Breaking News: CIBC to Reportedly Sell FirstLine

CIBC-BankWe have heard from multiple reputable sources that CIBC has put its broker-lending subsidiary, FirstLine Mortgages, up for sale.

Upon sale, one of our sources states that CIBC will then exit the broker channel.

FirstLine is an iconic brand in the mortgage market. As of Q2 2011, it was the #1 broker lender and one of the biggest mortgage lenders in Canada.

Its lender market share ranking plunged to 4th in the broker channel, as of Q3 2011. That’s a direct result of CIBC favouring its retail mortgage channels (through better pricing, etc.).

firstlineCIBC has owned FirstLine since 1995, when it bought its predecessor FirstLine Trust from Manulife.

We are hearing that:

  • CIBC is hoping to complete the sale by its fiscal year-end (October 31, 2012)
  • Potential purchasers have already been made aware of this news
  • FirstLine’s mortgage book is reportedly $47+ billion (i.e., massive!)
  • CIBC will likely retain a large portion (or potentially all) of the mortgages on its books.
  • There are no plans at this stage to shut down FirstLine or eliminate its popular broker incentives (i.e., its basisPOINTS and POINTS programs)
  • Existing FirstLine customers should not be adversely affected by this news.

At this stage, no information herein is official or confirmed. We are making attempts to get a comment from CIBC, but it’s the weekend so we probably won’t get word until Monday. We do, however, believe our sources to be accurate.

While this news could have materially negative implications to the mortgage broker channel, there may be some silver lining. Monoline lenders and competing broker channel banks could see a noticeable volume pickup—at least in the short-to-medium term.

As we confirm more details, we’ll post more here and on our Twitter mortgage news feed.


Rob McLister, CMT

  1. I have thought for about a year that Firstline was making a move to exit the broker channel as we know it. A company doesn’t go from its previous success to it’s current status without a major change. It will be very interesting how it affects current mortgage holders and the broker industry. I can only hope they return to the force they were as they had great products for clients that no longer exist – which seemed to disappear when their upper management started to disappear!

  2. They made their intentions pretty clear when they priced their Variable Product out of the market last year. I havent been a fan for quite a while now and it will not affect my volume in the least bit. They do have some awesome BDM’s especially in BC in Donna and Cathy who I feel bad for after their years of dedication. Our broker world is ever changing and evolving!

  3. This is terrific news!
    Freed from CIBC’s fetters they can go back to being the leader that they once were.
    Wayne Campbell,
    Invis – Prince George

  4. I couldn’t agree more with Wayne’s comment-it would be great if Firstline could go back to being a great mortgage lender….

  5. Thats terrific news? Are you kidding? This cannot be viewed by all as a positive move for the broker channel. Another broker lender , regardless of which big bank owns them …wants to exit? Keep the mortgages and customers they acquired and exit the broker channel. Let’s count how many that makes in the last 3 years!
    If Cinc isn’t selling their mtg book with the sale, then all the are selling are the people, the brand and some big guess at what first,one originates each year. How do you value that! And who wold buy it! Another big bank. no…I don’t bloody well think so.
    This isn’t good news mortgage brokers. Who is next? Does anyone smell a conspiracy by the big banks? Branch fulfill, branch origination or we are out.

  6. Who is next BNS ? TD? That’s all that’s left. And you can bet they will be rubbing their hands together hoping they get their share of $9b of mortgages every year from first,one…….right up to the point where they too conclude they need to exit.
    We need to ensure that the big banks don’t win out of this latest move. We need to support the lenders who support our broker industry, the sustainability of our business and our brands. Enough is enough? I’ve been pretty much ignioring the plee’s of the mgmt of my firm to stop supporting banks. Not any more.

  7. Completely agree with you (TD and BNS will likely follow at some point, when was the last time we saw a big bank say it’s a great idea to get back into the broker channel while at same time we’ve now seen (BMO, HSBC, and CIBC / FLM looking to exit). Sad and just another indication that the broker channel does not warrant big bank support (and once they leave we will be feeling the heat from product loss), things will only get tougher for us. This has nothing to do with loyalty of the banks (the banks are not loyal to us and in reality not many are loyal to them. The industry needs to take note that our current practices could potentially getting us to one final destination in a hurry, very few lender options. Support those who pay at renewal, a win-win for all.

  8. Since I know how good a fact checker Rob is; I know this is 100% true.
    I have posted before that I thought CIBC was making a mistake in their treatment of Firstline and now it appears they had a completely different agenda. Or at least they reached a different conclusion.
    Nobody could rationally say its a good thing when the company that was #1 in the broker space for a decade is suddenly sold or closed.
    The CIBC is withdrawing from broker lending where at one time the bank was originating 40% of its mortgages through Firstline. This may not bode well for us.
    I think all of the brokers who say we should just direct all of our attention to the monolines may not fully understand how vulnerable the monolines are to big stress factors in the financial world. The big 5 banks supply a large chunk of the funding to the monolines. There are reasons we should want to have powerful companies like the big 5 banks as direct players in our space.
    The broker market share of mortgage origination in the USA was 77% at the peak in 2007. In 2011 it was 11%. We should all watch these trends carefully.

  9. Well said Ron. The big 5 banks are crucial to our industry.
    I was wondering what was happening, it appears they are following RBC mortgage origination route….

  10. I knew something was in the works when they did not try to raise or question why my projected mtg volume with them would be what I was suggesting. I questioned them and was told that it was business as usual but they would be changing their name and all the Points etc were remaining…
    Interesting turn of events!

  11. Any business operated by CIBC is a joke so as far as I’m concerned, this is a good news story. I once had the displeasure of working here and the lack of regard their leaders have for employees is pathetic! The “Firstline is being sold” rumour has been circulating for over a year so this is no surprise. The morale at CIBC, but particularly in mortgages sucks (I don’t know anyone who is happy.) People have been scared about losing their jobs and someone in that deplorable management team needs to grow a pair, announce their intentions so that hard working employees who continue to get screwed finally make some decisions.

  12. Let’s be clear. CIBC HSBC and BMO are not getting out of the mortgage business. They are getting out of the mortgage broker business. That’s quite an alarming commentary on our industry. Hard to explain to Canadian homeowners why we can’t offer mortgages where they bank. Or at competitive rates. If either of TD or Scotia leave too…
    Question: Can a small industry of brokers compete with canada’s major banks for mortgage business with canadians?
    Answer: No. Not without these same banks mortgage products, at the same rates.
    It’s not as if cibc firstline was small and lacked the necessary scale, volume, or backing to compete. They were successful, and left anyhow.
    It was channel costs, cross sell and conflicts. And it’s driven by the diminished appeal of selling debt in a decade+ of deleveraging
    It’s just business.
    Going going, gone!

  13. Let’s be clear. CIBC HSBC and BMO are not getting out of the mortgage business. They are getting out of the mortgage broker business. That’s quite an alarming commentary on our industry. Hard to explain to Canadian homeowners why we can’t offer mortgages where they bank. Or at competitive rates. If either of TD or Scotia leave too…
    Question: Can a small industry of brokers compete with canada’s major banks for mortgage business with canadians?
    Answer: No. Not without these same banks mortgage products, at the same rates.
    It’s not as if cibc firstline was small and lacked the necessary scale, volume, or backing to compete. They were successful, and left anyhow.
    It was channel costs, cross sell and conflicts. And it’s driven by the diminished appeal of selling debt in a decade+ of deleveraging
    It’s just business.
    Going going, gone!

  14. Let’s be clear. CIBC HSBC and BMO are not getting out of the mortgage business. They are getting out of the mortgage broker business. That’s quite an alarming commentary on our industry. Hard to explain to Canadian homeowners why we can’t offer mortgages where they bank. Or at competitive rates. If either of TD or Scotia leave too…
    Question: Can a small industry of brokers compete with canada’s major banks for mortgage business with canadians?
    Answer: No. Not without these same banks mortgage products, at the same rates.
    It’s not as if cibc firstline was small and lacked the necessary scale, volume, or backing to compete. They were successful, and left anyhow.
    It was channel costs, cross sell and conflicts. And it’s driven by the diminished appeal of selling debt in a decade+ of deleveraging
    It’s just business.
    Going going, gone!

  15. I can say with relative certainty that the employees (perhaps not mgmt) of Firstline will be surprised by this. While the writing may have been on the wall with recent decisions; the employees have been kept in the dark. Sad they would treat their loyal employees this way. Very sad.

  16. I worked at CIBC twice over the past 30 years, they have a different business plan every year. As a broker for the past 13 years I have had a great run, and I believe that we will have a great business for a few more years yet. However, I would not want to be getting into the business today, it will be tough for those starting out. I have a very large client base, without that it will be tough for the newbies.

  17. Time to spend your points and basispoints, regardless of whether the new “buyer” will honour them . Good time to go on a winter getaway vacation with those POINTS…………..

  18. Hi Aaron,
    If this news is confirmed, then CIBC (FirstLine’s parent) may keep most if not all of FirstLine’s mortgages from what we hear. Even if they didn’t, there should be no adverse impact to you as a borrower. You’d just keep paying your mortgage as you do today, either to CIBC or to the new mortgage holder. At maturity, you’d have your choice of where you’d want to renew.

  19. Hi BC broker,
    From what we hear, the official decision to sell FirstLine is extremely recent. It was reportedly made only this week. It just happens that we got wind of this potential announcement before FirstLine/CIBC could inform its staff. I would not slight CIBC or FirstLine management for the timing of our story. It takes time for a big company to disseminate this sort of news.
    (Again, every statement we make on this topic is from sources we believe to be reliable, but is not confirmed fact at this time.)

  20. Rob, as an employee I can tell you with certainty that this decision was made in the upper echelons of CIBC last year or even in 2010. The move to separate our servicing dept from FLM (2010), then to move our location to a call center without even discussing the issue with us, pitting us against our broker partners with substandard rates and more recently changing commission structure are all visible changes of a well thought out plan to help us fail. Thus justifying a cause for sale.
    CIBC just never considered employees at FLM of much value but we continued to work hard very day. So we are naturally furious. FLM has great employees and managers and will be successful whatever they move on too …more than what I can say for Mr.McCaughey and his henchman at 800 Bay.
    We have sources too and were expecting some bad news to come out about 3 weeks ago…we just didnt know what.

  21. Correction,
    Thanks for the post. FirstLine certainly has assets, not the least of which is its highly professional, respected and dedicated employees.
    We’re well aware that CIBC has reportedly been considering this move for many months. For that reason, I carefully used the word “official” before “decision” above. We are told by good sources that the sale process was officially set in motion only recently. Until CIBC took definitive action to sell FirstLine (i.e., started soliciting indications of interest, briefing top management, etc.), it would have made little sense to notify employees. Had CIBC known this news would break, I suspect it would have certainly accelerated any planned internal announcements out of respect for the staff.
    I’m in total agreement that FLM is a tremendous organization. Assuming this news is confirmed, then given the right buyer, there is no reason why it can’t again be a preeminent lender in this space.

  22. Ron I agree with you if I think back to years ago to now and then look ahead 2 or 5 years from now? I don’t like the trend that is occuring. RBC never was in the business of accepting broker deals, then HSBC backed out, then BMO last year left only tpo leave us with TD,BNS&CIBC/1st line. Now with first line doing what they did with cap on mtg sizes and rates well they might as well be out of the busienss already! Now with this “rumor” there goes another “A” Lender. I see how agressively BNS,TD & CIBC are growing their bank Mortgage Specialist team and clearly by the end of the year CIBC will be gone, then I need to wonder not if BNS and TD will do the same but when…. next year or in 3 years?… Then what? We have “A” clients and we try and book them with “B” lenders ouch… That will not happen. Yes Ron we do need access to “A” money the big banks have, this is not a great “rumor” for any us I believe…

  23. So what happens to all the home owners that have first line mortgages can they have a choice to go to CIBC?And if FLM was such a big player why sell?

  24. Why sell?
    Simple. The mortgage transaction is no longer profitable when isolated, and sold apart, from the banking bundle and strategy. Or at least there are more profitable/strategic ways than broker originated. Banks don’t need any more mortgages, they need banking customers. Preferably with savings. …and bring your mortgages too :)

  25. Good riddance?
    Perhaps we should get rid of that pesky td bank, and scotia too while we are at it. Call it a total victory.
    12,000 commission salesmen against Canadian banks with 70 percent mortgage credit share and billions in annual revenue and millions of canadian customers.
    And the winner is….

  26. Good riddance?
    Perhaps we should get rid of that pesky td bank, and scotia too while we are at it. Call it a total victory.
    12,000 commission salesmen against Canadian banks with 70 percent mortgage credit share and billions in annual revenue and millions of canadian customers.
    And the winner is….

  27. Good riddance?
    Perhaps we should get rid of that pesky td bank, and scotia too while we are at it. Call it a total victory.
    12,000 commission salesmen against Canadian banks with 70 percent mortgage credit share and billions in annual revenue and millions of canadian customers.
    And the winner is….

  28. There’s one thing I still can’t wrap my head around here:
    If CIBC is reportedly retaining all/most of FirstLine’s massive $47 billion portfolio, then what, exactly, are they planning to sell? Just the name, “FirstLine Mortgages”? The value of tne name only lies in the portfolio and the tremendous employees behind it. So again, what exactly, are they looking to sell?
    Being devil’s advocate, wouldn’t it have been easier for them to just shut the door on broker business and give the employees the pink slip? What is the rationale behind the sale?

  29. it’s amazing to wake up and not know if you have a job. this firm is a joke and the lack of professionalism that the management team shows is comical. morale is awful and will only get worse. this company has zero regard for their employees. no foresight or forethought whatsoever. as one of the posters stated, cibc seems to have a different ‘plan’ every year and each ‘plan’ seems to contradict the previous. thank goodness for them that banks make money no matter what.
    cibc for what matters.

  30. HI Jeff. Great question and also one I was asking myself. My thought would be since they will keep the book under CIBC the only interested buyers would be a company looking to enter the mortgage market in the broker industry (Cdn Tire, Walmart) would be the type that would buy. Again that is my guess

  31. Neither have deposits and cmb can’t fund it all. Or at least cmhc doesn’t want to insure it all.
    Canadian tire tried, failed, and exited the game. Wall Mart has distribution already
    The broker channel is only appealing to companies that don’t have distribution branches or points of presence. Namely ING national bank, monolines. But only if the promise of cross selling is there, delivering a new customer to the companys existing business lines and profit centers. If not. On its own the mortgage transaction doesn’t constitute a viable “business” or strategy. At least not compared to competing integrated alternatives.
    One trick pony –

  32. I was actually posing the question to myself: what is there to sell without the mortgages?
    I wonder what you are selling in a brokerage mortgage lender WITHOUT the mortgages.
    There have been some reasonable answers given here: the employees (many excellent people),the software systems, the relationships (a lot less of that now, perhaps) and the brand itself.
    There have been some suggestions of possible buyers but nothing jumps out as obvious. Likely when it happens it may be something out of left field.
    The “why” of this thing at any company generally comes down to the leadership.
    At TD, RBC and Scotia and to a lesser extent BMO; all the CEOs spent big chunks of their formitive years involved in retail banking (lending) at the managerial and executive level. Mr. McCaughey’s background was that of a retail stock broker rising to the top management of the Wood Gundy / CIBC World Markets side of the bank from which he transitioned to the top spot. Basically zero time spent in retail banking / lending.
    Possibly just “selling” lending entities and changing plans rapidly comes more easily to him because he was never much involved in just how hard and time consuming it is to acquire retail lending business.
    So if I were a CIBC stockholder this withdrawl from broker business may turn out to be a great idea, it could be a well timed move to allocate resoures and capital to growing the “road rep” side or the branch side of mortgage lending; which CIBC management tells everyone at Firstline is a more profitable way to sell mortgages by creating stickier relationships and cross selling other products.
    It might seem to make sense to withdraw from the Mortgage Centre business as well. I am not trying to start any trouble! Just following the logic path here. Unless Mortgage Centre itself is a nice profit source and fits into the idea of feeding customers directly into branch sign-up systems.
    I still think the sale of Firstline is not a good thing for mortgage brokerage in general.
    I think it is always a good idea in business to try to be a student of history and it cannot be just a coincidence that the best years the mortgage brokerage business ever had in Canada were the years where we had the most lenders to choose from.

  33. Making the decision to sell the Firstline brand now is akin to listing your house after you’ve taken a sledgehammer to the drywall.
    This move, combined with the mounting funding stress across the industry, make CAAMP’s agenda even more pressing. Both the Ministry of Finance and Canadian consumers need to be reminded (loudly) of the valuable service mortgage brokers provide.
    This is not a year for bigger parties and golf tournaments.

  34. Very interesting, but just consider…
    …no rational seller would deliberately run down a business they were trying to sell as CIBC apparently has done. The brand would have been worth so much more a couple of years ago. So I’m concluding that this is a fairly recent decision that is partly about improving margins and mainly a (panicked?) reaction to the OSFI/Bloomberg story of the other week. Deservedly or not Firstline is likely getting blamed for a perceived excess concentration in stated income & condo investor loans.
    On a more general note, I’d be surprised if TD & Scotia exited the broker channel. If I was in charge at either bank, I’d use my new relative clout to beat down broker compensation over time and try and keep my owned distribution system honest.

  35. I’m glad you pointed that out because nobody on this blog (shockingly) is discussing the real issues behind the scenes. This has nothing to do with rates and insurance premiums—something much larger is at stake.
    You can lead a horse to liquidity, but you can’t make him borrow.

  36. As a reader who has been a people manager in the financial industry I wanted to address some of the comments about the lack of care for employees of this announcement…
    In any business if you have dis-engaged employees a range of detrimental problems can arise including: theft, breaches of confidentiality, negitivity from staff to clients, and attendance issues…
    These are even more serious in the financial industry as theft can be very hard to detect and reputation risk(affected hugely by confidentiality concerns) is a huge part of stock values.
    So even if a bank wanted to notify its staff well in advance and give them all months to make alternate plans or even days, the risks are far to great!
    When you give notice from a job at a bank you are immediately walked out and get paid for the 2 weeks notice but do not get another moment to view or access internal info.
    Don’t get me wrong… this is terrible news for the firstline employees and we can all feel terrible about it! However the protocol for which these type of situations are dealt with is normal for this industry.
    If you were a client of Firstline, would you want a dis-engaged employee with access to all your personal finacial information provided bad news well enough in advance to plan to make a profit from selling it to an unauthorized party? As the risk of losing his or her job is no longer a threat?
    Just a thought…

  37. Sorry Canadian Watchdog… I did not mean to rspond directly to you!
    Just to post my random thoughts after your last response.
    Cheers,

  38. you are right, I have worked for 2 institutions that closed ther ddoors and the employees and the managers are the last people to now for those stated reasons. My staff new the same time I did and the computers were shut down by the time we exited the annoucement meeting. Paid a severenace and ushered out the door through tear stained eyes. The writing was on the wall but you never chose to believe that it is realy going to happen. I hope we are all wrong about the other 2 banks pulling up stakes. They offer risky products that none of the other monoline banks offer. Until a lender comes along that can replace those products,I hope it doesnt happen even though the writing IS on the wall.

  39. This is not good news for the mortgage brokers of the world. We will loose more choice albeit not as good lately in regards to Firstline. If anything loosing the brand to brand product is a major blow. I have been a major Firstline supporter I guess I have learned my lesson regarding diversifying your business to different lenders.
    Jeff Attwooll-Verico KW- Mortgage

  40. I don’t think FLM would go back to being this great lender I’m hearing of. To me it seems like CIBC has been planning this exit for some time. FLM might have been a great mortgage lender in the past but aside from mortgages it is of little use. The banks are embarking on a strategy of up-sell, up-sell, up-sell. Mortgages on their own are no longer profitable as they once were. So instead of having separate subsidiaries competing with the retail channel, why not just sell mortgages only under the CIBC banner – and then capitalize on the opportunity to sell a whole bunch of other crap as well?
    The sale of FLM is essentially a way for CIBC to consolidate operations and build a fence around clients exclusively through the CIBC brand.
    I don’t think that losing FLM is a big blow to the broker channel. Their pricing hasn’t been competitive for some time now and there are other great lenders (i.e. MCAP, ING, First National, Merix, even Scotia) who would be all too happy to take on the many millions of dollars in business that CIBC would lose.
    In fact, I wouldn’t be surprised to see TD folding pretty shortly as well.

  41. Actually HSBC has been selling business units left and right to raise capital. They’re shedding units not just in Canada but all over the world and their Canadian mortgage market share is very very small.
    BMO decided to leave the broker channel because from a profit perspective it makes more sense to pay your employees 20bp commission (no salary, of course) to sell mortgages that are laden with restrictions and potentially exorbitant penalties.

  42. Hi Lior
    I agree with just about everything you say except for them leaving is not a big blow.
    Regardless of what you are selling, when a company that was #1 and 1 year later they exit that market, a move like that is not good for that industry. I do not think that matters if you are selling mortgages or nuts and bolts for plumbers. Overall no one benefits

  43. Banker99, I agree with you. I always keep in mind that the year that broker channel market share crested was the same year we had the highest number of lenders in the channel.

  44. Hi Ron. Exactly. Also no doubt the sales mangers at the Big 5 will use things such as this to talk current brokers to come and join them as mobile specialists again greater reducing the number of brokers in the market today.

  45. I don’t think your point applies in this case. Firstline probably wants to keep its staff in place for the acquirer. I’m guessing they didn’t tell anyone yet because they haven’t had time to prepare for an orderly dissemination of the news.

  46. This is NOT a good thing for our industry and eventually the consumer will suffer in the end. I am and have been a FLM supporter for years even when it has been very hard to do so.
    FLM has always had a layer of stupidity to it and the further up the chain you go you can see why but that being said there have and are some very good people who work there now. I cannot say enough about how professional and amazing our own RBM is and hope that Sara M will be around our industry for a long time to come. I feel for them at this moment and I imagine that being an employee there is soul sucking and is somewhat like the horror movie the human centipede with the smarter more caring ones at the bottom.
    I do feel that if you want to run a company into the ground on purpose then FLM should be an example of how to do so step by step.
    Banks look at brokers as the enemy and want us gone, competition is bad for banks and great for the consumer. The banks are incredibly profitable but want MORE, what they fail to realize is that when they have it all no one will have anything left to put in their bank.

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