Canadian Imperial Bank of Commerce plans to wind down its mortgage broker business FirstLine, after failing to find a buyer for the brand.
The bank said Wednesday it would no longer offer new mortgages through FirstLine as of July 31, effectively bringing an end to the business. In an internal announcement, CIBC said it had reviewed its options and “determined that an acceptable deal to sell FirstLine’s mortgage origination capabilities could not be reached.”
CIBC had been looking to sell the brand, and the broker sales capacity that came along with it, since January after the bank announced it was getting out of the business of selling mortgages through brokers. The bank is hoping to raise its profit margins by selling more mortgages in-house, which allows its bankers to also cross-sell products to the clients.
Broker sales are considered a higher-volume, but lower-margin business for banks, since they pay commissions to the middlemen for each mortgage that’s originated. CIBC follows Royal Bank of Canada and Bank of Montreal in exiting the broker business in recent years. “Our emphasis in the future will be far more so on the branch channel than it will be on the broker-mortgage channel,” CIBC chief executive officer Gerry McCaughey told analysts early this year.
Though CIBC had been trying to sell FirstLine, the difficulty in arranging a sale came because the bank intended to hold onto the mortgages already sold through the channel, which meant any buyer would be purchasing the brand and the infrastructure of the business, including its sales force, but not purchasing the financial assets. This likely limited the number of interested buyers.
The bank said some FirstLine staff will be offered jobs at the bank, while others will be offered severance packages.