With a new name, a new legal structure and a much larger portfolio of loans, deposits and investment accounts, Toronto-based B2B Bank looks like a very different company than it did just one year ago.

Since last September, the subsidiary of Montreal-based Laurentian Bank of Canada has acquired two of its main competitors – MRS Trust Co. and AGF Trust; has converted into a federally chartered bank, resulting in a name change to B2B Bank from B2B Trust; and has launched its own line of mortgage products.

B2B provides banking products such as guaranteed investment certificates, investment loans and term deposits exclusively through the financial advisory distribution channel, and offers investment account administration services.

The company is substantially larger than it was a year ago. Its loan portfolio has increased to $10 billion from $6 billion, its deposits have climbed to $14 billion from $9 billion and its portfolio of investment accounts has grown to 320,000 from 40,000. In addition, the number of financial advisors who have active accounts with B2B has jumped to 27,000 from 19,000, and the company’s staff has grown to almost 1,000 employees from 400.

Says François Desjardins, president and CEO of B2B Bank: “In these more uncertain times, companies that are in growth mode are rarer than the contrary.”

B2B is benefiting from having developed a specialized niche in which few financial services institutions are heavily focused. Other firms that distribute banking products through the financial advisory channel tend to do so as a supplement to their primary distribution network; recently, some have abandoned the channel altogether in order to focus fully on their core network.

“When it’s slower, in terms of the economic cycle,” says Desjardins, “companies have a tendency to go back to their core. For most financial institutions in Canada, the core is their own sales forces.” For B2B, he adds, this has meant attractive acquisition opportunities – including the MRS and AGF deals – and, simultaneously, less direct competition.

B2B’s acquisition of MRS from Toronto-based Mackenzie Financial Corp. was finalized in November. The deal included both MRS Trust Co., which provides deposit and lending products, and MRS Inc., which offers account administration services.

A great match

The biggest component of the transaction was the account administration portfolio, which included roughly 280,000 investment accounts through 135 dealer firms and 14,000 advisors. This line of business is one B2B hadn’t previously invested in heavily, as the firm had focused primarily on loans and deposits. So, Desjardins says, the acquisition presented an opportunity to beef up this side of B2B’s business.

“We thought it was a great match,” he says.

B2B completed its purchase of AGF Trust from Toronto-based AGF Management Ltd. in August. AGF Trust, like its new parent, provides banking products through advisors and mortgage brokers.

The deal adds scale to B2B, including about $3 billion in loan assets and $3 billion in deposits, and will provide cost-saving opportunities.

“We can get some synergies out of the purchase,” says Desjardins. “[There are] redundancies, in terms of processes and systems. And we can get a better cost structure for running the business.”

Such synergies will take time to realize, however. AGF Trust will operate as a stand-alone subsidiary for the next several months to minimize any disruption to advisors and their clients, Desjardins says. He plans to have the two companies’ operations fully merged by the end of 2013.

B2B’s acquisitions have raised some concerns among its peers that B2B is expanding too rapidly. A report by Toronto-based rating agency DBRS Ltd., for instance, states that although both acquisitions are consistent with B2B’s strategy to build scale and distribution, the integration process could be challenging: “Given that [AGF Trust] is the second acquisition made by Laurentian Bank in the B2B space within the last six months, DBRS is somewhat concerned with the pace of integration.”

However, says Darko Mihelic, financial services analyst with Cormark Securities Inc. in Toronto, these concerns are overplayed. He believes that AGF Trust, in particular, is a great fit for B2B.

“I think it’s exactly what Laurentian needed – growth outside of Quebec,” Mihelic says. “And this is not something that I think is difficult to integrate.”

When combined with B2B’s existing offerings, he adds, the two acquisitions bring together a well-rounded selection of offerings catering to the advisor community.

Although B2B already has gained substantial scale through these acquisitions, Desjardins is now focused on organic growth, – getting more advisors on board and tapping into cross-selling opportunities.

Banking products traditionally haven’t been among financial advisors’ core offerings, but, Desjardins says, the shift toward comprehensive financial planning has generated interest within the advisor community for products such as investment loans and high-interest savings accounts.

“Advisors and brokers are coming to grips with the fact that times are changing,” Desjardins says, “and relying on their expertise in financial planning might not be their only key to success with their customers. Since it’s harder and harder to make a buck and to [achieve] good returns in these slower economic times, it’s helpful [for advisors] to help Canadians with the other side of their finances.”

As more advisors embrace banking products, B2B decided to pursue changing its status to being a bank in order to reflect the growth the company has experienced on banking side of its business. Although investment account administration services had been the primary area of focus for the former trust company when it was launched in 2000, Desjardins says, most of B2B’s recent growth has come from its deposits and loan offerings.

“Our legal framework didn’t match what we actually did for a living,” Desjardins says, “[which] was much more in line with what a bank does than what a trust company does. So, we decided to change that [legal status].”

The company announced in July that it was converting into a Schedule 1, federally chartered bank. However, this won’t result in many major changes for B2B. The most important difference is the rebranding of the company as a bank, says Desjardins: “The perception of what we do is much clearer to advisors, brokers and, ultimately, the end-customer.”

In addition, the bank structure has allowed B2B to launch its own line of mortgages – a product line in which Desjardins sees strong growth potential: “For most Canadians who have a home, it is mortgaged. And most Canadians bank where their mortgage is. So, we think it is a growth space.”

B2B’s new mortgages are available only through the mortgage broker channel. However, the firm plans to launch a mortgage referral program for advisors by the end of 2013. IE

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