03 December 2006

Incoming BMO CEO Faces Challenges in 2007

Canadian Press, David Friend, 3 December 2006

As analysts forecast a tough fiscal year ahead for the banking sector, William Downe is preparing to become chief executive of Bank of Montreal next March, replacing Tony Comper.

After nearly 24 years working at Canada's oldest-largest bank, Downe's challenge is to regain retail banking clients that have been lost to other major players.

In an internal address to employees last week, Downe said the company needs to begin working immediately on building relationships with customers that will turn out "tangible business results."

His comments come as BMO's future direction seems uncertain.

The bank has been actively exploring expansion in the United States, helped by its strong presence in the Midwest through its Harris subsidiary, which it acquired in the mid-'80s.

But the waning popularity of BMO among clients in Canada has some analysts suggesting that it should find its domestic footing before venturing further into foreign territory.

"You have to be strong in your home country before you branch out. Water coming in the top of the glass and leaking out the bottom doesn't get you anywhere," said Ian Nakamoto, director of research at MacDougall, MacDougall and MacTier Inc.

Before taking on his role as chief operating officer at BMO Financial Group, parent of Bank of Montreal, Downe was one of the BMO's most prominent executives south of the border.

Today he keeps homes in both Toronto, where the parent has its headquarters, and in Chicago, where Harris has its head office.

"In terms of markets where we may be expanding, he knows that very well," said one colleague at BMO that asked to remain anonymous.

"What he has done is get the pieces in place so that now you can bolt onto Harris to integrate new banks very easily. I think you'll see the benefits of an acquisition more quickly."

Caldwell Securities portfolio manager John Kinsey said BMO has seen more success stateside than any other Canadian bank, but that lately they haven't made any major acquisitions.

"They've got about $3.6 billion in extra cash, and they could do something with that if they so desired," he said. "I feel like they've been on hold for eight years. They're dressed up to go to a wedding and the wedding isn't happening."

In September the bank agreed to a reasonably small US$290 million purchase of First National Bank & Trust in Indianapolis.

That buy was dwarfed by a November bid from TD Bank to acquire the rest of its majority-owned TD Banknorth Inc. of Portland, Me., for $3.6-billion.

Analysts certainly aren't popping the corks to celebrate the outlook for the next fiscal year either. In Canada, the market is expected to slow after five years of strength. In the United States, the economy is slowing and the housing market is expected to continue declines.