At least a quarter of Bank of Montreal’s profit and roughly 30% of its revenue come from the United States, but as far as Darryl White is concerned, that’s not enough.

The new CEO of BMO Financial Group is counting on its U.S. operations to boost profitability and even outpace the growth in its home territory of Canada.

White plans to accomplish that largely by building upon what the $565 billion-asset BMO already has here. The Canadian bank has 2 million customers and more than 500 branches in the U.S., as well as the No. 2 deposit market share in Chicago and in Wisconsin. To White, what that means is an opportunity to capture more market share.

“I’m personally quite excited about the opportunity we have in the U.S. for our momentum and also against the backdrop of what I think is a really constructive marketplace,” he said in recent interview with American Banker.

Breakdown of Bank of Montreal revenue by U.S. and Canada

Among the reasons for his optimism: BMO is nearing the end of some problem loans on the retail side of the house, while investments in its commercial banking and capital markets lines are expected to bear fruit in what many are expecting to be a friendlier U.S. economic climate thanks to cuts in taxes and red tape.

The company has also streamlined its mortgage lending operations and is expecting jumbo mortgages will help lift retail lending.

Last year BMO began to see hints of U.S. profit growth after several quarters of disappointing results. It hopes to show further signs of progress in its first-quarter results due out on Feb. 27.

Yet White — who succeeded longtime CEO Bill Downe on Nov. 1 — will have to overcome stiffening competition from U.S. banks, especially on the commercial lending sign, where early signs are that 2018 could be another slow-growth year for commercial lending despite many upbeat economic signs.

Recently, White talked to American Banker about BMO’s investments in its retail, commercial and capital markets businesses and why he thinks its U.S. business could outpace its Canadian business. This transcript has been edited for clarity and length.

How do you expect to see your U.S. business grow compared with your Canadian business? Can you share any targets you may have set?

DARRYL WHITE: In Canada, we will have our businesses grow at or above market, and that’s a broad statement because I might have something different to say business by business by business. In the Canadian mortgage market, it straddles 5%. In other businesses where market growth might be very slow or might be very volatile, it might be as low as 2%, and in other businesses it might be as high as 10%. We have a high market share in a slow-growing market in Canada, and that’s our expectation in Canada.

In the U.S., we expect a growth rate that significantly exceeds Canada, so we expect to continue to take share, and we expect it to be the highest growth rate in the bank. We haven’t, though, set particular targets publicly as to what those are, but we have great confidence and a very significant bet on our growth agenda in the United States.

You indicated recently that you expect BMO’s U.S. business to turn the corner on retail lending. What are some of the business lines or customer demographics where you think you’ll have an edge?

If you take a close look, what you’ll see is our deposit balances have been fantastic over time and our loan balances have been contracting slightly over the last two to three years, and there are a number of reasons for that. We had some workout loans from the [Marshall & Ilsley] acquisition that we’re almost at the end of; we have some balloons that we’re almost at the end of with respect to the home equity line of credit portfolio.

In the meantime, in parallel, we’ve completely redesigned our mortgage lending process from end to end, and we have an environment that has become very constructive.

So I’d put all those things together, and it gives me the confidence to say that this is our moment and this is the time where we see ourselves turning the corner on the retail lending business. I can’t be so specific as to say whether that’s this quarter or the next one or the next one, but it sure feels like we’re at the point where those balances will grow.

In what products? The answer is consumer lending generally. And likely the majority of that is mortgages first and in particular in the jumbo mortgage category in the Midwest.

What kind of improvements did you make to the mortgage lending process?

In our U.S. mortgage business, we redefined our sales model, streamlined processes and optimized our pricing to ensure that we are market competitive. As part of streamlining processes, we put in place a new loan origination system in 2016 to accelerate mortgage originations and improve customer turnaround times.

Darryl White, CEO of Bank of Montreal
Counting on consumers
"This is our moment and this is the time where we see ourselves turning the corner on the retail lending business," says Darryl White, the CEO of Bank of Montreal.

We removed a number of underwriting overlays to reflect more risk appetite, we introduced a best-in-class physician loan product, and we accelerated our focus on growing the jumbo portfolio by being a market leader in jumbo pricing.

What kinds of investments have you made in your commercial business, and how do you expect those to accelerate your growth in the U.S.?

What we’ve been doing recently is expanding [our] footprint. You can open an office of commercial bankers, take advantage of the infrastructure that you have and the sales focus that you have and then move reasonably aggressively into certain markets. Across the U.S. we’ve been opening offices that have really been a plug and play to our model.

We’ve really been able to accelerate that business over time, and it’s completely linked to our Canadian business, so there’s a seamless offering across the border. When we look at our commercial business and our capital markets together, 40% of our customers are active across the border, so we’ve made investments there to make sure that we can service them wherever they are.

Ten or 15 years ago, [BMO’s capital markets business] was a very small offering. Today we have over 1,000 professionals distributed between Chicago, New York, Boston, as well as in Houston and San Francisco, and it’s completely integrated between those points of sale, as well as with the Canadian business, and we have a really consistent focus. Along the way we’ve made small tuck-in acquisitions in the investment category.

Two years ago we bought a boutique M&A advisory business called Green Holcomb Fisher. And as we added that to the platform, it actually became a wonderful bridge between the commercial business and the capital markets business.

Are you planning any big moves for BMO’s U.S. commercial business this year? New markets or product lines, for instance?

Our commercial business now has offices in Atlanta, Columbus, Ohio, Dallas, Irving, Texas, Phoenix, Rancho Cordova, Calif., Seattle, the list goes on. You might see us continue that pattern of having commercial banking offices in places that we don’t already, and you will probably see us in places where we don’t yet have a full offering of products and services. There you could think about asset-based lending, commercial lending, dealership finance, financial institutions, and different sectors like food, consumer, agriculture, sponsor finance, etc. You’ll see us round out the product offering in the places where we don’t yet quite have it fully rounded.

What you’re not likely to see us do, at least in the near term, is take a big leap out into markets or products or segments where we’re really not very active right now. We see so much market share that’s available in the places we’ve chosen to compete and slowly but surely we’re taking share year after year in those businesses. I think what you’ll see is more of the same in terms of investments in our people and good client relationships.

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