Vancouver city sav-ings Credit Union has sold off what it considers to be non-core parts of its business over the past several months in order to raise capital to invest in two key growth areas: wealth-management products and services, and commercial banking for small and medium-sized businesses.

\u201cOur ability to meet [members\u2019] full financial needs, while paying attention to what\u2019s important to them in terms of family and community, hasn\u2019t kept pace with the market,\u201d says Tamara Vrooman, CEO of Vancity, the largest credit union in Canada outside Quebec. \u201cWe now have an opportunity to grow and change to meet the changing needs of our members.\u201d

Vancity is keeping its specific plans for growth in wealth management and commercial banking under wraps for the time being, but expects to roll out a three-year plan at the beginning of 2010.

\u201cThe key changes will come in our product and business development and in the service development for our representatives in those two [business] areas,\u201d Vrooman says. \u201cAnd you\u2019ll start to see that early next year.\u201d

Vancity\u2019s first major sale came in July, when the credit union sold Vancity Insurance Services Ltd. <\/b>, its home, automobile, travel and business insurance business, to Guelph, Ont.-based insurer Co-operators Group Ltd. <\/b>

Then, in August, Vancity sold the retail mortgage and loan business of its 12-year-old online bank subsidiary, Citizens Bank of Canada<\/b>, to Toronto-Dominion Bank<\/b> and decided to discontinue Citizens Bank\u2019s other retail banking operations, including deposit-taking.

Vancity will keep running Citizens Bank as a commercial-only operation.

STRATEGIC PLANS<\/b>

Finally, in October, Vancity sold Inhance Investment Management Inc. <\/b>, its socially responsible investing mutual fund business, to Toronto-based IA Clarington Investments Inc., <\/b> while, at the same time, entering into a partnership to distribute IA Clarington funds through Vancity branches.

Although Vancity has not released figures from any of the sales of the divested business lines, the credit union now has enough capital to implement its strategic plans, Vrooman says, adding it doesn\u2019t have any immediate plans for further divestitures.

\u201cIt would have taken us from five to 10 years to generate the same amount of capital from normal operations as we did from the sales,\u201d Vrooman says. \u201cNow, we\u2019re back in growth mode, but in a way that\u2019s consistent with our values and with meeting our members\u2019 needs.\u201d

Exiting the non-core businesses should help Vancity achieve its strategic goals, says an analyst who tracks the credit union.

\u201cThe non-core areas took management\u2019s focus away from core areas,\u201d says Robert Long, a financial institutions analyst with Toronto-based credit rating agency DBRS Ltd., <\/b> \u201cand the capital tied up in those businesses can now be put to better use.\u201d

Vancity\u2019s decision to sell the three subsidiaries came as a result of a strategic review of its operations undertaken in 2008 to see whether those lines of business were delivering a benefit to members and whether they generated returns that helped the bottom line. The credit union also looked at the areas in which it felt it was underserving members, and decided it needed to beef up its wealth-management and commercial-banking services.

\u201cThose are the two goals, but always we want to do that with a Vancity flavour,\u201d Vrooman says, \u201csocial finance on the business side and SRI on the investment side.\u201d

In selling the insurance business, Vrooman says, Vancity exited a business line that it felt other firms could do just as well or better.

\u201cHome and auto is a transactional business, largely, and it was ancillary to our core focus,\u201d she says. \u201cFrankly, we had gotten to a point in that business at which we had to invest significantly in it or take another path.\u201d

Co-operators has taken over all the 17 VISL branches, including all staff, in Greater Vancouver and Victoria.

However, Vancity did keep its life and creditor insurance business. \u201cThat business,\u201d Vrooman says, \u201cwill be a key part of our plans to grow wealth management.\u201d

In selling Citizens Bank\u2019s retail mortgage and loan division, Vancity has finally raised the white flag on what had become a losing proposition, Vrooman suggests: \u201cWe were the first online bank in Canada. But very, very quickly, other providers came to dominate that space at a size and scale that we simply couldn\u2019t compete with. We\u2019re large for a credit union, but we\u2019re not as large as ING Direct, or any of the online offerings of the Big Five banks.\u201d

@page_break@BANK NOT PERFORMING<\/b>

Vancity\u2019s sale of Citizens Bank makes best use of the credit union\u2019s capital, says Long: \u201cThe bank had not been performing particularly well recently, and had never been very profitable.\u201d

Citizens Bank had $64 million in Tier 1 capital and $96 million in total capital as of June 30, according to Long in a DBRS report issued in early September. Most of that can now be freed up for Vancity to use on other strategies.

However, Vancity will keep running Citizens Bank, through which it will continue to offer its Visa credit card business, commercial real estate lending and foreign-exchange services for businesses.

\u201cForeign exchange has been very successful for us, and a very important part of the services that we offer to small and medium-sized business members,\u201d Vrooman says. \u201cAs we want to grow that sector, that\u2019ll continue to be a key part of the offering for us.\u201d

Although Jason Farris, who has been CEO of Citizens Bank since 2006, says he was offered an opportunity to keep running the bank, he has decided to leave the bank once the retail operations are wound up \u2014 likely, by January, Vrooman says: \u201cHe came to Citizens Bank with a real passion for the Internet and the retail space, and he\u2019d like to take that passion to some other venture.\u201d

The deal struck with IA Claring-ton will see the Inhance funds merged with new SRI funds from IA Clarington and with two existing funds offered by that firm.

Meanwhile, Inhance fund man-agers will stay with Vancity Investment Management Inc. <\/b> and serve as subadvisors to the new IA Clarington SRI funds. \tIE<\/b>

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