Home Capital Group Inc. is starting up a new division to attract the deposits of retail banking consumers, in an effort to diversify its funding.
The company, which is best known as a non-traditional mortgage lender, said Wednesday that it is rolling out Oaken Financial, a direct-to-consumer brand that targets a new generation of banking customers that is comfortable with online banking.
"We feel we need diversity in our deposit range of products, and we really would like to have a larger direct-to-the-public product offering, and that's where Oaken came in," chief executive Gerald Soloway said. Home Capital has more than $21-billion in assets.
Oaken will operate through Home Capital's subsidiary Home Trust, which is a member of Canada Deposit Insurance Corporation (CDIC), the agency protecting consumer deposits. But Oaken's main draw is its competitive rates, Home Capital's executives note. Oaken's Guaranteed Investment Certificates (GICs), for example, offer a slightly higher interest rate than other Big Bank peers. The five-year rate for a GIC at Oaken is 3 per cent, and the savings account earns 1.65 per cent.
"There really are fewer alternatives for folks to invest outside of [the big banks], so we're trying to provide that alternative," said Benjy Katchen, vice president of deposits at Home Trust. Oaken Financial also offers other registered plans such as Retirement Savings Plans (RSPs), and Tax-Free Savings Accounts (TFSAs).
Consumers who had been banking under the Home Trust name have been moved to Oaken.
Oaken will be able to move money digitally, but the brand also has offices in Toronto, Vancouver, Calgary and Halifax. The Quebec market is not yet eligible.
Beyond building the personal and commercial business, Home Capital is also looking at a senior deposit notes program for institutional investors, in order to further diversify its funding.
"We are looking at a senior deposit notes program that we would develop over the next number of years to be a regular issuer of those, generate the investor appetite for that," said Martin Reid, Home Capital's president, on a recent analyst call. "And that is very separate from our direct-to-consumer deposit initiative."
This initiative doesn't replace Mr. Soloway's intention to convert Home Capital's operations from an operations trust structure to a bank structure, however.
"I think at some point we will convert to a bank model, or operate with a bank as a subsidiary, but there's not a big immediate benefit to converting, so we haven't moved quickly on that," he said.