Hush Companions
Seeking.com

Big Banks

Vostok

Member
Jul 3, 2012
162
24
18
Why do little banks and and credit unions offer services for cheaper prices than the big banks?

Don't the big banks have economy of scale on their side? Shouldn't they be able to provide the same services for better price points?

I'm having trouble understanding this. When we look at Wal-Mart they crush the little guys by offering better prices. Why doesn't this apply to the big banks.

How can Tangerine offer a free checking account but all the big banks have increased their monthly fees?
 

Carvher

Active member
Apr 13, 2010
450
141
43
If you have alot of money you just yell them you will not pay the fees and they will waive them.
But I don't get what they are trying to achieve with this strategy either.
My kids are going to the other alternatives and there are plenty.
Shouldn't they be trying to get the young people in the door? I know they don't have much money now but they atleast have a mortgage. They will have money later. It seems like a short sited strategy to me.
 

silentkisser

Master of Disaster
Jun 10, 2008
968
925
93
Tangerine and online banks don't have the expense of branches. They have an office, call centre and that's about it. The don't offer some services, or do it all virtually, so they have less overhead.

Credit Unions don't have traditional shareholders. I mean, if you're a member, you own the bank. So, they don't need to show a massive profit or pay dividends to institutional funds and what not. And they usually provide superior customer service, but they might only have like 15 branches across Ontario.

Now, the benefit of the big banks....If you lose a client card, you can waltz into nearly any branch and get a temporary one immediately. They are nearly everywhere, and they have ATMs in places besides branches. You're paying for that sort of convenience. Now, my BIL tells me that credit unions have an ATM network that allows these smaller institutions to use each others machines without service fees. Apparently Manulife Bank (who knew there was such a thing) is part of this network.

EDIT: Also, there is another factor - many people don't want to switch from one of the big banks to other places. It could be about the hassle of doing it (which, really, isn't one), or that they aren't aware of the benefits of the other financial institutions. They might now think they are as secure as CIBC/RBC/TD etc., or that they wouldn't get the services they need (like converting CDN$$$ into, say, Euros or USD$$.
 

Darts

Well-known member
Jan 15, 2017
12,268
2,038
113
"Too big to fail". Can't imagine Ottawa allowing a big bank to fail.

Also, I think credit unions operate under a more favourable tax regime.
 

Darts

Well-known member
Jan 15, 2017
12,268
2,038
113
OSFI has lifted the moratorium on financials increasing their dividends.

"Manulife increases common shareholders' dividend payable in December 2021 by 18%"
 

Ponderling

Lotsa things to think about
Jul 19, 2021
289
147
43
Mississauga
Yep, sitting on a bunch of bank stocks salivating for a rise in divvy. OTOH not sure if price will sink a bit since the pile of cash locked up in the stock starts leaking away in higher payouts.
 

silentkisser

Master of Disaster
Jun 10, 2008
968
925
93
Those are American institutions.
Yeah, the US banking system has like a thousand tiny banks of maybe one or two branches, then like 10 HUGE banks like JPMorgan Chase, CitiGroup, Bank of America, etc. The big banks are the ones that tend to take stupid risks once in a while. But, BMO, TD and RBC all increased their American presence during the Great Recession, buying up distressed smaller institutions like Bank North, Harris Bank and others.
 

emerging44

Member
Sep 19, 2006
240
0
16
Those are American institutions.
Yes, they are. But did you see their market caps at time of failure?

Canadian banks are protected by the federal government and also restricted by it. Banks wanted to change things in early 2000's but Martin wouldn't cave. Harper (in opposition) supported banks but luckily the events of 2008 demonstrated the correctness of Martin's position.
 

Darts

Well-known member
Jan 15, 2017
12,268
2,038
113
Canadian banks are protected by the federal government and also restricted by it. Banks wanted to change things in early 2000's but Martin wouldn't cave. Harper (in opposition) supported banks but luckily the events of 2008 demonstrated the correctness of Martin's position.
We had some smaller institutions that crashed and burned or almost.
The trust companies debacle.
Home Trust
Pace Credit Union

Canadian banks simply aren't big enough to compete on a global scale. Maybe that is a good thing. Their retail business in Canada is almost like a utility generating constant profits every year.
 

tribunus

Terror Belli Decus Pacis
May 26, 2008
2,582
295
83
If you bought bank stocks when they plummeted last year, you're smiling ear to ear these days. BMO, RBC & TD have been skyrocketing all year. I only wish I had purchased more.
 
  • Like
Reactions: emerging44

emerging44

Member
Sep 19, 2006
240
0
16
We had some smaller institutions that crashed and burned or almost.
The trust companies debacle.
Home Trust
Pace Credit Union

Canadian banks simply aren't big enough to compete on a global scale. Maybe that is a good thing. Their retail business in Canada is almost like a utility generating constant profits every year.
The Pace Credit Union story while reported on in business news somehow never made it to the headlines. I wonder why?
 

Darts

Well-known member
Jan 15, 2017
12,268
2,038
113
The Pace Credit Union story while reported on in business news somehow never made it to the headlines. I wonder why?
People will get nervous and there will be a "run on the bank".

That Pace incident was a real debacle. Innocent people trusted their CU and got financially raped. Did they eventually settled for 70cents on the dollar?
 

Darts

Well-known member
Jan 15, 2017
12,268
2,038
113
Yep, sitting on a bunch of bank stocks salivating for a rise in divvy. OTOH not sure if price will sink a bit since the pile of cash locked up in the stock starts leaking away in higher payouts.
BNS announces an 11% dividend increase and a share buy-back.
 
Seeking Arrangement