SEATTLE - Bank of Montreal will continue to expand in the United States by opening new branches rather than making acquisitions, according to chairman and chief executive Matthew W. Barrett.

"We have a good presence through Harris (Bankcorp), $30 billion in U.S. assets, and are building critical mass in the Chicago area," Mr. Barrett said in an interview at the International Monetary Conference, a three-day gathering here of the world's 200 top financial leaders.

The Canadian banker did not rule out "opportunistic" purchases of smaller community banks by Harris, Bank of Montreal's main U.S. operating unit. But he emphasized that his reluctance to embark on a major acquisition drive had to do with the high price of most targets.

You need to create value, not just buy it," Mr. Barrett said. "There's always a trade-off between how much value you get by buying and how much you get by creating."

Bank of Montreal and Amsterdam-based ABN Amro Holding have both built up large retail and middle-market operations in the Chicago area, mainly by buying local banks and consolidating them into larger franchises. More recently, in February, the National Bank of Australia also entered the Midwest - by acquiring Michigan National Corp.

Bank of Montreal, which also has large wholesale corporate banking activities in the United States, hopes to have at least one million U.S. retail customers by the year 2002, compared with 400,000 today. The bank would also like to increase earnings from the United States to 50% of its total profits from around 30% currently.

Mr. Barrett emphasized, however, that one of his main concerns is, "I don't want to spread our resources too thin."

He added that this same caution extended to developing Bank of Montreal's operations in Mexico, where the bank has opted to continue with only a representative office rather than obtaining a Mexican banking license under the North American Free Trade Agreement.

"We don't intend to become involved in indigenous banking in Mexico," Mr. Barrett said.

He add that harmonization of banking supervision and regulations in North America is becoming increasingly necessary, both as a consequence of the free trade agreement and ongoing deregulation of interstate and investment banking in the United States.

If Canadian banks obtain full-fledged interstate branching and investment banking powers in the United States, he suggested, Canada would likely move to ease its own restrictions which now require U.S. banks to operate locally via separately capitalized and chartered subsidiaries.

Mr. Barrett said he does not intend to pursue a strategy similar to the one adopted by Canadian Imperial Bank of Commerce, which has been downplaying its commercial banking and lending activities in favor of building a capital markets-oriented institution with a heavy emphasis on underwriting, trading, debt distribution, and derivatives-related activities.

"It's not our stated objective to be one of the top 10 derivatives players in the world," Mr. Barrett said. "We're not averse to capital markets, but we do have a conservative risk management culture and we do not intend to engage in proprietary derivatives trading."

He added that Bank of Montreal would continue to build its investment banking operations in the United States through Harris' section 20 unit. He added that the acquisitions of two Canadian brokers, Burns Fry and Nesbitt, give Bank of Montreal substantial clout in investment banking, enabling the bank to "defend itself from incursions by bulge bracket firms."

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