CIBC to swallow PC Financial's banking business, rebrand as Simplii

President's Choice is getting out of the daily banking business and more than two million current PC Financial customers are moving to CIBC, which will rebrand the bank as Simplii.

The two companies announced the end of their almost 20-year collaboration on Wednesday, as Loblaw says it will retain its loyalty point program and MasterCard-branded credit card program, while all daily chequing, savings, lending and other banking services will move to CIBC, which has been running the back end of the bank's operations behind the scenes since it launched.

The bank promises a seamless transition with no changes to account numbers or pre-existing automatic payment and savings plans while it absorbs more than 2 million PC customers between now and November.

"We are excited about the future and our ability to create new products to serve Canadians," PC Financial spokesperson Lana Gogas said in a statement. "Today marks the start of an exciting new chapter for PC Financial, including continued strength in payments and loyalty through our PC Financial Mastercard products."

What's left of Loblaw's banking division — the corporate title of which is President's Choice Bank — is a registered Schedule I Bank under the Bank Act, which means it is legally allowed to conduct banking services such as taking deposits and offering loans. But as of November 1, it will no longer be doing so.

Although new products are in development, PC says it plans to focus on its popular loyalty program to "to further improve our customer experience."

"At the moment, our focus is on ensuring a smooth and seamless transition for our customers; tomorrow, our focus will be ensuring our future is as innovative as our past," Gogas said.

RBC Capital Markets analyst Irene Nattel said in a note that the news is neutral for Loblaw, which will be putting more focus on its PC Plus program and MasterCard offerings.

"From Loblaw's perspective, today's announcement is yet another signal that the company is focusing its efforts/resources on programs that reinforce customer loyalty/traffic to its retail banners."

While Loblaw has handled the branding of the PC Financial unit, CIBC was running the banking unit behind the scenes since the bank was created in 1997 primarily as an online high-interest savings account. Everyday banking services such as chequing accounts, lines of credit and mortgages came a little later.

CIBC says the hundreds of PC Financial kiosks and automated banking machines in Loblaw-owned stores across the country will be closed down between Nov. 1 and March 31. Financial terms of the deal were not disclosed, but the bank said it would take a $100-million charge in its next quarterly earnings related to the deal.

Currently, bank machines inside Loblaw stores are branded as PC but provided by CIBC. Those machines will be removed and replaced with new bank machines owned by PC, and CIBC customers will pay a fee to use them — the same way they would pay a fee to use an ATM to owned by anyone other than CIBC.

Bank alternatives

For years, PC Financial and Netherlands-based ING Direct were the two biggest online-based banks in Canada, gobbling up customers by promising no or low-fees for basic accounts, and higher rates for savings accounts than those on offer at the big banks at the time.

Then ING was bought out by Scotiabank in 2012 and rebranded as Tangerine. CIBC's move to take over PC means the two largest players in the space have both been gobbled up by Canada's big banks.

Mike Boluch, executive vice-president of direct banking at CIBC, said the bank plans to invest more in Simplii's offerings over time.

"Our focus in the near term is to make this a seamless transition over for our clients. Over time, we're going to invest in the offer. We at CIBC have a long history of being known for innovation."

The new division will provide more options for the full range of client needs, from no-fee online banking to more advice-oriented customer service, Boluch said.

"We see a wide spectrum of client needs, and we see this as being an important part of that spectrum. We're pretty confident there's a place for both business models."