BMO Financial Group on Friday put a new figure on how much it expects to save in operating costs following
The third-largest Canadian bank by assets says it will be on pace for more than $800 million USD in pretax annual cost savings by next November, when its 2025 fiscal year begins, Chief Financial Officer Tayfun Tuzun told analysts during the Toronto-based company's fourth-quarter earnings call.
That's nearly 20% higher than BMO's original estimate of $670 million, Tuzun said. The increase is largely a result of a "reassessment" of technology and operations needs, he said.
BMO thinks it will achieve "almost all" of the run-rate benefits by February 2024, Tuzun added.
And as for how much confidence BMO executives have in actualizing $800 million in savings?
"Virtually 100% on those," Darryl White, chief executive of BMO, said on the call.
"This was a large and complex acquisition, requiring exceptional planning and integration across the BMO and Bank of the West organizations," he said. "Now, we are at the starting line to realize the full benefit of our expanded scale."
BMO's acquisition of Bank of the West, which was based in San Francisco, was one of the largest bank deals to be completed this year. Bank of the West was sold by France's BNP Paribas, which had operated it as a U.S. subsidiary since 1979. When the deal with BMO was announced, Bank of the West had about $105 billion of assets and branches in 24 states.
To help secure U.S. regulatory approval, BMO has agreed to a five-year, $40 billion
BMO has pledged to retain Bank of the West's front-line employees but laid off others. Earlier this year, it
Through October, BMO realized about $220 million in cost savings from the $16.3 billion deal, which was
By folding Bank of the West into the mix, BMO is now operating in 32 U.S. states.
Total integration costs are expected to be about $1.4 billion, which is "largely behind" the company, Tuzun said. That figure is higher than when the deal was first announced, in part because of increased contract-termination costs and larger-than-anticipated closing costs, he said.
For the quarter, which ended Oct. 31, BMO's operating expenses were higher than expected at $4.2 billion ($5.7 billion CAD), analysts said. One reason was a charge related to real estate consolidation and extra expenses tied to BMO's June 1 acquisition of the Air Miles rewards program business, Mike Rizvanovic, an analyst at Keefe, Bruyette & Woods, noted in a research note.
The Canadian banking giant reached a five-year deal with community groups that includes $40 billion in investments to underserved groups. BMO aims to close its acquisition of San Francisco-based Bank of the West before the end of the year.
In addition to the cost synergies tied to the acquisition, BMO has begun a separate initiative to curb expenses that should result in annual savings of $294.4 million ($400 million CAD), Tuzun said.
BMO is currently
In October, media reports suggested that BMO was
"We are not getting out of that business, no matter what the scuttlebutts may say," he said.
