# Future of Ally Finacial Canada (or lack thereof)



## Robillard (Apr 11, 2009)

In other news today, it looks like RBC is intent on buying Ally Financial's Canadian operations for about $4 billion. 

http://www.reuters.com/article/2012/10/22/allyfinancial-canada-idUSL1E8LMBZW20121022

Comments?


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## andrewf (Mar 1, 2010)

Losing another high interest savings account provider.

The upside is that these seem easy to set up these finds of banks. Hopefully some new entrants will pop up to replace ING and Ally.


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## CanadianCapitalist (Mar 31, 2009)

I don't like the Ally acquisition because Ally currently offers one of the highest interest rates around. I'd expect the interest rates to go down once RBC gets its hands on the bank.


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## CanadianCapitalist (Mar 31, 2009)

It's a done deal now. RBC has acquired Ally.

http://www.rbc.com/newsroom/2012/1023-announce.html


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## andrewf (Mar 1, 2010)

Boo.


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## Square Root (Jan 30, 2010)

Another reason to buy(and hold) the banks. TD has purchased Target's CC portfolio in the US as well as partnering in other unspecified ways. $5-6billion in receivables. Presumably they will also issue the CC's when Target comes to Canada next year. Both RY and TD are down big today. This probably reflects the normal deal announcement declines. Interesting times.


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## Sampson (Apr 3, 2009)

I'm surprised everyone thinks this is negative. Many of the same posters were neutral and saying, lets see what happens with the ING Canada acquisition.

Do you guys believe it is simply in the big 5's nature to increase margins at the expense of losing some customers.


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## Young&Ambitious (Aug 11, 2010)

Didn't ING's savings rates get slashed upon their takeover? As Ally is now moreso one of the few higher-interest savings/chequings providers, why wouldn't RBC reduce this a bit to increase their own revenues.


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## Echo (Apr 1, 2011)

@Young&Ambitious - ING's savings rates did not get slashed upon their take over. That said, they haven't had the highest rates for a while now. I believe the savings account rate dropped from 1.5% to 1.35% earlier this year.

@Square Root - It was RBC, not TD, who purchased Target's CC portfolio. They will be releasing an RBC Target MasterCard when the Target stores start opening next year - http://www.rewardscardscanada.com/target-rbc-mastercard-in-the-works/


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## andrewf (Mar 1, 2010)

No one cared about ING because ING was no longer very competitive in HISAs when Scotia acquired them.


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## Sampson (Apr 3, 2009)

Echo said:


> @Square Root - It was RBC, not TD, who purchased Target's CC portfolio. They will be releasing an RBC Target MasterCard when the Target stores start opening next year - http://www.rewardscardscanada.com/target-rbc-mastercard-in-the-works/


Not true. TD purchased the underlying portfolio and assets. RBC releasing a Target MC doesn't mean they own Targets lending portfolio.

As a customer, I don't really care. As an investor of both RBC and TD, I'm worried.

Seems like they are stretching/reaching to diversify. Their core strategies have not been working (asset management and lending into capital markets for RBC) so they are looking elsewhere. Makes me nervous especially since neither of these acquisitions can be clearly called good to excellent.

Seems like competition among Canadian banks and a pile of cash has led to 'fair-value' acquisitions at a time where it appears things may go south again in the economy.


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## Echo (Apr 1, 2011)

@Sampson - you're right, my mistake - http://www.bloomberg.com/news/2012-...n-buying-spree-to-bolster-slowing-profit.html


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## Cal (Jun 17, 2009)

If the rate drops substantially, I move my money. Its that simple.


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## Robillard (Apr 11, 2009)

On the issue of TD acquiring Target's credit card portfolio, I'm a little concerned. Consumer finance is a great segment for a bank to be in during an economic expansion, when everyone makes their loan payments and you rake in the money hand-over-fist. But it really stinks when the party is over, and you have to write down large portions of the loan portfolio. I hope that TD got a good price for the the credit card portfolio, and for the Chrysler finance assets that they bought earlier. 

I note that HSBC is exiting the consumer finance business, as they already got burned by this market segment in the financal crisis.


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## Sampson (Apr 3, 2009)

Robillard said:


> I hope that TD got a good price for the the credit card portfolio, and for the Chrysler finance assets that they bought earlier.


This is just it, they did not, paid book value. Meanwhile, the market thinks Target got a good deal.


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## Square Root (Jan 30, 2010)

A purchase of a CC portfolio is always preceded by a thorough due diligence review. I participated and ran many of these when I was working. TD is very aware of the risks associated with such a portfolio. They usually insist on a clawback of losses above a certain level to protect themselves. I am quite sure they acted prudently with this purchase. Their purchase of Chrysler financial has worked out quite well so far. Paying book value for a well performing asset (ROE usually in excess of 20%) sounds like a reasonable cost to the buyer to me?

Any business that grants credit can be run well or not well. The ones that are run well with good underwriting standards can be very profitable. Obviously, if you don't run it well you can blow your brains out. The Cdn banks have done pretty well recently much better than most of the other international banks.

The market is never wrong, but it changes its mind frequently. I am betting on TD.


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## Sampson (Apr 3, 2009)

Square Root said:


> The Cdn banks have done pretty well recently much better than most of the other international banks.


Based on what metric. Give it 5 years, and an acquisition like Well's Fargo's dime discount, government sponsored purchase of Wamu is infinitely better than buying at book value.

I trust TD's management to an extent, but these buys (Ally and the Target credit) are neither fortuitous, nor do they fit into either company's stated strategies.


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## sags (May 15, 2010)

It will be interesting to watch what TD does with Ally.

As an example, GM owned GMAC and could set their own lending criteria for customers. They moved a lot of cars to subprime borrowers. After they sold GMAC, they discovered they couldn't sell cars, because a lot of their customers didn't qualify for a loan with the new lenders.

So, they acquired their own lender again, and lowered the lending requirements.

The question is if TD will maintain the bank's lending criteria to Ally financing, or go after the business auto subprime lenders, such as Carfinco or Cash for Cars, are presently doing. These secondary lenders are charging over 30% a year interest and install a GPS tracker in the car which can turn the car off if payments are in default. Their loan default rate is very low.

If TD just absorbs Ally into their business and sets the borrowing standards at the same level as the banks......what do they gain?


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## Square Root (Jan 30, 2010)

Sampson said:


> Based on what metric. Give it 5 years, and an acquisition like Well's Fargo's dime discount, government sponsored purchase of Wamu is infinitely better than buying at book value.
> 
> I trust TD's management to an extent, but these buys (Ally and the Target credit) are neither fortuitous, nor do they fit into either company's stated strategies.


I totally disagree with your statement on strategy. These deals are right on their stated stategies. What do you think their stategies are? The CDN banks have certainly outperformed virtually all internationally comparable banks over the last 5 years based on any metric. Incidently,the RY deal was well in excess of BV and generally well liked by analysts. The TD deal was less significant as it was more of a partnership with Target with the benefits split(mostly to Target). The partnership lasts for 7 years.


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## Square Root (Jan 30, 2010)

@Sags RY got Ally, TD partnered with Target


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## Sampson (Apr 3, 2009)

Square Root said:


> What do you think their stategies are?


RY has clearly stated they wish to grow through capital markets and by increasing their asset management portfolio, I state this above. While the Ally acquisition may be possibly fortuitous, there isn't much basis for the timing of the acquisitions. The moves seem like they are brewed out of impatience, hoarding tonnes of cash over the past 5 years, these banks must do something.

TD has been very successful in expanding their network internationally, and made reasonable, albeit not overly profitable venture in the Eastern seaboard of the US. Those network expansions and carrying the TD brand of customer service to individual banking customers has been the basis of their growth over 10 years. Perhaps you could say the Target credit is simply more consumer services and hence lateral expansion in this niche, but bricks and mortar is what they have been good at, not credit (look at their Canadian mortgage portfolio and other lending activities).

Fair to disagree Sqrt, but what how do you believe these acquisitions fit into their strategies? I'm not making judgement on whether they will pan out or not since I have never looked deeply into Targets credit card portfolio, nor into Ally/ResMor, are they profitable? what is the risk etc? Of course the 2 banks have done their research and their management is presumably trust worthy, but when companies start to venture away from what they have been good at, then flags in my head begin to be raised.


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## Sampson (Apr 3, 2009)

Square Root said:


> The partnership lasts for 7 years.


If I'm understanding the deal correctly, this is only a transitioning period, where Target continues the responsibilities of the accounting, but TD does all the risk management analysis etc. After 7 years, its all TD baby. Hopefully the economy will be thriving by then and TD can score a whole lot of Canadian consumer debt by then.


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## Square Root (Jan 30, 2010)

i think both these deals fits well into their stategies. 

For TD, their main stategic thrust is retail banking especially in the US where they currently have more deposits than assets. As such they are always looking for good quality retail assets- hence the Chrysler and now Target deals. Both portfolios are profitable and growing and expand TD's personal customer base in the US. Incidently, TD has been in US branch banking for only 8 years and has managed, despite a terrible envireonment, to remain profitable, gain market share, hugely expand it's footprint, and earn pretty close to it's CoC. Contrast with RY or BMO which were much less successful. TD's credit performance has been exemplary especially in the US. In Canada their credit losses have been higher (although expected) due to their purchase of car finance and credit card businesses. These businesses have generally higher credit losses offset by higher spreads.

For RY: again although Wealth management and Wholesale banking have been a focus of their international stategy, they are still the largest retail bank in Canada but, until this deal, have not been strong in auto finance( Scotia and TD stronger). Royal feels they can capture higher returns if they are the dominant player in a particular business. Probably 
true. The deposits are certainly profitable in their own right.

Both businesses (Target and Ally) were profitable and commanded a competitve auction. Both RY and TD have proven the know how to manage suc businesses and ern retrns higher than their CoC.


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## Sampson (Apr 3, 2009)

I guess Sqrt this is something we are in total disagreement over. I think our visions of what the companies have been doing and where they have been successful is in line. You view the acquisitions as lateral expansions to these efforts but I do not.

As a side-bar, I wouldn't call TDs expansion into the US as fully successful, they are gaining market share, but the American portfolio is not nearly as profitable as the Canadian side. I do believe they can and will make their Banknorth, Commerce and South Financial acquisitions prosper much more in time. But these acquisitions fit into the pattern set back in the late nineties and highlighted by the Canada Trust acquisition of expanding 'classic' retail banking.

Whether the Chrysler, MBNA, and now Target credit acquisitions pan out, not tested, no evidence. Again, the basis of my malaise, I'm not refuting your argument that the management decisions have been excellent, but call me conservative, I don't like 'new' ventures. I invested and will continue to invest in TD for their strength of retail banking.

For either company to grow, it is clear that Canadian retail offers very little. This could be a very interesting time for Canadian banks as they try to look for growth opportunities, they can't all work out just because they have good management teams. Mistakes do and will happen.


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## Square Root (Jan 30, 2010)

Let's agree to disagree. Wih me the banks glass is always half full. Having said that I have done very well with them over the years and have no immediate plans to lighten. Being retired, I just love those growng divs. 

Incidently, retail banking in Canada earns a ROE of over 40%. Even growth at 5-7% is a great business. TD has said they will grow their div 12%/ year for the next several years. I think it would be unreasonable to expect any bank to buy its way into the US market and have established a totally successful business within 8 years in this envireonment. But like I said, the glass is always half full for me.


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## Robillard (Apr 11, 2009)

Do you think the higher profitability of Canadian retail banking has any connection with the higher profitability of Canadian retailing? 

By that, I mean that Canadian retailers are generally more profitably than US retailers, hence why so many (Target and Nordstrom to name a couple) are trying to set up shop. The main reason why Canadian retail is more profitable is that there is a general shortage of retail-suitable real estate in Canda, which limits the amount of competition. In general, the US has looser planning and land use restrictions, which permits retail developments to pop up all over the place. It wouldn't surprise me if the same limits on retail real estate in Canada make retail branch banking in Canada relatively more profitable than retail branch banking in the US. That being said, I think the general shortage of competition (not retail real estate) is the main reason why Canadian banks are so profitable.

By that logic, TD's US banking operations might never be as profitable as their Canadian operations, where they face much less competition.


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## Square Root (Jan 30, 2010)

Robillard:TD's US branch banking will probably never be as profitable as the Canadian business. In Canada we have decided we want a protected oligopoly that is stable and profitable(very). The US is very different. Wild west comes to mind, at least before the crisis. Also, keep in mind that TD had to pay market price (say 2x book) for their US operations and this will reduce their returns. But if TD can earn a reasonable 12-15% return on it's investment in the US (currently earning about 7-8%) it will be a huge win for them.


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## kjmcrae (Apr 3, 2009)

Echo said:


> @Square Root - It was RBC, not TD, who purchased Target's CC portfolio. They will be releasing an RBC Target MasterCard when the Target stores start opening next year - http://www.rewardscardscanada.com/target-rbc-mastercard-in-the-works/


Hadn't heard about this new RBC card, but the TD deal has been in the news quite a bit in the past week or so: http://www.theglobeandmail.com/glob...rtfolio-to-td-bank/article4630664/?cmpid=rss1

Based on this, I would imagine that RBC would likely sever its ties with Target...?

Regards,
_--kjm_


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## Eclectic12 (Oct 20, 2010)

Square Root said:


> ...In Canada we have decided we want a protected oligopoly that is stable and profitable(very). The US is very different. Wild west comes to mind, at least before the crisis...


I doubt that except the broad strokes - the US banking system is going to shift much away from a wild west scenario. 

Long before the 2008 crisis, my folks went through something like twelve banks in nine years. Not because they changed banks but because the bank they were with was bought out or merged. It was a major headache for them to keep up with the changes each new bank brought to their accounts (ex. bank 1 charges a fee for using the ATM but not the teller, bank 2 charges a fee for using the teller but not the ATM etc.).


Cheers


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## J Watts (Jul 19, 2012)

Sampson said:


> I'm surprised everyone thinks this is negative. Many of the same posters were neutral and saying, lets see what happens with the ING Canada acquisition.
> 
> Do you guys believe it is simply in the big 5's nature to increase margins at the expense of losing some customers.


Exactly what I was thinking. ING's investments have remained the same; there was no huge fall when ScotiaBank bought them, and I haven't seen any change in Ally's current 1.8% high interest savings rate. And if there is, move the money to another bank.


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## CanadianCapitalist (Mar 31, 2009)

J Watts said:


> Exactly what I was thinking. ING's investments have remained the same; there was no huge fall when ScotiaBank bought them, and I haven't seen any change in Ally's current 1.8% high interest savings rate. And if there is, move the money to another bank.


The ING and Ally acquisitions haven't closed yet. I personally don't care about the ING takeover for two reasons. One ING's savings offerings are not in the top tier anymore. Second, Scotia has explicitly stated that they are planning on keeping ING's business model.

The Ally acquisition differs on both counts. Among CDIC insured savings products, Ally offers one of the highest interest rates. And AFAIK, RBC has made no commitment to maintaining Ally's deposit products.


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## olivaw (Nov 21, 2010)

This is disappointing. I had planned to move a substantial amount of cash (for me) to Ally. I may reconsider. 

Can anybody tell me if the CDIC consider Ally to be part of RBC for insurance purposes?


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## J Watts (Jul 19, 2012)

olivaw said:


> This is disappointing. I had planned to move a substantial amount of cash (for me) to Ally. I may reconsider.
> 
> Can anybody tell me if the CDIC consider Ally to be part of RBC for insurance purposes?


Ally is already a member of CDIC: http://www.ally.ca/en/cdic.html


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## CanadianCapitalist (Mar 31, 2009)

olivaw said:


> Can anybody tell me if the CDIC consider Ally to be part of RBC for insurance purposes?


If RBC keeps ResMor Trust separate, then Ally will be considered separate from current RBC deposit taking institutions (there are at least five according to this webpage: http://www.cdic.ca/Pages/Members.aspx#RR). However, we won't know that until the acquisition closes.


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## olivaw (Nov 21, 2010)

Thank you very much for the answers to my question about CDIC insurance at Ally.


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## leeder (Jan 28, 2012)

I'm just wondering if it is worth keeping my money with Ally. I have both a Cdn HISA and US dollar account with them. RBC just placed a notice up, stating people can no longer start new accounts with Ally. I would speculate that next thing RBC woud do is either drop rates on the current Ally products or force people to convert to one of their RBC lines of products by a certain date. I am starting to get concerned, particularly the US $ account, which is not CDIC insured (I don't have any other US account to transfer...wishing I could transfer the amount to TD Waterhouse).


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## james4beach (Nov 15, 2012)

A bit off-topic, but TD has acquired so much US banking (including bundled packaged loans and mortgages, stuff that's been sold off at FDIC auctions of failed banks) that they now have tremendous US risk exposure.

If the US economy turns down again, TD is going to get hit very hard. Possibly even harder than in 2008, when TD drew on $26 billion of government and central bank assistance.


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## andrewf (Mar 1, 2010)

I wonder why the government allows the big banks to buy up and shut down competing lenders/savings institutions.


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## emperor (Jul 24, 2011)

What about peoples trust? They have 1.9 % HISA and a 3% TFSA.


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## Eder (Feb 16, 2011)

I checked into Peoples Trust but they have no online access , same as Bridgewater bank....pretty useless for my purposes.


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## NorthernRaven (Aug 4, 2010)

Eder said:


> I checked into Peoples Trust but they have no online access , same as Bridgewater bank....pretty useless for my purposes.


Actually, it sounds like Peoples does now have the online banking up and running with their e-Savings accounts.


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## jamesbe (May 8, 2010)

Checked out ING but only 1.35%? Bah, I had a lot of my money in Ally I just moved some but still have 10k in there. 1.8 is pretty good at this time, hope they don't force us out to RBC's 1.2 esavings account.


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## Eder (Feb 16, 2011)

NorthernRaven said:


> Actually, it sounds like Peoples does now have the online banking up and running with their e-Savings accounts.


Nice! Thanks.


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## GoldStone (Mar 6, 2011)

RFD posters reported that Peoples Trust external transfers are down. PT blames 3rd party technical issues. Hmmm....


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## MrMatt (Dec 21, 2011)

emperor said:


> What about peoples trust? They have 1.9 % HISA and a 3% TFSA.


With variable rate mortgages charging less than 3%, I don't see how a TFSA/HISA at 3% is anything more than a teaser rate.


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## mrPPincer (Nov 21, 2011)

It may seem hard to believe but it's actually not a teaser rate, they (People's Trust) have had it at 3% for their TFSA HISAs since feb.16/2009, seems like they mean it 
http://www.highinterestsavings.ca/chart/


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## GoldStone (Mar 6, 2011)

Ally HISA rate is down to *1.2%*. FU RBC.


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## J Watts (Jul 19, 2012)

GoldStone said:


> Ally HISA rate is down to *1.2%*. FU RBC.


Time to transfer the money back to Scotiabank!


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## pwm (Jan 19, 2012)

That totally blows! Now I have to rethink where to park my cash. Back in the day I used TDW Money Market Fund, but when the yield on that went to almost zero I went with an ALLY HISA at 2.0%. Now what?


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## travelgeek (Nov 29, 2009)

Guess it's time to dust off the ING account as a parking spot for now.


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## jamesbe (May 8, 2010)

Wow may as well move the money back to my RBC esavings as it is instantly available and the same interest rate.


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## nuke2uk (Nov 1, 2011)

GoldStone said:


> Ally HISA rate is down to *1.2%*. FU RBC.


I second that. I was a loyal and active customer of both brands before the buyout, however now I'm torn.


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## andrewf (Mar 1, 2010)

Well, RBC officially wants to kill Ally.


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## the-royal-mail (Dec 11, 2009)

All of this highlights why I do not chase returns on cash accounts beyond the typical HISA rate. It's just not worth all this fuss when the music stops.


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## J Watts (Jul 19, 2012)

andrewf said:


> Well, RBC officially wants to kill Ally.


And they are:

http://www.rbcroyalbank.com/ally/index.html



> On February 1, 2013, Royal Bank of Canada announced it completed the acquisition of Ally Financial Inc.’s Canadian auto finance business (Ally Credit Canada Limited) and Canadian deposit business (ResMor Trust Company).
> 
> *As a result of the acquisition, RBC Royal Bank has performed a comprehensive review of Ally’s‡ product portfolio, and implemented some changes that may impact your account(s):
> 
> ...


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## andrewf (Mar 1, 2010)

Why does the government allow the big banks to buy/shut down competing operators?


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## leeder (Jan 28, 2012)

Nice knowing you, Ally. Back to my old flame, PC Financial...


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## HaroldCrump (Jun 10, 2009)

I am not a customer of Ally and never been, but I must say, this is an outrage.
This is a clear case of restrictive competition practices.
The Competition Bureau needs to look into this right away.

The acquisition should not have been allowed to begin with.
But now that RBC has taken explicit action to shut down Ally, and dissolve all its features, etc. this is clearly a bigger shark eating the small fish.
Our Telcos and our Banks are the worst monopolies.


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## GoldStone (Mar 6, 2011)

RBC didn't buy Ally to shut down the deposit taking competition. I don't think it was the intention.

The value of Ally (for RBC) is in the auto finance business. That business will continue under RBC umbrella.

Ally needed the deposit taking business to finance the auto business. RBC doesn't Ally deposits. They have their own deposit base. It's much cheaper and it's huge.


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## warp (Sep 4, 2010)

jamesbe said:


> Checked out ING but only 1.35%? Bah, I had a lot of my money in Ally I just moved some but still have 10k in there. 1.8 is pretty good at this time, hope they don't force us out to RBC's 1.2 esavings account.



They did exactly that today!.....Ally now paying 1.2% !

Please post what you think is the best HISA in Canada now, taking into account the interest rate, which the most important factor...and also ease of use, including easy ONLINE transfers of money in and out.

thanks


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## J Watts (Jul 19, 2012)

Hilarious timing:

February 14, 2013 I receive a letter from Ally:

"... Remember, when you invest with us, you know you're always getting one of the best rates in the country."

February 15, 2013 I receive a letter from Ally-RBC:

"Your account will be closed on April 30, 2013."

... Ally FAIL!


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## Echo (Apr 1, 2011)

@J Watts - Talk about a marketing fail - wow!


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## J Watts (Jul 19, 2012)

Has anyone else had trouble transferring their money out of Ally/RBC? I've put in a transfer request 3 times now, and each day the transfer is deleted but the money is not actually moved. I called Ally, and they said there are "restrictions" on my account which prevent my money from being moved.

What are these restrictions? They have no idea!

Has anyone else heard of this? Are they just holding my money to try and convince me to keep it with RBC rather than transferring out?


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## pwm (Jan 19, 2012)

I can't imagine what "restrictions" they could be referring to. That sounds flakey to me. I transferred all my cash out after the announcement, and then also moved the interest when it arrived on March 01 with no problems.


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## eulogy (Oct 29, 2011)

J Watts said:


> Has anyone else had trouble transferring their money out of Ally/RBC? I've put in a transfer request 3 times now, and each day the transfer is deleted but the money is not actually moved. I called Ally, and they said there are "restrictions" on my account which prevent my money from being moved.
> 
> What are these restrictions? They have no idea!
> 
> Has anyone else heard of this? Are they just holding my money to try and convince me to keep it with RBC rather than transferring out?


No restrictions. I've been receiving my regular transfers. I called in on Friday to close my accounts. They said it would take 5-7 business days to close and 2-4 business days to transfer the money. Closed and in my bank account in 3 business days.


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## Cal (Jun 17, 2009)

I had everything transfered out in 2 days and the account was closed immediately afterwards...last week.

1.2% was not worth having another account at another institution.


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## fraser (May 15, 2010)

I really do not care what happens to ING or to Ally. We are waiting for our People's Trust and Canada Direct accounts to open. Then we will move the funds out. 

Why on earth would we accept a decline in rates on our Ally account when we can simply move over to Peoples. Does RBC or Scotia for that matter think that their depositors are complacent enough to accept that. Oh, I forgot, we are complacent Canadians.


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