- Key insight: BMO's plan to open more branches in California is about what executives call "densification" across the country's most populous state.
- What's at stake: Greater density should lead to higher market share and larger returns, BMO executives told analysts at the bank's investor day.
- Forward look: BMO expects to achieve a 12% return on equity for its U.S. business by the fourth quarter of 2027, according to the bank's U.S. president.
BMO Financial Group presented a detailed case Thursday for opening more than 130 branches in California, saying that its planned expansion in the nation's most populous state will attract more customers and more deposits and deliver higher returns.
BMO's U.S. president, Aron Levine, told analysts that the Canadian bank expects to reel in $50 million to $60 million of retail deposits from each new California branch within three years of its opening. BMO, which currently has about 220 branches in California, plans to have more than 350 locations there within the next five years.
Levine's comments came a week after BMO announced
In both of those Midwestern states, its market share is in the double digits. In California, where BMO is still a relative newcomer in certain cities, its market share is 2%.
"Clearly, density matters," said Levine, a former Bank of America executive
BMO's branch ambitions in the U.S., which also include about 15 new branches in Arizona, are among the various growth drivers the bank identified at its investor day. Executives are betting that BMO's future expansion will allow the bank to capture more business from existing clients, a strategy that other banks have also undertaken in search of higher profits.
Commercial banking is a core component of BMO's plan, as are its wealth and capital markets businesses. The U.S. banking unit, which was brought under one umbrella last year and now includes personal and business banking, commercial banking and wealth management, is also central to the strategy. In 2025, BMO derived about 40% of its total earnings from the states.
The bank's U.S. business got a jolt in 2023 from the acquisition of San Francisco-based Bank of the West. The transaction offered contiguous market expansion for BMO, whose stateside operations prior to that time were largely concentrated in the Midwest. It also offered accelerated growth in commercial banking and a scaled point of entry into the California market.
But the Bank of the West purchase came with some unexpected challenges, including in commercial lending, and BMO didn't capture revenue synergies as quickly as anticipated.
As a result, the bank has been reconfiguring its U.S. business. It
In late 2024, BMO set a goal to achieve a 12% return on equity for the U.S. business within three to five years, part of a larger goal to achieve a 15% return on equity across the entire company.
For the three-month period that ended on Jan. 31, the U.S. return on equity came in at 7.9%. Company-wide, return on equity was 12.1%.
On Thursday, Levine narrowed the timeline for hitting the U.S. goal, saying he's confident that the 12% target will be reached by the fourth quarter of 2027. He pointed to the bank's progress so far and its future plans, such as growing revenue, deepening client relationships and maintaining expense discipline.
During a question-and-answer session, Ebrahim Poonawala, an analyst at Bank of America Securities, wondered about the reasons for BMO's underperformance in the U.S. over the years.
BMO CEO Darryl White said it was hard to compete as a regional bank in the $50 billion to $100 billion-asset range, so BMO focused on making investments, including acquisitions. Then, following the Bank of the West acquisition, the bank "took a hard look" at its position and ultimately decided that BMO needed an "in-country integration" in the U.S., White said.
When he met Levine, he told him the job came down to going from 8% return on equity to 12%.
Prior to that, "we weren't ready for that type of performance," White said. "Today, we bloody well are."
