HSBC Bank Canada finally did what many insiders have expected for over a year. They shut their doors to mortgage brokers.
“We plan to concentrate on growing our business through our network of over 140 bank branches,” said HSBC Bank Canada spokeswoman Sharon Wilks. (See this Globe Story)
HSBC says it will honour all existing broker commitments.
Besides going into a branch, Wilks said customers will now need to apply for a mortgage “online or work with one of our telephone-based relationship managers.”
None of this is a complete surprise. About a year ago, HSBC began dealing with only its top 100 brokers. Many industry executives saw this as HSBC’s first step out of the channel. Since then, HSBC’s best rates and products have typically been available only through its branches. HSBC’s broker centre seemed to be running on a minimal staff as well.
Prior to HSBC, the last major bank to exit the broker channel was BMO in 2007.
“BMO has lost significant market share since they stopped using brokers, but their profit margins have improved,” said Canaccord Genuity analyst, Mario Mendonca. (BMO’s share is now estimated at 9.2% versus 9.9% one year ago.)
“It’s hard to tell on a net basis whether [giving up broker business is] the right thing to do,” he says.
So where does HSBC’s move leave the broker industry? Well, we never like to see a bank exit the channel, but fortunately, HSBC never gave us much to miss. Apart from limited-time rate promos, HSBC’s broker rates was often way above the market. Moreover, its turnaround times during broker rate specials left much to be desired. (We’ll never forget waiting four weeks to get approvals back during HSBC’s summer 2008 rate promo.)
The main niches we liked about HSBC were its products for non-residents, co-ops, and leasehold properties. For those deals, HSBC’s top 100 brokers will now be looking for alternatives.
It’ll be worth watching to see how HSBC modifies its business model going forward. In the meantime, we want to wish the best to all the HSBC broker channel employees affected by this news.