Monday, April 02, 2007

UBS Maintains 'Neutral' & $74 Target on BMO

Financial Post, Duncan Mavin, 2 April 2007

A new management team at Bank of Montreal is taking steps to deal with "self-inflicted" problems by focusing on customer service, says UBS Investment Research analyst Jason Bilodeau.

BMO, which has struggled to keep pace with its domestic peer group and recently announced 1,000 job cuts, has a new chief executive — Bill Downe — as well as new leadership in both Canadian and U.S.retail banking.

Mr. Bilodeau says the new team "understands its challenges" and is acting to put things right.

The bank's plans include upgrading the BMO branch network; a drive to grow credit card market share; and a more competitive personal lending offering.

Most importantly, BMO aims to get its personal mortgage business on a better footing. The bank's former regime were widely blamed for lowering industry-wide mortgage rates in an unsuccessful attempt to grow market share. But the new management is pricing BMO's mortgages in line with other leading lenders, while adding to the number of mortgage specialists in BMO branches, says Mr. Bilodeau.

In the U.S., BMO's Harrisbank susbsidiary still faces intense competition but could also benefit from a significant growth opportunity, Mr. Bilodeau says.

If a European mega-deal involving ABN AMRO and Barclays Bank goes through, then ABN AMRO's ownership of mid-West based LaSalle bank could be on the line, with BMO as a possible suitor, says Mr. Bilodeau.

UBS maintains a neutral rating on BMO shares and left his price target of $74 unchanged.
Bloomberg, Doug Alexander, 2 April 2007

Bank of Montreal, Canada's fourth- largest bank, may offer to buy the Chicago branches of LaSalle Bank if they become available following a possible merger of two European banks, said Jason Bilodeau, an analyst at UBS Securities Canada.

``Management indicated that it would be interested in the Chicago-based assets of LaSalle, which it knows well,'' Bilodeau said today in a research note, after meeting with bank executives including Chief Financial Officer Karen Maidment.

Bank of Montreal wants to expand its Chicago-based Harris Bank by opening branches and buying assets. ABN Amro Holding NV's LaSalle Bank could provide an opportunity if it's sold, Bilodeau said. ABN Amro, the biggest Dutch bank, is in talks to be bought by Barclays Plc, a move that may result in the sale of some U.S. assets.

UBS says ``several banks'' would be interested in LaSalle Bank, most likely Citigroup Inc., Bank of America Corp., Fifth Third Bancorp and National City Corp. LaSalle is the largest Chicago-based bank with more than 135 branches in Chicago and its suburbs, according to its Web site.

Bank of Montreal probably wouldn't want to buy all of LaSalle Bank, which has about 265 branches in Michigan and Indiana, and operations in about 18 other states. LaSalle Bank has about $124 billion in assets, compared with C$355 billion ($307 billion) for Bank of Montreal.

``Management was clear in expressing their interest in the Chicago-based retail business, which would be an attractive asset to combine with Harris,'' Bilodeau said.

Such an acquisition could be worth about $10 billion to $12 billion, and a partnership ``could be workable,'' Bilodeau said. That would make it the largest purchase by the bank in at least 23 years, according to Bank of Montreal's Web site.

``Management remains committed to growth via aquisitions in the U.S. and continues to target assets up to C$2 billion in size,'' wrote Bilodeau, who didn't return a call today seeking comment. ``We believe they would be willing to consider larger deals under the right circumstances.''

Bank of Montreal spokesman Ralph Marranca didn't return a call.