Bank mergers and acquisitions are difficult to see through to completion, especially in this regulatory environment. Two executives behind the BMO-Bank of the West transaction, which recently closed, speak with American Banker Editor-in-Chief Chana Schoenberger to tell the story of the deal and what BMO's plans are now. Ernie Johannson is Group Head, North American Personal & Business Banking, at BMO; Nandita Bakhshi was CEO of Bank of the West until the transaction closed and is now Special Advisor to BMO's CEO. Both are past honorees of the Most Powerful Women in Banking.
Transcript:
Chana Schoenberger:
Thanks for joining us. I'm Chana Schoenberger, I'm the editor in chief of American Banker and I have with me here today Ernie Johannson, who is the group head for Personal and Business Banking at BMO, and Nandita Bakhshi, who is the special advisor and a board member at BMO. She's also the former CEO of Bank of the West. Thanks very much for coming.
Ernie Johannson:
Thanks for having us.
Nandita Bakhshi:
Thank you for having us.
Chana Schoenberger:
So you two have done something that's pretty unusual, which is you closed a bank deal. That's amazing. Really rare these days. Starting at the beginning, do you want to tell us first of all why Bank of the West was an acquisition target for BMO?
Ernie Johannson:
I can start that one off and thanks. Thanks again Chana, for the opportunity. It's, it's wonderful to be on a panel with Nandita and so let's start at the beginning. We obviously had a more Midwestern footprint. We know, knew we were ready for more and while our commercial bank and our capital markets banks had gone across the country, it was time for us to get scale. And so when we started to do our paperwork and strategy thinking, Bank of the West came to the top of the heat for attractiveness of market, like-mindedness in terms of approach to the business model, people that cared about each other having an amazing culture and a purpose. And so we went from paperwork that looked like the strategy went well to meeting Nandita and the team and that just set it all off very quickly. When we sat across the table, we found that we were so much more alike, not only in the strategy that we're pursuing digital commercial purpose, but the culture and the people were just a rare find. And I think many of us know that any integration or any merger is only successful if there's a like-minded culture and the teams coming together as one. So that the, let's just say the great icing on a super cake for this integration work.
Chana Schoenberger:
Nandita, what was your view on this?
Nandita Bakhshi:
I would say that having lived in Toronto for a couple of years, I was definitely familiar with BMO. But as Ernie mentioned, I did meet the executive team in Chicago as we started these talks and I was so impressed, so impressed that we have such a similar culture, purpose driven organization focused on employees, focus on customers, completely aligned. And for the business side, what a strategic fit. If you look at our footprint, it helps with the footprint. My branches, the Bank of the West legacy branches are ecstatic because they now get an additional size, another 500 branches and customers are happy. So this was a win-win from the very beginning and as Ernie said, it was so aligned, it was meant to happen I guess.
Chana Schoenberger:
Yeah. Great. Great. Okay, so you decided to tie up your two companies, you announced this and then you had what's often the hardest part of a bank deal, which is the regulatory review. How did you make sure that regulators approved the deal because they really have been approving so few deals in this administration?
Nandita Bakhshi:
So I'll tell you what we did at Bank of the West. We did announce the deal in December of 2021 and we knew it may take a little bit of time. So I came back and focused on business. I focused on three major tenets, understanding that this was an uncertain time, not knowing when we would get regulatory approval. It was uncertain time for the employees, it was uncertain time for the customers and we had to grow our business. So the three tenets that we adopted at Bank of the West is transparency, focus on business and leverage personal leadership. And I'll tell you, during these uncertain times, the best thing you can do is go out and communicate, communicate and be transparent. So we increased the number of calls that we had with our employees, the top 100, the top 400, and then of course reaching out constantly to them with memos and information.
The communication team set up what was called get to know vma, and this was done right after December, 2021. And in that they set up interviews with both, they profile different executives. We talked about BMO's focus on purpose culture, just to get people excited about the bank, the BMO merger. When that happened, and I would tell you customers were in the same boat, they wanted to know more about BMO, they wanted to understand what would be segment of customers would be served or the complement of products that would be provided to them. So we went out and did that and I'm very happy to tell you that we grew business, that we kept our customers, informed them happy, and we got some of the best employee scores during this period and this was happening. Remember during the great resignation, this is right after COVID. And I would tell you personally, I was out there meeting people and I asked each of my leaders to meet from every chair. So while we didn't have much control over what the regulators did, we did what we had control over and I'm very, very pleased that we were able to pass the terrific growth company that we have built over the years over to BMO. When we did get regulatory approval earlier this year,
Ernie Johannson:
Yeah, and I would just add, we followed the process and at BMO we spent a lot of time in the community. We met with the community, we met with obviously colleagues, I can't — Nandita — probably thousands of meetings, not the thousands of people we've met, but literally hundreds of meetings just to share who we are as an organization and our commitment to the team and to the progress that we were ahead to share our purpose and to boldly grow the good in business and life which resonated with the Bank of the West colleagues immensely and also with the communities. And we did a lot of work in developing listening sessions, not only with colleagues at Bank of the West but with the community to be able to understand how to shape and form our program, whether it be for our colleagues at Bank of the West and also for the community and our community benefits plan.
So those that was a long duration, like you said, Chana, in terms of the time between saying we're going to do this to getting regulatory approval and we followed all the rules, the no jump gun jumping rules. We went as far as we could in having the alignment conversations. And you can imagine our Bank of the West colleagues were also having to prepare for legal day one at the same time. So while we waited for that process, there was still work that was underway and as Nandita said that the team did business as usual at the same time they were preparing for legal day one and in the midst of a lot of change, and I think it comes down to the work that as Nandita said that we were focused on leadership and conversations and getting to know one another through that process as much as we could so that we were prepared for to answer our customers questions, which we answered. All of everybody did quite exceptionally and allowed us as Nandita said to carry on running the business and growing the business while at the same time preparing for a significant change that was coming.
Chana Schoenberger:
So what can other bankers learn from your experience closing this deal?
Ernie Johannson:
Do you want to go first, Nandita?
Nandita Bakhshi:
Yeah, I was going to say, I don't know if folks put as much emphasis on communication during this period. I think we have to, each one of us have to place ourselves in the shoes of our colleagues and see what does uncertainty do to you? It essentially makes you less productive, perhaps dysfunctional. It has rumors surrounding and any time you are transparent, you recognize that it's a difficult place for them to be. I love the fact that Ernie just acknowledged it again to say they were doing BAU and preparing the bank for the merger. That's a terrific task. Anytime you recognize that, acknowledge that, and then go out for the information you have because you don't have too much information at that point and you can share that. I think that makes more tremendous amount of difference.
Ernie Johannson:
I, I'd only add that the casting, the vision of what's possible as a collective in the new world coming together, sharing that excitement and the tenets of saying we're going to be double the size together, that the world has become more digital and it requires us to invest in digital tools, advanced capabilities, the fact that we're stronger together. That was our theme through all of this was we are stronger together. There was compelling reason for us to come together as a bank and compelling for our colleagues on both sides, whether you were at BMO or Bank of the West, there was an acknowledgement that said it's time for these two organizations to really come to the market together and be bigger so that we can help more customers make real financial progress and help more communities do better, grow the good because collectively we could do more together. So that shared vision was important.
Chana Schoenberger:
Makes a ton of sense. And the planning for uncertainty as well. We, we've had a number of mergers fall apart recently and then the banks have to pick themselves up and go their way independently. So I imagine that there's a lot of planning that goes on for contingencies as well.
Ernie Johannson:
Yeah, our focus was on our future together as much as we could. We were planning for that and thinking about what it means, post our approval as much as we could, you know, the gun jumping rules obviously prohibit you for doing a lot of that planning, but vision casting out there a little bit was helpful for us.
Chana Schoenberger:
How do you keep employees motivated during a period of uncertainty like this?
Nandita Bakhshi:
I think the point that is excellent point. When you create a vision of that we are better together, we are stronger together. Look at the footprint, look at the additional product that you are getting, look at the compliments, look at the investments that BMO is going to make to the Bank of the West, which I already see. It gets people excited. Everyone wants to work for a growth organization, an organization that is focused on purpose culture. So it's not difficult if you have the right partners to get employees excited and inspired and stay with you. We have one of the best retentions period in terms of employees retention during this period of time with all the uncertainty
Chana Schoenberger:
That works. Okay, so now you are both, you've both been honorees on our Most Powerful Women in Banking list and it's super unusual to have a deal where the leaders on both sides have been honorees on this list partially because there's so few women at the top of the banking industry. What was that like?
Ernie Johannson:
Well, I can say when I walked into the room and I had immediately obviously knew of each other a bit, it was delightful to see the diversity that Nandita had on her leadership team. And I think we walked in with a similar kind of diverse team. I have to say it was special. I have had so much respect for Nandita prior to that and then through the process getting to know Nandita so much better and just recognizing her journey as a business leader. I would say it was one of the highlights of the experience for me on a personal level and the fact that we shared a common language and a common approach. So I think we had had that common bond. I'll use that term.
Nandita Bakhshi:
No, I agree. I agree. Again, I've known off Ernie as an honoree, as a colleague in the industry, but I've really got to know her after we've announced the deal. And first of all that I'm a big fan of women running businesses. And if you look at the business that Ernie's running, 21,000 employees serving over 10 million customers, one of the largest P&Ls and and again, what she brings to the table is a very inclusive, collaborative way of collecting, which I absolutely love. So no, I think you should have more female leaders sitting across each other when we do mergers like this. Yes,
Ernie Johannson:
I would have to add that Nandita being on our board is just again a testament to the fact that she has been through this process with us, we're locked arms and to have her on our board, which is a very diverse board, is going to be really an accelerant for us moving forward. And I think a great highlight of a great leader, a CEO of a organization now joining the board to help us continue to be better. So I'm looking forward to her challenging questions as a board member.
Chana Schoenberger:
That's great. It reminds me of when Jane Fraser, who was our number one woman on the Most Powerful Women in Banking list. She spoke at our gala last year, two years ago now, and she said that it's a myth that women in senior roles don't support one another even when they're competitors, that in fact they very much try to help each other, sort of a recognition of a shared path. So that's what this sounds like to me.
Ernie Johannson:
Absolutely.
Chana Schoenberger:
Anything you can tell us about the leadership journey here? What is it like to be a leader at what is now a much bigger organization?
Ernie Johannson:
I guess I can start and you can pile it on. So what is it like as a woman? So I think it goes back to you never lose your roots as to what you've been kind of learned along the way. There's just no question, you don't kind of totally lose what you've done before and grab a new skillset. You stay true to who you are and what you represent. For me personally, we were preparing our business to be built for more, to be ready for more and then to be able to take this team, merge it with the great team that Nandita had assembled is just a career moment for me personally. Being able to see these two organizations come together and now go to the market in a bigger way, it is really powerful. And so I would say it's a career moment for me and I'll say there's many women on our combined integration team that are all in this moment of making sure this is great for our customers, for our colleagues in the communities that we're in. So it's been a highlight, I would say, a career highlight for me.
Nandita Bakhshi:
And I would say that it's a very interesting role for me. I don't have the operating role anymore. I stopped being the CEO of Bank of the West as a first effect. And so today I'm in a role to advise them on things that they're doing well on. There are opportunities that I see that I point that out because my one point agenda is to make sure that it's a smooth transition from legacy Bank of the West to a combined eight largest North American bank in the continent of Canada and the US. And I would tell you that my focus on business, on the technology integration and on people, I'm back on the road talking to employees, legacy Bank of the West employees to talk to them again. If they have questions I can answer them, I can bring those questions back to and make sure they get answered.
But what I'm hearing from our colleagues, legacy Bank of the West colleagues when I go out is they are just so excited about these key organizations coming together to become this eighth largest powerhouse in North America. And so my role is different, but my role I believe is very important. And as already mentioned, I will remain, I have joined and will remain on the BMO board to again make sure that there is a voice, having known that business, having known the people I can help BMO be stronger in this session. So I've got a very different role but an exciting role and I'm really enjoying it.
Chana Schoenberger:
That's great. So how is the integration coming along? This is often the part where mergers run into.
Ernie Johannson:
Yeah, it's a great question. As you can imagine, there's the amazing integrated team that have been working on it for many months and so it's going as well as one could imagine. I'm been really, really pleased with how the teams have come together to build the technology that's necessary to look at acquisitions that have happened in the past, take learnings from that to transform the customer journey through the process of going through the conversion weekend. We're running lots of work with colleagues in training, so you can imagine hundreds of people are going through training. We had an amazing event in LA just recently where we brought all the colleagues together who run the branch network to start the training process. There's lots of new things they're going to learn. All of that is change people change management and training technology, consumer conversations are all happening as we speak.
So we're excited. You're always, as you get, as prepared as you possibly can, think through anything that could possibly go wrong, but also recognize that there are going to be a few things that typically do happen through conversion, but it's going to be the quality of that team in having them empowered to be able to answer customers questions and having information at the ready to be able to address any situations that come up. We know that the best thing we can do is release the capability of our team to deal with whatever comes their way, but I would say we're really in a good spot at this point in time for our conversion in the fall.
Chana Schoenberger:
So how do you convince customers, either Bank of the West customers to stay or new customers to come on board? What's the plan?
Ernie Johannson:
Well, I can start. Nandita, please feel free to add in because I think we've already experienced the excitement and the energy in the market around introducing BMO, whether it be us taking a stadium in LA and with naming rights with BMO Stadium, that's a generated excitement and interest in the LA market all the way through to the conversations that happen have happened already and continue to happen. We're seeing on our commercial business customers who recognize the most broad offering and expanding their relationships with us, whether that be through our capital markets group or our treasury management group. So we're seeing the stronger together already materializing with customers as a result of Bank of the West colleagues, having conversations, introducing a BMO colleague who will be able to fulfill that need right now as we wait for systems to and conversion to happen and be sitting on the same platform, we're seeing great referrals back and forth between the groups and just generally through this kind of just unstable time as we like to say, we're seeing customers asking questions, getting great responses, feeling comfortable about where their position is at Bank of the West, excited about the future as well.
And that all comes down to great colleagues having great customer conversations and ensuring we're sharing the good news of what's possible when the two companies get together and what's possible. Even today as we come to come together, we'll be doing lots of marketing as you can imagine, to get the BMO brand out into the California market in particular in Colorado where we don't have a footprint and that'll take some time to build up, but that's our game plan to be very, very present in the market and very, very present with our teams that are there and are as excited as we're for the integration. Nandita, you have some insights as well, your thoughts?
Nandita Bakhshi:
Yeah, I would say that as I talk to customers, they are very excited, very excited about the fact that it'll be a much more expanded network of branches, of CPMs, more products, more sophisticated system. So they're very, very excited and this is existing customers and I know this will catch on like a wildfire and we will get incremental brand new customers to be now going forward. In fact, if you look at our growth trajectory at Bank of the West, we haven't stopped, even though we're waiting for the merger to happen later this year, we're still growing. So I think that's the trajectory we are on. We'll continue to as the two organizations have their systems come together.
Chana Schoenberger:
Great. Great. Okay, so the backdrop to everything happening earlier this year is that regional banks have gone through a bit of turmoil. The banking crisis looks like it's stabilized for now. We're not aware of any banks that are going to fail this weekend, which is nice, but what does this mean for you, for BMO?
Ernie Johannson:
Well, for BMO and for Americans in general, we are a top 10 US bank. We're the eighth largest North American bank and it is, we're double the size as that. We were a year and a half or so. This is a very trusted, organized bank, an organization. We're over 200 years old. That may not be a fact many people know. And the strength and the power of us coming together just allows us to bring that, the breadth of product experience that Nandita was mentioning earlier and the capabilities that exist, the digital capabilities, the ATM capability, the capital markets capabilities, the ability to service our customers from a retail bank to a wealth bank, a capital markets, and a commercial bank, a business banking where a full holistic bank that is in the top tier. And that is a significant presence for the markets that we're entering into now.
And it really creates an opportunity for our acceleration. There is no question BMO is in a growth pattern and this acquisition is really a game changer for us and it, it's been part of our strategy to keep accelerating and there's certainly this opportunity that we think will change again, continue to expand our capability, but changes our momentum in the marketplace and gives us that scale that's necessary. Chana, that you're kind of referring to scale diversification is what's required in banking right now and we have that, have that more by joining together with Bank of the West.
Nandita Bakhshi:
So I completely agree completely. Just to add to say, it's a very well diversified company. It's got all the business lines you can think of and we've got solid capital position, very strong liquidity position and a terrific future as we look forward.
Chana Schoenberger:
So where will you be five years from now? What's your prediction?
Ernie Johannson:
Five years from now, our US business is going to be half of the BMO financial group franchise. There's no question we'll be far bigger than we are now. We've committed to the street, obviously our position is that in 25 we'll have 2 billion of PPPT added to the enterprise that is out there and public and our commitment to do that and more. So that's even a short term goal, Chana, and it goes north from there as like to say, it grows from there from that position. For us, it's also about our communities we're operating in. Yes, it's about the profitability of the bank, but it's also what we're going to be able to do in delivering our community benefits program effectively in the marketplaces as well, which is significant and is something we're fondly. We really, really are committed to our purpose, to boldly grow the good in business and life, which means our work in the communities is only just started in these new markets and will accelerate.
Chana Schoenberger:
Great. Any final thoughts, funny anecdotes that you can tell us from the merger or the integration process? We're almost out of time.
Ernie Johannson:
Nandita, do you want to go first?
Nandita Bakhshi:
I would say that, I think the fun part, I don't know if it's funny, but the fun part is to be with legacy Bank of the West employees as they are poised to take on new positions, new challenges with BMO and really grow the, and that is just so gratifying. I was in one of our regional centers earlier this week and just spending time with hundreds of people there and hearing that excitement, it's infection.
Ernie Johannson:
Yeah, I'd agree. This is about people first and we talk about at BMO where it's people first, banker second. And so what's exciting for me is just I am incredibly confident in the combined team and what they're capable to do. And there's no question we're stronger together. We've seen that in action up until this point and it it'll continue on from there. And so for me, this is just to reiterate, this is about two great organizations coming together, aligned on culture, aligned on purpose, and really excited and committed to one another and to the markets that we work in that we think this is going to be the stronger together, the momentum that is going to change the trajectory of our overall business and the communities we work in. So we're absolutely excited and confident in the future.
Chana Schoenberger:
Great. Well we're out of time, but thank you so much Nandita and Ernie for joining me here today. It's been really interesting to hear about this deal.
Ernie Johannson:
Thanks so much.
Nandita Bakhshi:
Thank you for having us.
