William Downe doubled down in the U.S. last year, and on Tuesday he may have upped the ante.
The head of the BMO Financial Group said Canada's fourth-biggest bank would grow loans and consider more acquisitions in the states in 2012.
He directed the message to investors nervous that the Toronto banking company is at risk of losing customers on both sides of the border from the stress of absorbing Marshall & Ilsley Corp. The Milwaukee bank lost money and market share before BMO bought it in July for $4.1 billion.
BMO's fiscal fourth quarter results did little to show investors and analysts in December that BMO had stopped customers from fleeing Wisconsin's onetime deposit leader, prompting Downe to address their concerns during a presentation at a Toronto banking conference. The president and chief executive of the $480 billion-asset BMO used personal anecdotes and a bullish vision to make his case at the event sponsored by RBC Capital Markets.
"I probably had 100 meetings in the course of the year between meeting with [M&I] staff, management, doing business round tables," Downe said. "I'm pretty confident from my own face-to-face exposure that we're holding our key clients through this transition."
BMO is in the process of combining M&I with Harris Bank in Chicago under the name BMO Harris N.A. The U.S. unit has 700 branches and $189 billion of assets in Illinois, Wisconsin and four other states.
RBC Capital Analyst Andre Hardy, who moderated the session with Downe, said it has been hard to tell how M&I has been faring under its new parent.
M&I lost $116 million in the three months ended March 31, the last time it reported quarterly results, on continued problems with Florida and Arizona homebuilding loans. Since the deal closed last summer, there were no comparables for the combined U.S. operations for the three-months ended Oct. 31.
"There's two questions I get a lot — the first is, how can you show us that M&I is not losing customers or people as a result of the integration? Is it an issue or is it not an issue?" he asked.
Downe played up BMO Harris' prospects to become a regional powerhouse. The addition of M&I has boosted BMO's credibility as a business lender in the Midwest — and its profile, he said. It is the only major corporation in Indianapolis to have its name and logo plastered on all four sides of a downtown skyscraper, thanks to some legacy signage rights that belonged to M&I.
BMO Harris should begin making enough business loans throughout the Midwest by yearend to outpace the massive runoff in M&I's commercial real estate book, which could contract by as much as $3 billion over three years.
"This is a market that is really benefiting form the beginning of economic recovery," Downe said. "Our [commercial and industrial] book is growing nicely now."
BMO will also continue to look for new acquisitions in adjacent markets, he said.
It has an "ongoing dialogue" with "complementary properties" in the U.S. even as it focuses on integrating M&I, he said.
"We've been acquisitive for the last two decades. … There will be opportunities to do smaller [acquisitions] in the future — there is no question," he said.
BMO told investors in December that M&I's commercial and industrial loans had contracted in the most recent quarter, citing a seasonal slowdown. BMO also reported $100 million in new nonperforming assets at M&I, which troubled some market watchers because its was unclear whether growth in bad credits was consistent with the $4.7 billion of loan losses BMO has forecast at M&I. The Federal Deposit Insurance Corp.'s latest market share report showed that, at June 30, M&I had lost its status as Wisconsin's deposit leader after ten years to U.S. Bancorp.
In a separate presentation, a Royal Bank of Canada executive touched on the decision last year to sell RBC Bank USA to PNC Financial Services Group Inc.. Gordon Nixon, Royal Bank's chief executive, called the sale a "strategically important" move that would free capital for investing elsewhere. The deal should close early in 2012. Royal Bank of Canada still offers wealth management and capital markets banking in the U.S.