Equitable Bank parent company EQB is buying PC Financial from Loblaw, bringing two banking challengers together in what appears to be a bid to better take on Canada’s Big Five banks.
The $800-million deal, which will also make EQ Bank the exclusive financial partner of the PC Optimum rewards program, was announced on Wednesday evening. The combined digital bank will represent nearly 3.5 million banking customers and more than 17 million PC Optimum members. The deal will also give Loblaw ownership of 17 percent of EQB stock.
Keldon Bester, Canadian Anti-Monopoly Project
“[This is a] rare example of a merger that we probably don’t have to worry about.”
EQB said in a news release that the deal will “bring together two made-in-Canada brands to drive change in banking with a louder voice to champion consumer interests.”
EQ, an online bank, is Canada’s seventh-largest bank, managing $137 billion in combined assets under management and administration; the purchase of PC will bring in another $5.8 billion in assets under administration. The Big Five—RBC, TD, Scotia, BMO, and CIBC—each manage around $1 to $2 trillion in assets.
Keldon Bester, executive director of the Canadian Anti-Monopoly Project, described the deal as the “rare example of a merger that we probably don’t have to worry about.”
“On balance, I think there’s reasons for optimism,” Bester told BetaKit in a phone interview on Thursday. He said that he views the deal as an opportunity for smaller players to build out more competitive business. He argued that rollups like these could serve to “rationalize the sector.”
EQ and PC suggested there would be benefits to customers beyond the combined bank’s increased ability to compete with bigger players. PC customers will gain access to a broader range of online savings and registered accounts, while EQ’s customers will gain access to credit cards, as well as being able to bank in-person at the more than 2,500 Loblaw locations across Canada. Those locations will be rebranded with EQ’s yellow signage. Both banks offer no-fee accounts that provide interest, and both have lean, digital-first models, according to the release.
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Until 2017, PC Financial was partnered with CIBC to offer banking services. When that partnership ended, the company focused largely on its credit card and loyalty business, but began to inch back into banking in 2020.
The acquisition will also offer benefits for shareholders, although potentially not for all EQB and PC employees. EQB highlighted that it anticipates run-rate cost synergies—which can sometimes refer to reducing redundant staff or infrastructure between companies in the event of a merger or acquisition—of $30 million per year.
Canada’s banking market has faced some recent shakeups. Earlier this week, Laurentian Bank announced it would be sold to Fairstone Bank and National Bank for $1.9 billion. Last month, Questrade received approval to launch a new bank in Canada, six years after it first applied for a banking licence. That bank, Questbank, will launch next year.
The news of the deal came the same day as EQB announced its Q4 earnings, which the bank described as the end to a “difficult year.” While the bank’s customer base grew, its revenue dropped by four percent year-over-year. In October, the bank cut eight percent of its staff.
The deal is expected to close next year.
Feature image courtesy EQ Bank.