here on a possible future winding down of Motusbank, if it does not generate the growth in not only deposits but in loans, which generate revenue for the bank and thus the credit union, within 1-3 years. Meridian Credit Union, Motus Bank's parent company, are very cost conscious and do not want Motusbank to be a perennial drag on Meridian's earnings with indefinite losses and thus reduced dividends to Meridian member owners. Indeed, some of its key executives including CEO Maurin and Motus Bank's COO Baldarelli are former bank executives, with the latter even doing a turn at uber cost conscious HSBC Bank Canada.

While the company will never confirm planned winding down of operations in advance, as such announcements are highly restricted information and uber confidential, there is already a growing body of tangential evidence that suggests Meridian executives have at least discussed this, including that:
  • Meridian's 1, 3, and 5 year GIC rates are now higher (some markedly higher) than its subsidiary, Motusbank (Source: https://www.highinterestsavings.ca/gic-rates/)
  • No corporate press releases from Motusbank have been issued since launch, nor has the company's Twitter and other social media accounts been particularly active, especially when you consider how active its chief rival Alterna Bank is on social media
  • With future planned provincial re-incorporations federally of Innovation Credit Union, First West Credit Union, and potentially one or more Ontario credit unions (DUCA Financial Services Credit Union and Libro Credit Union being two of them) as well as the recent direct-to-consumer launch of B2B Bank's offerings, relaunch of Manulife Bank's offerings, and the planned no-fee Laurentian Bank chequing account and HISA offering, the landscape has changed dramatically
The first of the three is the highest indication and, as such, I suspect Meridian has at least discussed winding down Motusbank, transitioning its deposit and minimal mortgage customer base to a Meridian virtual branch transit à la Zag Bank, which could lose its OSFI Bank Act and CDIC member status any day now.

Cheers,
Doug
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Do you have a source that they are thinking about this? This sounds like a guess based on perceived actions right now more so than something more concrete. I think it's still very much conjecture at this point as there's no hints coming from the credit union itself that it's even considering a potential wind down of operations. MotusBank's social media activity is pretty consistent with Meridian's as Meridian doesn't post much either, most of their updates to their members are through email, I do get emails from both Meridian & Motus from time to time as well, so to me, that's not an indication of a wind down either.
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deltatux wrote: Do you have a source that they are thinking about this? This sounds like a guess based on perceived actions right now more so than something more concrete. I think it's still very much conjecture at this point as there's no hints coming from the credit union itself that it's even considering a potential wind down of operations. MotusBank's social media activity is pretty consistent with Meridian's as Meridian doesn't post much either, most of their updates to their members are through email, I do get emails from both Meridian & Motus from time to time as well, so to me, that's not an indication of a wind down either.
That's my point - of course it's conjecture, but logical conjecture. It's hard to imagine the senior executive haven't discussed "options" for Motusbank. They're losing, on average, $2-3 million per quarter so that's a $10-12 million annualized run rate. It will be very disappointing for Meridian's CEO to have to report to members that Motusbank has disappointed their initial expectations and, as a result, member dividends will dip year over year, but the "good news" is they expect to maybe have it lose slightly less money than in 2019 in 2020 and 2021.

E-mails are quick and easy to generate so of course that's not going to indicate a wind down, but more telling is that Meridian's GIC rates are now higher than Motusbank and that Motus Bank has not issued a press release or blog post since its April 2019 launch.

I'm just saying...be prepared, folks. I might be wrong, but there is tangential evidence that my prediction seems more likely to prove true in the next 12-18 months. When the wind down announcement comes, uber poster @jacnel can remind everyone that @dmehus predicted this. ;)

Cheers,
Doug
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Well you got me on the click bait. You have no source for your post title.
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dmehus wrote: I'm just saying...be prepared, folks.
For what? If they fold Motus into Meridian, it'll still keep working.

Even if they close Motus completely, I don't think anyone has them as their only bank. Transferring money isn't difficult.
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dmehus wrote: I've previously speculated here on a possible future winding down of Motusbank, if it does not generate the growth in not only deposits but in loans, which generate revenue for the bank and thus the credit union, within 1-3 years. Meridian Credit Union, Motus Bank's parent company, are very cost conscious and do not want Motusbank to be a perennial drag on Meridian's earnings with indefinite losses and thus reduced dividends to Meridian member owners. Indeed, some of its key executives including CEO Maurin and Motus Bank's COO Baldarelli are former bank executives, with the latter even doing a turn at uber cost conscious HSBC Bank Canada.

While the company will never confirm planned winding down of operations in advance, as such announcements are highly restricted information and uber confidential, there is already a growing body of tangential evidence that suggests Meridian executives have at least discussed this, including that:
  • Meridian's 1, 3, and 5 year GIC rates are now higher (some markedly higher) than its subsidiary, Motusbank (Source: https://www.highinterestsavings.ca/gic-rates/)
  • No corporate press releases from Motusbank have been issued since launch, nor has the company's Twitter and other social media accounts been particularly active, especially when you consider how active its chief rival Alterna Bank is on social media
  • With future planned provincial re-incorporations federally of Innovation Credit Union, First West Credit Union, and potentially one or more Ontario credit unions (DUCA Financial Services Credit Union and Libro Credit Union being two of them) as well as the recent direct-to-consumer launch of B2B Bank's offerings, relaunch of Manulife Bank's offerings, and the planned no-fee Laurentian Bank chequing account and HISA offering, the landscape has changed dramatically
The first of the three is the highest indication and, as such, I suspect Meridian has at least discussed winding down Motusbank, transitioning its deposit and minimal mortgage customer base to a Meridian virtual branch transit à la Zag Bank, which could lose its OSFI Bank Act and CDIC member status any day now.

Cheers,
Doug
I don't know if DUCA is planning on becoming a federal CU, I don't think so, however they are planning on expanding in some way soon.

Could see Libro go federal though.

Edit: nevermind, it seems that DUCA does have intentions to be federally chartered and regulated under the bank act as specified in their recent shares offering.
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Really bizarre clickbate title. You've been saying this consistently whenever possible on this forum- I get that you're skeptical of their finances, but it's like you're trying to short privately held Meridian shares or something.

As a counterpoint, I get ads on Instagram and Facebook all the time for Motusbank mortgages. Why are they blowing ad cash on me if they are winding things down?
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someweirdo wrote: For what? If they fold Motus into Meridian, it'll still keep working.

Even if they close Motus completely, I don't think anyone has them as their only bank. Transferring money isn't difficult.
To be perfectly honest, it still never made sense to me why they opted to create Motus instead of making itself a federal credit union. Aside for the higher savings interest rate, they pretty much offer the same as what Meridian offers but in a digital only format. They could have done the same offerings by being a federal credit union just like what Coastal Capital Savings has been doing. Their services are now available in Ontario via this method.

On the consumer's point of view, it made absolutely no sense and to create a new bank makes its own headaches, many companies still can't deposit payroll into Motus as they're still too new. I have friends who want to use Motus as their primary but can't because their employer's payroll system doesn't recognize Motus's institution number as valid.

ownthesky wrote: Really bizarre clickbate title. You've been saying this consistently whenever possible on this forum- I get that you're skeptical of their finances, but it's like you're trying to short privately held Meridian shares or something.

As a counterpoint, I get ads on Instagram and Facebook all the time for Motusbank mortgages. Why are they blowing ad cash on me if they are winding things down?
Funny thing is that one can't even own MotusBank shares as they're a wholly owned subsidiary of Meridian Credit Union. You can indirectly own shares I guess by being a member of Meridian.
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deltatux wrote: To be perfectly honest, it still never made sense to me why they opted to create Motus instead of making itself a federal credit union. Aside for the higher savings interest rate, they pretty much offer the same as what Meridian offers but in a digital only format. They could have done the same offerings by being a federal credit union just like what Coastal Capital Savings has been doing. Their services are now available in Ontario via this method.

On the consumer's point of view, it made absolutely no sense and to create a new bank makes its own headaches, many companies still can't deposit payroll into Motus as they're still too new. I have friends who want to use Motus as their primary but can't because their employer's payroll system doesn't recognize Motus's institution number as valid.



Funny thing is that one can't even own MotusBank shares as they're a wholly owned subsidiary of Meridian Credit Union. You can indirectly own shares I guess by being a member of Meridian.
Maybe Meridian can recoup their money later by selling Motus bank as an entity to a foreign buyer. In the meantime they're hemorrhaging money with their operating costs and excessive deposits compared to loans.
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Many businesses don't make profit first five years in business, I'd say this is way too early to speculate.
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Bull Dog wrote: Maybe Meridian can recoup their money later by selling Motus bank as an entity to a foreign buyer. In the meantime they're hemorrhaging money with their operating costs and excessive deposits compared to loans.
Don't think OSFI would allow that as MotusBank is a schedule 1 bank.

The banking sector in Canada is pretty heavily regulated, you can't simply sell to foreign entities just because.
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WTF?
Your suggestion that GIC rate differentials between Motus and Meridian are predictors of solvency makes no sense to me. In fact it's just the opposite. When Home Trust ran into trouble they had to boost their savings and GIC rates to maintain capital. The fact that Motus is offering lower GIC rates suggests they aren't having trouble attracting capital.

Motus is aggressively taking market share in the residential mortgage market. For the past couple months they've had the lowest advertized uninsured 1-5year fixed rate mortgages of any national lender. For a couple years before Motus's launch, HSBC usually had the lowest nationally-advertized 2- & 5-year rates.
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jacnel wrote: I don't know if DUCA is planning on becoming a federal CU, I don't think so, however they are planning on expanding in some way soon.

Could see Libro go federal though.

Edit: nevermind, it seems that DUCA does have intentions to be federally chartered and regulated under the bank act as specified in their recent shares offering.
Interesting, @jacnel, about the disclosure in the DUCA share offering. Yeah, I based my speculation on them previously allowing out of province members, so that indicates national ambitions. :)

As for Libro, I suspect, but this is just speculation on my part, Coast Capital Savings is eyeing them up as a potential merger partner if Libro wants to avoid the lengthy re-incorporation process. ;)

Cheers,
Doug
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deltatux wrote: To be perfectly honest, it still never made sense to me why they opted to create Motus instead of making itself a federal credit union. Aside for the higher savings interest rate, they pretty much offer the same as what Meridian offers but in a digital only format. They could have done the same offerings by being a federal credit union just like what Coastal Capital Savings has been doing. Their services are now available in Ontario via this method.

On the consumer's point of view, it made absolutely no sense and to create a new bank makes its own headaches, many companies still can't deposit payroll into Motus as they're still too new. I have friends who want to use Motus as their primary but can't because their employer's payroll system doesn't recognize Motus's institution number as valid.



Funny thing is that one can't even own MotusBank shares as they're a wholly owned subsidiary of Meridian Credit Union. You can indirectly own shares I guess by being a member of Meridian.
Exactly, @deltatux. I couldn't possibly "short" either Motus Bank or Meridian Credit Union even if I wanted to. I can only own Meridian shares and there's no secondary market. Moreover, crucially, they are redeemed at their par value by the credit union. ;)

Also right on your first point - I, too, wondered why Meridian didn't re-incorporate federally...it's strange. The deposit insurance limits with FSRAO (previously DICO) and CDIC are not that different. Alternatively, they already permitted out of province members to join, so could've stayed as an Ontario provincial credit union and, with the proposed and enacted legislative amendments, the more credit union-friendly regulatory and capital rules would like please Meridian executives.

Cheers,
Doug
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Shawguy wrote: Many businesses don't make profit first five years in business, I'd say this is way too early to speculate.
Banks are little different, @Shawguy. They did launch at a very, very, and I repeat, very bad time in terms of anemic loan growth, but what they ignored and possibly didn't foresee is that even more digital competition was coming down the pipeline. I'm surprised to hear you support Motus Bank, though, and their backwards, antiquated tech processes. ;)

Cheers,
Doug
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nerdralph wrote: WTF?
Your suggestion that GIC rate differentials between Motus and Meridian are predictors of solvency makes no sense to me. In fact it's just the opposite. When Home Trust ran into trouble they had to boost their savings and GIC rates to maintain capital. The fact that Motus is offering lower GIC rates suggests they aren't having trouble attracting capital.

Motus is aggressively taking market share in the residential mortgage market. For the past couple months they've had the lowest advertized uninsured 1-5year fixed rate mortgages of any national lender. For a couple years before Motus's launch, HSBC usually had the lowest nationally-advertized 2- & 5-year rates.
No, that's not what I'm saying at all, @nerdralph. Liquidity-wise, both are fine (Motus is over-capitalized relative to their loans). Capital wise, they both seem fine. What I'm saying is that Maurin and Meridian executives previously said Motus would offer deposit rates that would offer a slight premium (given, presumably, no branches and lower costs). With Meridian's rates now at, or, in many cases, besting that of Motus, they seem to be de-emphasizing their Motus offering and I'm suggesting that executives have at least privately discussed re-working Motus into being a virtual, digital only Meridian branch. While Motus is still small, the transition costs would be minimal to do so, and minimal customers would be impacted for the 3- to 6-month EFT forwarding window whereby direct deposits and pre-authorized payments routed to Motus would be forwarded to the assuming Meridian transit.

Also, Motus' own data don't bear that out - they're not "aggressively taking market share in the residential mortgage market". They're offering excellent rates, but have yet to attract more than a dozen mortgages.

Cheers,
Doug
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dmehus wrote: Interesting, @jacnel, about the disclosure in the DUCA share offering. Yeah, I based my speculation on them previously allowing out of province members, so that indicates national ambitions. :)

As for Libro, I suspect, but this is just speculation on my part, Coast Capital Savings is eyeing them up as a potential merger partner if Libro wants to avoid the lengthy re-incorporation process. ;)

Cheers,
Doug
Actually in their share offering they also list why they went from nationwide acceptance to only provincial acceptance, supposedly they got legal advice which warned that provincial regulations could cause issues accepting customers nationally. Not sure why Meridian is able to get around this but whatever.

As for Libro I can’t see coast capital buying them since they’re more regionally focused, I’d see DUCA merge with them before that.

As for Motus, Meridian should have just gone national as a federal CU instead of bothering with the whole bank nonsense
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dmehus wrote: Banks are little different, @Shawguy. They did launch at a very, very, and I repeat, very bad time in terms of anemic loan growth, but what they ignored and possibly didn't foresee is that even more digital competition was coming down the pipeline. I'm surprised to hear you support Motus Bank, though, and their backwards, antiquated tech processes. ;)

Cheers,
Doug
I never said anything to say "I support them"

In fact I've closed my account for too their antiquated processes.

I was just stating that other failures... Like Citizens Bank and Ally... Lasted a few years before shutting down... Not in the first 12 months
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jacnel wrote: Actually in their share offering they also list why they went from nationwide acceptance to only provincial acceptance, supposedly they got legal advice which warned that provincial regulations could cause issues accepting customers nationally. Not sure why Meridian is able to get around this but whatever.

As for Libro I can’t see coast capital buying them since they’re more regionally focused, I’d see DUCA merge with them before that.

As for Motus, Meridian should have just gone national as a federal CU instead of bothering with the whole bank nonsense
They don't have good lawyers, that's your answer, @jacnel. DUCA is smaller firm and, in turn, likely uses a smaller, regional law firm as opposed to a Bay Street law firm Meridian likely uses. I can assure you Meridian is well within their rights to operate nationally, though they may be currently restricted on lending out of province. But as far as deposits, accounts, and the like go, there's no problem. Even Libro Credit Union told me that they would accept me as a deposit only client if I said I was a "future Ontario resident" and subsequently changed my plans on moving. So, it's not just Meridian that will accept out of province residents. Also, Windsor Family Credit Union will accept out of province members through their Omnia Direct virtual branch even though their own bond of association doesn't permit this.

Libro's products and branch design are more like Coast Capital's than DUCA's, though. DUCA also has that Dutch influence, which is counter to Coast's ethos. I would say Libro or another Toronto area credit union would be Coast's target, possibly Tandia Financial but they're a bit small.

Cheers,
Doug

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