Bank of Montreal CEO Bill DowneMATHIEU BELANGER
Bank of Montreal is open to more expansion once the lender's landmark acquisition of Wisconsin's Marshall & Ilsley Corp. is complete, chief executive officer Bill Downe says.
Mr. Downe predicted that because of the $4.1-billion (U.S.) M&I purchase, BMO could be earning $1-billion from its U.S. operations in the "medium term," which he said is generally defined as three to five years - more than quintuple what it brings in now from the U.S.
BMO agreed to buy M&I in December, and if the integration goes smoothly and the window for purchases of banks at good prices remains open, the bank would consider doing more deals.
"It [M&I]is a very significant transaction and we want to digest it properly and make sure that it's running extremely well, so I don't want to create expectations that there's another transaction pending," Mr. Downe said in an interview on Tuesday after the bank's annual general meeting. "But the speed with which we're able to complete integration will create value and the faster we do it, the sooner we would have an opportunity to look at other alternatives."
BMO as aggressive acquirer is a new persona for the bank. Prior to the M&I deal, BMO for years had appeared content with being a smallish Canadian bank engaged in trench warfare for domestic market share, with an even smaller U.S. bank tacked on.
M&I changed that in one day. If Mr. Downe can reach the $1-billion goal, BMO will be almost as big in the U.S. as it is in Canada. Mr. Downe said the target is based on the fact that BMO generates about $1.6-billion (Canadian) in profit now from Canada, where it has 900 branches, so with about 700 U.S. branches in the fold the bank should be able to generate $1-billion there.
BMO had been trying to do a deal for years, but finding prices high, Mr. Downe said. The financial crisis changed that, and M&I came available at an attractive level.
"It's opportunity, but also what you've seen in the last five years is a tremendous emergence in pride of the employees," he said. "It is a very different company."
Canadian companies need to take advantage of their strong home market as a base for growth, he said.
"We are a unique nation. We have a very strong, stable fiscal environment, a very strong monetary environment, a high level of secondary and post-secondary education, technology infrastructure, everything to compete in the world. Pushing beyond our home market is a natural thing for companies that want to grow."
However, BMO doesn't foresee pushing beyond North America when it comes to retail banking.
"The model is to integrate North America. I think we can be more competitive in both the U.S. and Canada," Mr. Downe said.