Here are some of the stories that caught our eye this week:
Warren Buffett to The Rescue (?)
You know his name.
After months of questions surrounding the survival of the embattled lender Home Capital, famed investor Warren Buffett, through his firm Berkshire Hathaway has swooped in to back the company with a new $2 billion line of credit and an initial investment in HC of $153 million for 20% equity stake. Then, the deal includes an additional $247 million investment for just over 38% stake in the company (pending shareholder vote in Sept).
This is apparently the best deal out of 70 other interested companies.
Some investors are questioning the deal, despite the confidence boost Buffett’s name brings to Home Capital.
However, Buffett’s backing does make a case for their sound mortgage portfolios, and is reassuring to many investors (and consumers) that Home Capital’s lending practices are credible.
Buffett said in a statement, “Home Capital’s strong assets, its ability to originate and underwrite well-performing mortgages, and its leading position in a growing market sector make this a very attractive investment.”
And as one Toronto lawyer told the Financial Post, “His investment will be worth several times what he laid out of pocket to gain entry. That’s what he does and that’s why he is a legend.”
Wealthsimple heads across the pond
Not long after Wealthsimple announced it was expanding into the United States (where they will be targeting a slightly older demographic than here at home), they’ve made another expansion announcement. Wealthsimple will be launching a beta version (invite-only) in the U.K. this summer, with a public launch in September. CEO Michael Katchen says this is part of their plans to become a global financial services firm, saying:
“Our mission is to make smart financial services accessible to everyone in the world. There are a lot of people in the UK who aren’t getting the tools and advice they need to live their best financial lives, and in particular young and first-time investors,” said Michael Katchen, founder and CEO of Wealthsimple.
Consumer debt by Canadian province
A recent report by Equifax stacked up the levels of consumer debt by Canadian province in an effort to better understand how Canadians are dealing with debt loads. According to Equifax, the average Canadian carries $22,125 in non-mortgage debt. Albertans rank at the top of the consumer debt list with an average of $27,871 in debt, and Fort McMurray residents carry around $37,345 of debt on average. At the bottom of the list? Manitoba, whose residents carry an average of $18,312 in consumer debt.
Canadians are fairly hungry for cheap credit. In Q2 2017 the level of debt held by Canadians exceeded the country’s gross domestic product (for the first time ever). Canadians now owe approximately $1.68 for every dollar of disposable income.
RBC to slash 450 jobs
One of Canada’s Big Five banks will reportedly cut 450 jobs in an effort to refocus the bank’s priorities to better address “client preferences.” Royal Bank of Canada is looking at laying off staff at its head office in Toronto’s financial district. As a part of its restructuring efforts, the bank will be paying more attention to developing digital, data and new technology opportunities, which shouldn’t come as a surprise in light of the bank’s recent interest in fintech. Earlier this year RBC contributed to the $32 million CAD raised by Toronto-based fintech company Wave.
In January 2017, RBC’s CEO mentioned that the bank would like to spend at least 40% of its overall technology budget on “innovation, such as artificial intelligence and blockchain” rather than maintaining old systems. It looks like restructuring is just the first in a series of game-changing decisions which are yet to come for RBC.