ING Direct has been looking for a buyer for their Canadian business and now, they’ve found one in Scotiabank!
In a deal that will be closed and finalized in December, Scotiabank has purchased won the bidding war over National Bank (the other interested buyer) and has purchased ING Direct for $3.1 billion. The move is going to make Scotiabank the second-largest provider or mortgages in the country if they continue offering mortgages the way they are currently. The only question is – will they?
Anatol von Hahn, Group Head of Canadian Banking at Scotiabank, said that mortgage business at Scotiabank will be “predominantly in the retail channel because that’s where the day-to-day relationship is with the customers.”
He also said that there’s a good chance that ING will most likely pull back from the mortgage broker business some. With the recent closing of FirstLine Mortgagse at CIBC, this has many worried – especially those that just moved theirs from FirstLine to ING!
ING did release this statement to mortgage brokers, which didn’t promise anything but does say that things will continue on in a normal fashion at least for the time-being.
“To our valued brokers,” the correspondence said, “ING Direct Canada confirms that it is business as usual. Scotiabank confirms that ING Direct will continue to operate separately – as a wholly-owned subsidiary. We will continue to provide you and your customers excellent service and great value, while keeping you apprised of any further developments during the upcoming transition period.”
Another Scotiabank spokesperson also said directly after the sale,
“Approximately half of ING’s mortgage book was built by purchasing third party mortgages where there is no customer relationship. This business will be allowed to reduce over time….We will, in due course, work with the management team at ING to consider the value of these channels and the degree to which they support the ING Direct’s unique value proposition.”
That certainly doesn’t sound promising. So, what happens if even more banks follow the lead and pull out of the mortgage broker channel?
It would be bad news, and mostly for mortgage customers. Canadian Mortgage Trends predicts that if all banks were to pull out of the mortgage broker channel, mortgage rates would go up .2% or .3% in a month. Can you imagine what would happen over six months or a year if Canadian consumers were left at the mercy of the banks, and they had no competition?
Of course, brokers could never be eliminated completely from the Canadian mortgage landscape. There are still second-tier lenders, third-tier lenders, and private mortgage lenders that rely on the services of mortgage brokers to bring in new business. Should the major banks continue to pull away from the broker channel, it might mean only mean that they’ll lose profits as those customers are sent to brokers looking for better deals.
Banks might think that exiting the mortgage business is going to boost their own business; but it doesn’t always work that way. Just ask CIBC who, after closing FirstLine, has shown near-zero growth the first two quarters of this year.
