Bank of Montreal Weighs Listing on the Big Board
Bank of Montreal is mulling whether to list its shares on the New York Stock Exchange as a first step toward acquiring a large bank in the Midwest, the Canadian bank's chairman said.
Matthew W. Barrett, Bank of Montreal's chairman and chief executive, told the New York Society of Security Analysts last Thursday that the bank plans to decide about a listing before yearend.
A Big Board listing would clear the major obstacle to expansion by a Canadian bank in the United States, possibly kicking off a new wave of cross-border acquisitions.
Two likely candidates to follow suit are Royal Bank of Canada and Canadian Imperial Bank of Commerce. Chairmen of both banks have repeatedly stated that they hope to carry out large expansions in the United States.
A listing by the Bank of Montreal is tied to an expansion strategy that calls for boosting U.S. earnings to 50% of the total from 30% currently.
Although Mr. Barrett expects to generate half of the growth internally, he said his bank "will almost certainly need to make a significant acquisition in the United States over the next few years."
"We're not looking for bargains, and we're not looking for failed thrifts," Mr. Barrett said. "What we want is a large, well-run organization in the Midwest."
A spokesman declined to name any banks that might fall within Bank of Montreal's parameters, but conceded that midwestern banks with assets in the $10 billion to $15 billion range are the likeliest targets.
Eye on Big Investors
In addition to expediting expansion, a U.S. listing could boost demand for stock by permitting institutional investors, such as pension funds, to invest. Many of these institutions now are barred from investing more than a small portion of assets in foreign companies.
Any stock price increase would make stock-swap acquisitions cheaper.
Like other big Canadian institutions, Bank of Montreal has been keen to acquire a U.S. franchise but unwilling to meet more stringent U.S. disclosure requirements.
Mr. Barrett said that the July 1 agreement between U.S. and Canadian securities regulators to accept each other's listing requirements had "removed the main obstacles" to a U.S. listing.
David L. Robertson, senior vice president and general manager for Royal Bank of Canada in New York, said his bank is conducting a similar review, but added that "no decision has been taken to date."
Parent of Harris Bankcorp
Bank of Montreal, Canada's third-largest bank, with $84 billion in assets, already owns the $12.5 billion-asset Harris Bankcorp in Chicago. It also owns 14 local U.S. banks.
Analysts noted that even if Bank of Montreal obtains a U.S. listing, it may have to satisfy U.S. regulators' concerns about its Community Reinvestment Act record.
Harris needs to improve a low Community Reinvestment Act rating U.S. regulators assigned last month that bars the bank, and its parent company, from making any new acquisitions.
Mr. Barrett stressed that bank is giving "top priority" to improving its CRA rating and expects to pass another audit "with flying colors" early next year.