Industry Committee on Oct. 28th, 2024

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Okay.

TD, what's yours?

[Meg McKee]

It's 12.99%.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Okay, nice. That's actually gone down. It was 13.9% when I looked online, so if it's 12.99%, I must have missed something.

I just note that all of you are within a percentage point of each other. When I looked at what your various travel cards are worth, every single one of you was 20.99%. When you look historically, there was a gap between credit card rates and interest rates of 2% in the 1980s. It was only 2%. Do you guys know what that gap is today?

RBC, do you know what it is? Do you know what the gap is today between your high-interest rate cards and what the going interest rate is today?

[Ramesh Siromani]

I don't remember. The prime rate today is 5.95%. I would characterize this, in terms of the benefits that the customers get—

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Just provide the number, please. What's the difference in percentage between the two?

[Ramesh Siromani]

Do you mean 6% and 20%? It's about 14%, which takes into account all the different costs and all the different benefits that we just went through.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

With your 20.99% card, what's the gap between that card and the prime interest rate? Do you know what the number is?

[Ramesh Siromani]

It's based on the type of card and the type of rate. I can't remember. I'm sorry.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

I know. I'm asking you specifically about the 20.99% rate on your travel card, because that's the most popular card that most people would get. That's a pretty common one. Just about everybody has one.

What's the difference in the interest rate on that travel card and what the prime rate is for interest?

[Ramesh Siromani]

I think we would be simplifying the business models greatly by comparing the prime rate and the interest rate charged on a card, because so many factors go into defining that business model. If you mean a simple mathematical calculation, it is 20.99% minus 5.95%, so it's about 15%. That would take into account—

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Okay. There we go.

Thank you. I appreciate that.

The reason I'm saying that is when you compare all of the different cards that everybody offers, it's all the exact same. The differences between each and every single card that's out there is basically nothing. The only difference that is going to come down to a consumer is who they are already doing their day-to-day banking with, and that's generally who people are going to get their cards from. Sometimes people will go to a different institution, but it simplifies making your payments if you're at the same bank.

Really, at the end of the day, I've heard a lot of you talk about the different choices and the great options that are out there, but it's all the exact same. There is no real incentive to choose among all the different cards. The competition is actually quite false. There are five of you here today, but there is no competition. What is preventing one of you from saying your travel card is going to be—pick a number—12%? Is there anybody?

Let's go back to RBC.

[Ramesh Siromani]

As I said earlier, it is a complex business model, and it would be simplifying it too greatly by just taking a particular interest rate and saying, “Why not?” As I said, the benefits to customers are varied. The choice given to them is varied, and the costs associated with those choices are varied. There will have to be differential interest rates and differential costs in the marketplace, which we provide. There's a choice to the customer and the value and the convenience that we provide that fits that choice and its purpose.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

I'm going to pick another one here. I'll pick TD. I want to extend the same question to you.

What is stopping you from offering, let's say, 12% on your travel card, given that all the random perks and benefits that all the different cards have are virtually identical? What is stopping you from saying, “To get more people on our card, we're going to go to 12% instead of 20%”?

[Meg McKee]

As an issuer of credit cards, we're designing products that resonate with Canadian customers and meet their needs and expectations. I would say that it's a highly competitive market in Canada, so it would be expected that offerings would be similar. The benefits and rewards offerings are an example of an opportunity we have to differentiate amongst each other.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Patzer.

Mr. Turnbull, the floor is yours.

[Ryan Turnbull, Liberal, Whitby, ON]

Thanks, Mr. Chair, and thanks to the witnesses.

I note that one of the witnesses earlier, and I can't remember which one, said that it is an expensive business that you run. I'm interested in understanding that extending credit to your customers is certainly a service, but I want to know how profitable it is for each one of you.

Could each one of you remark on what the profit is that your financial institution makes from offering credit card services to your clients?

I'll start with Ms. Douglas from Bank of Montreal.

[Jennifer Douglas]

As you know, we have quarterly results that are public, and BMO doesn't actually report credit card profitability down to that granular level, so—

[Ryan Turnbull, Liberal, Whitby, ON]

Ms. Douglas, I'm not going to let you go on if you don't have an answer, I want to move on because I have limited time. I don't mean to be disrespectful, but I'd like to hear from Ms. Ferri from CIBC.

[Diane Ferri]

Revenue and net income from our credit card businesses are included in total revenue and net income for our personal and business banking business unit. It is not individually disclosed.

[Ryan Turnbull, Liberal, Whitby, ON]

Okay, so no breakdown is provided.

Mr. Siromani, how about RBC? Is it the same answer? If it is, we'll just move on.

[Ramesh Siromani]

Yes, it is the same answer.

[Ryan Turnbull, Liberal, Whitby, ON]

Mr. McDonald?

[D'Arcy McDonald]

Yes, it is the same answer.

[Ryan Turnbull, Liberal, Whitby, ON]

Ms. McKee?

[Meg McKee]

Yes, it's the same answer.