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Bill Downe pledges that the new BMO Harris, which combined Harris Bank and recently acquired M&I, will be a regional powerhouse despite M&I's loss of market share and other problems.
January 10
Bank of Montreal (BMO)'s takeover of Wisconsin lender Marshall & Ilsley is a "game changer" that allows Canada's fourth-largest lender to expand in the U.S. Midwest with further takeovers, according to Chief Executive Officer William Downe.
The Toronto-based bank will pursue more acquisitions after it finishes integrating the C$4.1 billion ($4.13 billion) purchase of M&I by the end of the year, Downe said today in an interview after the bank's annual meeting in Halifax, Nova Scotia.
Bank of Montreal expanded its U.S. banking business in July by buying M&I in its biggest acquisition, adding to its BMO Harris Bank platform in Chicago. The takeover doubled the number of U.S. branches and deposits for the Canadian lender, giving Bank of Montreal more branches in Chicago than Toronto and opportunity for further growth within the U.S. Midwest.
"The in-fill opportunities are very significant," Downe, 59, said. "Now, the territory allows us to make acquisitions within the footprint. That's a game changer."
Bank of Montreal has a No. 1 market position in Wisconsin, and a No. 2 deposit share in Chicago and the third-largest market share overall in the Midwest states it operates in, Downe said earlier at the investors meeting. Further growth will come from the same regions, Downe said.
The integration of M&I, which will "largely be done" by the end of the year, "really clears the way" for further acquisitions, Downe said. "We haven't and won't do anything until the integration is complete," Downe said.
Third of Profit
Bank of Montreal had about 33 percent of its profit, or C$362 million, from the U.S. in the first quarter, according to company filings. Of that, C$137 million came from U.S. consumer lending. The bank set a goal last year of getting annual profit of C$1 billion from the U.S. in the "medium term." Downe said today the goal is "within reach."
Bank of Montreal is also considering more opportunities to expand its private-client business, which accounted for about 18 percent of profit in the fiscal year ended Oct. 31. "If you look at our track record for acquisitions, wealth management has actually been a major part," Downe said. "The capability that we've built up in wealth management in London and Hong Kong is going to drive a more international business in wealth management for BMO, and the Middle East as well."
In February, Bank of Montreal agreed to buy a 20 percent stake in COFCO Trust Co., a Chinese firm with assets of $5.7 billion, to expand in wealth management in the Asian nation.
Bank of Montreal is considering such areas for growth amid an expected slowdown in Canadian banking.
"Retail banking is going to be influenced by a plateauing in the Canadian housing market," Downe said. "There, the growth is going to come from taking market share."
Within Canada, Downe said, the bank is focusing on commercial banking to gain business.
"The areas where the biggest opportunities for us rest are in commercial banking, and particularly in the operating services, cash management and commercial deposit area," Downe said.
