BMO Financial Group is sticking with its year-end timeline for closing the Bank of the West acquisition — and says the deal should boost its efforts to keep deposit costs down.
The Canadian banking giant is currently awaiting regulatory approval for the merger, which would bolster the U.S. footprint of its Chicago-based subsidiary BMO Harris Bank.
The deal comes as interest rates are climbing sharply, raising the prospect that the industry's
So far, BMO has not needed to be very aggressive in matching its competitors' offers and has been able to keep deposit rates subdued, company executives said on a quarterly earnings call Tuesday.
"We continue to protect our turf," said BMO Chief Financial Officer Tayfun Tuzun, adding that the bank is "not actively pricing up" to attract more deposits, since it still has excess deposits in the United States.
Keeping a lid on deposit costs helped BMO's U.S. segment record an increase in its net interest margin on average earning assets during its most recent fiscal quarter, which ran from May to July. The margin rose to 3.7%, up from 3.49% a year earlier.
BMO expects further improvement in its net interest margin into next year, and the Bank of the West acquisition will give it an even "better NIM profile" since the large amount of core deposits at the San Francisco-based bank requires less repricing, Tuzun said.
"They clearly have a very good core deposit portfolio, and core deposit portfolios tend to actually be very beneficial in terms of maintaining margins, depending upon what part of the rate cycle you're in," Tuzun said.
The total average deposits in BMO's U.S. division fell slightly to $111.8 billion in U.S. dollars, down from $113.9 billion in the prior quarter, but a bit above the year-ago figure of $111.7 billion.
The Canadian company would gain $80 billion in deposits by acquiring Bank of the West, which has $94 billion of assets and a
But the banks still need to get approval for the merger from the Federal Reserve and the Office of the Comptroller of the Currency.
Several groups raised concerns at a public hearing about the Canadian bank’s proposed acquisition of Bank of the West. They accused BMO of shortcomings in its mortgage lending to Black and Latino borrowers and said they won’t support the deal without the bank's firm commitment to help underserved communities.
Last month, the two agencies held a
Asked whether there's a risk of the deal being delayed — which has
"Based on what we see and based on what we are involved in today, we stand by that prediction," White said. "And we'll update you as and if that changes. But as of now, that's our current view."
Excluding the impact of a merger-related earnings hit, the Canadian's bank adjusted net income slipped to CA$2.1 billion ($1.63 billion), down from CA$2.3 billion a year earlier.
