15 April 2008

BMO Sees Buying Opportunities in US

Reuters, Nicole Mordant, 15 April 2008

Bank of Montreal expects the tough economic environment in the United States to create acquisition opportunities for its U.S. operations for at least the next 12 months, executives at Canada's fifth-biggest bank said on Tuesday.

"We believe with the current environment, there will be more opportunities at better prices than in the past and we are monitoring these very closely," said Ellen Costello, chief executive of Harris Bankcorp, BMO's U.S. retail bank.

Costello said several banks in the U.S. Midwest, Harris's key market, were either in trouble because of their exposure to problem areas of the real estate market, or were preoccupied with internal issues.

"All of these things represent opportunities for us that are unprecedented," she said during a half day of presentations to investors and analysts in Toronto.

Asked if BMO and Harris were interested in National City Corp, a troubled Midwest bank that is effectively on the sales block, BMO Chief Executive Bill Downe told Reuters: "We have an active group that is constantly talking to other banks, so when something pops up in the newspaper I am pretty confident that we have done background work...It is a matter of degree."

Downe said there was no rush to make a purchase as the opportunities coming out of this tight credit cycle were likely to be around for at least a year.

The Wall Street Journal reported last week that Bank of Nova Scotia, Canada's third-biggest bank, had jumped into the bidding for National City, a Cleveland, Ohio-based lender that is suffering from mortgage-related losses in the hard-hit Ohio and Michigan real estate markets.

Downe said that with 8,000 banks in the United States, there will certainly be consolidation. The Midwest is also a more fragmented banking market than many other areas.

Harris and BMO have experienced a rise in provisions for credit losses because of exposure to the weakening U.S. housing market, but executives said the hit was much lower than at their competitors.

"Our exposure to U.S. developer and investor-owned real estate is well below the peer group, which should help us as we move through the cycle," said Tom Flynn, BMO's recently appointed group chief risk officer.

BMO is also scouting for small acquisitions in private banking and asset management in the United States, Gilles Ouellette, chief executive of BMO's private client group said.

In Canada, wealth management prospects are hard to find and tend to be expensive, he said.
Financial Post, Duncan Mavin, 15 April 2008

Bank of Montreal's top U.S. executive says banks in the Midwest are cheap right now thanks to the credit crunch and buying them is "a key priority."

"We believe with the current environment there will be more opportunities and at better prices than in the past," said Ellen Costello, chief executive of BMO's Chicago-based Harris Bankcorp Inc. subsidiary.

The banking market in and around Chicago is fragmented and ripe for consolidation, she added.

Harris completed a deal for First National Bank & Trust in Indiana last year and announced the acquisitions of Ozaukee Bank and Merchants and Manufacturers Bancorporation, Inc. in Wisconsin. The BMO unit now has 270 branches in the Midwest, and about 1.2-million customers, compared with 982 BMO branches in Canada, and more than 7-million domestic BMO customers.

Ms. Costello's comments at a BMO investor day in Toronto come after BMO CEO Bill Downe told the Financial Post earlier this month he would be in a position to "take advantage" of the turmoil in the U.S. banking sector in the second half of 2008.

"There is going to be some pressure on mid-sized regional banks [in the United States] and that will create opportunities for consolidation," Mr. Downe said.

The BMO chief is not the only Canadian bank that is eyeing opportunities in the region. Mr. Downe could find one of his Canadian peers has become a big rival in the U.S. Midwest if Bank of Nova Scotia follows through on its interest in Cleveland-based National City Corp. It emerged last week that Scotiabank is one of several banks in negotiations to possibly acquire all or a part of the 1,400 branch bank, which operates throughout the Midwest. (NCC moved into Harris' Chicago heartland when it bought 82-branch MAF Bancorp Inc. in the area last year.)

Analysts say Scotiabank could buy a meaningful stake in NCC for as little as US$1-billion since NCC's stock price has plummeted in recent months on fears about its book of bad loans. Speaking at the BMO investor conference, Mr. Downe refused to be drawn on questions about why BMO was not named among potential bidders for NCC, although he said BMO is focused on "high quality" banks.

If Scotiabank, or a big U.S. bank, buys into NCC, it will be following quickly on the heels of Bank of America, which also muscled in on BMO's Chicagoland turf last year when it bought LaSalle Bank. Harris executives say one benefit to them from that transaction has been that some former employees of LaSalle have moved over to Harris. Ms. Costello said a shakeup in ownership in NCC could have a similar effect, sending "talent" over to Harris.