It was called Unity Bank of Canada because it proposed to capitalize on Canada’s disunity—the ethnic minorities allegedly neglected by the WASP-dominated chartered banks. Bay Street didn’t believe it,
and the initial Unity Bank underwriting in 1972 proved extraordinarily difficult. And then it appeared that Unity didn’t believe it either, because after management changes it began to review its loan portfolio on a purely commercial basis. But the arrest of Toronto developer James H. Black on charges of fraud in January raised further fears about Unity’s loans. Black is believed to owe Unity some seven million dollars, such a sizable sum when set against the bank’s $21 million capital base that at least one critic speculated that Ottawa’s Inspector General of Banks should have acted. Depositors are not threatened at all by the bank’s problems. The Canada Deposit Insurance Corporation will protect those under $20,000, and it is “unthinkable,” according to industry sources, that the other chartered banks would not assume Unity’s obligations in the event of catastrophe,thereby preserving confidence in the system.
No one seems willing to bet that Unity will survive as an independent entity. With $180 million assets, it is the tenth biggest Canadian bank, with more than 20 branches (some are being closed) exposing it to the fiercely competitive retail bank market. Unity lost money in each of the last three years, finishing with more than $3.5 million in the red last year. It has never paid a dividend. Paradoxically, with some adventurous investors interested in the stock, currently at $2.75 after starting its career at more than nine dollars, the bank may recover. If not, as Kersi Doodha,
analyst at Bache, Halsey, Stuart Canada Ltd., points out, the terms of any ultimate take-over will probably be satisfactory.
Life is hard for any new bank in Canada; Unity, however, made its task even harsher by choosing to compete for smaller customers in a country that has more retail branches per head than almost any other in the industrial world. (Like airlines, the chartered banks prefer to compete on frills rather than price.) Other new banks, such as Mercantile or Canadian Commercial and Industrial Bank in Alberta, prefer to concentrate on corporate business, where skill can beat scale.
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