Bank of Montreal is revamping its U.S. digital operation and targeting small businesses in the Midwest to boost growth at its BMO Harris Bank lender.

The new U.S. strategy, which also emphasizes mobile apps to woo more retail customers, is part of the changes being introduced by Erminia "Ernie" Johannson, who relocated to Chicago from Toronto after being appointed group head of U.S. personal and business banking in February.

"Scale is now based on what you can do in digital," Johannson said in an interview at BMO Harris's Chicago headquarters. "In deposit taking, your customer is less correlated now to the branch network you have — the footprint — than it is to the brand you have, the digital capabilities and your ability to attract new customers or marketing."

Erminia Johannson, head of U.S. Personal and Business Banking for BMO Harris Bank.
Erminia Johannson, head of U.S. Personal and Business Banking for BMO Harris Bank. Bloomberg News

The new emphasis is a shift for Bank of Montreal, whose U.S. unit has typically grown faster in commercial lending as personal and small-business banking lagged behind. BMO Harris earned C$658 million ($494 million) in the fiscal first half, accounting for 30 percent of overall profit at the Toronto-based bank. The U.S. unit, which Bank of Montreal acquired in 1984, reported profit of C$1.03 billion in 2017, down 2.3 percent from a year earlier.

Future export


BMO Harris, with 573 branches in eight states, is rebuilding its digital platform to work across mobile devices and personal computers, while better integrating credit cards, investments and other retail products, and adding person-to-person payments. Johannson said the new "made-in-the-U.S." platform will probably be offered starting in October, and later be exported to Bank of Montreal's Canadian operation.

"We have an opportunity to bridge digital and our brand and our network — our footprint — together to do something more impactful for growth," she said. "It's about how do I get more customers in the most cost-effective manner possible, then how do I get full share of wallet."

Johannson said the parent company's strengths set BMO Harris apart in the region. Bank of Montreal, Canada's oldest bank, has C$743.6 billion of assets, placing it among North America's top 10 banks by that measure. BMO Harris Bank had $112 billion of assets as of March 31.

"I'd be pretty frightened if I was this size, by myself, operating in this marketplace," Johannson said. "But I'm not fearful because I also know what I can leverage from the North. That is really important when you've got big players spending billions on technology in this digital space."

Small businesses


Johannson is also pushing growth in banking for small businesses, or firms that generate less than $20 million in annual revenue.

"We're expanding ourselves in what I'd like to say are areas where we can take retail thinking and bring it to business banking," she said, adding that the "underserved" sector can help win a client's retail business and become "a feeder" for commercial banking as companies expand.

Johannson said she plans to disclose more details of the changes when Bank of Montreal holds an investor event on Oct. 24.

"If you look at our projection for the next three years, I see a significant part of our personal and business-banking growth coming from that segment," she said. "We're a commercially known bank, so for us to capitalize on that makes a great deal of sense."

Bloomberg News