Bank of Montreal, which is working to close the largest acquisition in its history, is selling C$3.15 billion ($2.31 billion) in equity to make sure it can meet Canadian regulators' recently increased capital requirements.
The bank is issuing C$1.4 billion in shares in a public offering at C$118.60 each, and another 14.8 million shares at the same price to a group of six Canadian pension plans and BNP Paribas, according to a statement Monday.
Bank of Montreal fell to C$119 as of 4:58 p.m. in Toronto, down 5.7% from Friday's close. The equity deal will dilute the bank's earnings per share by about 4%, Bloomberg Intelligence analysts Paul Gulberg and Ethan Kaye said in a note.
Bank of Montreal's capital levels have been under closer scrutiny since Canada's Office of the Superintendent of Financial Institutions last week raised the required common equity tier one ratio for the country's largest banks by 50 basis points, to 11%, as of Feb. 1.
With the bank's $16.3 billion acquisition of Bank of the West from BNP set to close in the first quarter of next year, the lender was at risk of failing to meet that hurdle, prompting it to sell stock to give it some breathing room.
Bank of Montreal said Monday that it will target a CET1 ratio at or above 11.5% in light of the regulator's announcement last week.
