Bank of Montreal Plans To Step Up U.S. Growth
NEW YORK - Eyeing the rapid consolidation in the U.S. banking industry, the Bank of Montreal is planning to accelerate the pace of its acquisitions in the United States.
B. Kenneth West, chairman and chief executive of the Canadian bank's U.S. unit, Harris Bankcorp, told the Globe and Mail, Toronto, this week that it plans to triple U.S. banking assets to between $35 billion and $40 billion through sizable acquisitions.
Over the past few years, Harris has been steadily acquiring community banks with assets between $150 million and $500 million in the Chicago area as part of a plan launched by Bank of Montreal chairman Matthew W. Barrett to boost U.S. revenues to 50% of Bank of Montreal's total.
Strategy Being Formulated
It now appears the Canadian institution wants to ride the U.S. merger wave with bigger acquisitions. The Toronto newspaper reported that senior Harris officials are completing a strategic plan for faster expansion in the U.S. that will be submitted to the parent company for approval by the end of this month.
Chicago-based Harris Bankcorp, the parent of Harris Trust and Savings Bank, had about $12.5 billion in assets at the end of 1990. Bank of Montreal, the third-largest institution in Canada, had $72 billion. It acquired Harris in 1984.
Mr. West was not available for comment on Wednesday, but a Bank of Montreal spokesman confirmed the newspaper account.
|Speeding Things Up'
"It doesn't constitute a radical change from existing strategy but it does mean speeding things up," the spokesman said. He declined to comment further on what the review might entail.
According to Harris vice chairman Philip A. Delaney, Harris would be unable to achieve Bank of Montreal's long-term goal of raising U.S. earnings to half its total unless Bank of Montreal revised its current strategy.
"It's a strategic decision that the Bank of Montreal has to take," Mr. Delaney said.
"To achieve their goal, they have to follow a different strategy. I don't think they can do it by buying $150 million banks."
Interstate Deals Possible
Mr. Delaney did not preclude the possibility that Chicago-based Harris may pursue its acquisition program by buying banks in neighboring states.
The U.S. unit accounted for about 20% of Bank of Montreal's net profits of $132 million for the quarter ended July 31. The bank spokesman said total earnings, including those from Bank of Montreal branches in the United States, accounted for "close to 30%" of all earnings.
Analysts said that Harris is coming under increasing pressure as consolidation quickens in Illinois in advance of interstate banking at the end of this year.
But banking analysts said the Bank of Montreal cannot continue its current strategy if it wants to acquire bigger institutions.
They added that Harris will likely have to issue stock if it hopes to finance the purchase of bigger banks.
"Prices are high at around 2.5 times book and they don't have any currency to pay with," said Hugh Brown, a banking analyst with Burns Fry Ltd. in Toronto.
"They'll have to give high-priced stock, and one of the alternatives is taking Harris public."
PHOTO : Philip A. Delaney Harris vice chairman