Wednesday, May 09, 2007

Citigroup Analyst Speculates on BMO's Intent for Harris Bank

Financial Post, David Pett, 9 May 2007

Merger mania is gripping the banking industry in Chicago's metropolitan statistical area, forcing Bank of Montreal's hand regarding Harris Bank, according to Citigroup analyst Shannon Cowherd.

"It may be difficult to maintain its #3 rank with just below 10% market share without jumping in the fray," she said in a note to clients. "[We] believe BMO will succumb to pressure to either take out a local competitor or divest Harris.

The banking landscape in the U.S. Midwest has changed dramatically in the last few weeks following the announcements that Bank of America wants to buy LaSalle Bank and National City has agreed to purchase MAF Bancorp.

LaSalle is currently the #2 bank in the area, controlling 14% of the market, while the National City acquisition would make it #4.

Ms. Cowherd added that if BMO were to sell Harris – an attractive option in her view – at the high end of the market or approximately US$9.9-billion, the bank could allocate the proceeds via a US$20 per share special dividend.

Or,conversely, she said BMO could use it to fund another acquisition.

She reiterated her "buy" recommendation and $85 price target.