EQB, the parent company of Equitable Bank, will acquire President’s Choice Bank, PC Financial Insurance Agency Inc., PC Financial Insurance Brokers Inc. and other affiliated entities.CHRIS HELGREN/Reuters
EQB Inc. EQB-T is buying PC Financial from Loblaw Cos. Ltd. L-T in a deal valued at $800-million that propels the digital challenger bank into the credit-card market.
The parent company of Equitable Bank will take on the seventh-largest credit-card portfolio in Canada with about 2.5 million customers, $5.8-billion in assets and more than $800-million in direct retail deposits.
“For the past few years, we’ve been talking about the need for payments, innovation and how we really need to bring that to our platform to really differentiate EQB,” the bank’s chief executive officer Chadwick Westlake said in an interview. Loblaw and EQB will partner on the PC Optimum loyalty program.
“The buy and partnership option made so much more sense than us building it here. The stars aligned in our cultural belief that there is room for more competition. There is room for us to really carve out our space.”
EQB will acquire President’s Choice Bank, PC Financial Insurance Agency Inc., PC Financial Insurance Brokers Inc. and certain other affiliated entities.
Weston-controlled Wittington Investments launching $100-million fund to back Canadian food producers
Some Canadian shoppers have switched back to U.S. products, Loblaw CEO says
Once the deal closes, EQB will become the exclusive financial partner of the PC Optimum loyalty program for Loblaw. It will also acquire PC Financial’s flagship no-fee Mastercard credit-card portfolio with more than two million active accounts and $32-billion in annual transaction volume.
About 10 per cent of PC credit-card holders have deposit accounts, adding to EQB’s base and providing it with the opportunity to persuade PC Financial’s customers to open accounts and other products.
The deal nearly doubles EQB’s revenue and connects the bank to more than 17-million loyalty members. PC Financial locations will be rebranded with EQB’s yellow marketing in more than 2,500 stores and 500 ATMs across the country.
The program is a crucial resource for Loblaw, generating significant data on the shopping habits of Canadians that the retail giant uses to understand its customers and tailor its advertising to them. But it is not unusual for retailers with sizable loyalty programs to rely on separate banks to administer the branded credit cards associated with them.
The deal ties PC Financial to a banking partner for the first time in eight years, since it split from a two-decade partnership with Canadian Imperial Bank of Commerce in 2017. At the time, CIBC moved about two million daily banking customers over to launch its Simplii Financial branchless banking brand, as both companies sought more control over aspects of the long-running relationship.
With EQB, Loblaw will gain two seats on the board and will remain involved in the loyalty program – a key factor in the grocery giant’s decision to partner with a bank, according to Loblaw chief financial officer Richard Dufresne.
“We are transferring ownership into the hands of an organization that we think is going to help us grow it even faster,” Mr. Dufresne said on a conference call with analysts on Wednesday evening.
“These are our best customers, but we want more of those. And we feel EQ Bank’s strategy is best-positioned to increase the number of credit cards that get issued year in, year out. That’s ultimately what we seek.”
The data Loblaw owns through the program is a “strategic advantage,” CEO Per Bank said on a call last month to discuss Loblaw’s earnings. For example, the company has generated an increase in sales by using the information to inform planning in its stores, to ensure layouts and that product selections reflect local preferences.
EQB plans to purchase PC Financial for 1.15-times book value at closing, excluding excess capital above a 13-per-cent common equity tier 1 (CET1) ratio – a measure of a lender’s ability to absorb losses.
Loblaw will receive approximately $500-million of excess capital and other value from PC Bank, at an estimated total of $1.3-billion. The company will own a minimum of 17 per cent of EQB’s common shares. The deal is expected to close next year.
Mr. Westlake was tapped as EQB’s CEO in July after previous CEO Andrew Moor died unexpectedly in June. Mr. Westlake was chief financial officer for 4½ years before he left in March to join enterprise software provider Open Text Corp.