One year into his role as CEO of BMO US, Darrel Hackett, joins American Banker's editor-in-chief, Chana Schoenberger, to reflect on BMO's acquisition of Bank of the West, and share how he's finding growth opportunities despite economic headwinds.
Transcription:
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.
Chana Schoenberger (00:09):
Hello, welcome. I'm Chana Schoenberger. I'm the editor-in-Chief of American Banker, and I have with me here today Darrel Hackett, who is the US CEO of BMO. Thanks so much for joining me, Darrel.
Darrel Hackett (00:23):
Glad to be here. Chana, thanks for the invitation.
Chana Schoenberger (00:26):
So you've been at BMO for now almost 20 years, right?
Darrel Hackett (00:32):
Actually, yes, 20 years. As of this past June.
Chana Schoenberger (00:36):
That is, congratulations. That's a really long time to be at the same bank. So walk me through what your day is, what occupies your time right now?
Darrel Hackett (00:47):
Wow. What is my day? As you can guess, there's no day that is typical or normal, but on any given day, I spend time with great clients, spend time with our great team, do spend time with our boards, and also spend time with our regulators. But I also spend a lot of time out in the community just making sure that we're actually living our purpose.
Chana Schoenberger (01:11):
And you're based in Chicago, that's your headquarters, right?
Darrel Hackett (01:14):
That's right. Chicago is our US headquarters and our international headquarters is Toronto. So it's our US headquarters, and now we have a physical presence in 32 states. But we've been here, interestingly enough, this will be a 40 year anniversary for Chicago being our US headquarters through the acquisition of Harris four decades ago.
Chana Schoenberger (01:39):
But you don't use the Harris name anymore?
Darrel Hackett (01:42):
We do not. We actually sunset that name with the integration with Bank of the West, and so as you can imagine, it's been quite an adventurous year and a half here, but we do not use that name anymore, although we still admire that history.
Chana Schoenberger (01:59):
It's probably how a lot of people still think of you. Lot of people still think of
Darrel Hackett (02:02):
You. It is, and we're not offended when it happens.
Chana Schoenberger (02:09):
That's great. Okay, so you brought this up. This is what I really wanted to ask about last year. You all closed on your deal for Bank of the West, which was a pretty big marquee acquisition, which I think is that the biggest deal that you've ever done?
Darrel Hackett (02:26):
It's not only the biggest deal we've ever done, it's the biggest deal that's ever been done in Canadian banking history. So quite significant in the industry.
Chana Schoenberger (02:34):
So walk me through how that whole thing happened.
Darrel Hackett (02:40):
Yeah, well look, I'll start with my career here. I've been here 20 years and the US has always been a really important part of the puzzle, piece of the puzzle. But when I started, the US business made up less than 10% of the income for BMO overall. If I fast forward and I'll come back now, we make up 45% of the total net income for BMO. But we've always had a really ambitious aspiration and many people didn't know, even before the Bank of the West acquisition, 50% of our revenue actually came outside of the Midwest. So yes, we are Chicago based, strong presence here in the Midwest, but since we have such a significant commercial bank and capital markets group, we already had a national reach throughout all 50 states. We did have an ambition to expand our reach and we had a great opportunity with another purpose-driven bank and Bank of the West, which also happened to have a foreign parent in BNP Paribas. So we were fortunate to win that process and we had a chance to spend some really great time with the leaders there, and we knew we were culturally aligned. But now what that gives us is we've catapulted ourselves into being a top 10 US bank with over 4 million clients, fiscal presence in 32 states, in presence in many of the top 25 MSAs, 14 to be specific. And we also have a really great concentration now on the west coast, which is something that we were really excited about.
Chana Schoenberger (04:27):
So it's pretty hard to get a bank field. How did you do it? How did you come up with the plan? How did you get it approved? And then next I'm going to ask about the integration. The integration,
Darrel Hackett (04:43):
Okay, sure. Yeah, look on the plan in terms of the strategy was right on strategy for us in terms of where we wanted to go, what we wanted to do, the compliment that we wanted to have. And Bank of the West, first of all, brought us a really significant retail client base and helped us to get scale there in terms of the approval. Yeah, look, the approval took longer than past acquisitions have taken, but fortunately we had a very transparent process with regulators. We always would've liked for it to be faster, but considering the environment, we made progress at a pace that was understandable and appropriate. And it wasn't until February of last year that we officially closed, but by then we were able to quickly pivot and we had done a bunch of integration planning, so we were able to quickly pivot into really integration mode and thrust ourselves towards a real system conversion in September of last year, so not quite a year ago.
Chana Schoenberger (05:55):
What sort of things do you have to plan when you're merging to large banks in terms of technology?
Darrel Hackett (06:02):
Yeah. Well, technology was obviously one of the big synergies. What we tend to do is we take a look at the capabilities across both institutions. While we use most of the BMO platforms, there are a couple of platforms and capabilities that we knew Bank of the West had that we didn't want to use and leverage. We look at the business offering and we had to get a great understanding of how the businesses complimented one another. We spent most of our time not just on technology though, but on people try to have the right transparent conversations, trying to understand the softer things such as culture as well. But I'll tell you, going into this process and the systems conversion we got a lot of practice in, and we may have practiced more than other institutions. We really wanted it to go well. And I'm happy to say it didn't really go well.
(06:57):
We were really proud of it. It's not just us saying it. We were actually recognized for the 2024 Celent Model Bank award for integration excellence. And that's something we're proud of. And even during the process, I remember the weekend I was right there in LA and it was a big weekend and there actually was a spike in social media post, but it wasn't because of things happening with us, it was because this guy named Messi was in town to play at BMO Stadium, which we had put our name on against LAFC. But on the flip side of that, RBC capital markets also did some really great analysis around social media during that weekend. And what they found was that negative posts were much lower than historical levels of other integrations, other system conversions. And given the size of the client base that we converted, it was insignificant. So we were proud of that. And none of these are never perfect, but we practiced a lot and we felt good about the outcome.
Chana Schoenberger (08:02):
What did the practice look like? Are we talking war games?
Darrel Hackett (08:09):
Yeah, the practice was everything from going through the different stages of the process to running an actual full conversion, a shadow conversion, and literally running through every step. And we did this not just with ourselves, we used some great external partners, some third party partners as well, but practice looked like what we did is we went through the process and then we highlighted everything that wasn't quite right. And then once we put it on the board, we would take a look at why it wasn't quite right. We'd look at what was required in order to resolve it, and we'd run the play over and over again. And in certain cases, if there are areas that were a bit more challenging, then we would focus that on those areas and spend a bit more time. So that made us ready, that made us ready for anything that could have happened on the day of or the weekend of conversion.
Chana Schoenberger (09:05):
How many people did you have working on the integration?
Darrel Hackett (09:09):
Oh, that's a great question. It was in the thousands, and I remember when I left LA that weekend, I wanted to be there with our new colleagues and I came back mid weekend and I also wanted to go see LAFC at BMO Stadium and watch Messi with clients, which is a great marketing boost. But when I came back here at our operation center in Naperville, Illinois, we had people from all over our footprint. So we had colleagues from the enterprise in Toronto, colleagues from Bank of the West, the former Bank of the West, colleagues from the former BMO Harris, and there were thousands of us. It definitely took a village to get this done the right way.
Chana Schoenberger (09:58):
Okay, so I'm trying to imagine what this actually looks like. It's the weekend you're hoping that people will not go to branches and that they're just going to sort of step away from the bank so you can do the conversion and then should I picture a NASA control center? What does it look like?
Darrel Hackett (10:18):
Control center is the right way to think about it. So we definitely had a control center and we were watching everything and we did a lot of communication with our clients prior to, so they knew what to expect. They knew that we were going, we would go dark with a system. So you give them a lot of notice and you tell 'em as of six o'clock on Friday evening, we're going to be working on conversion. But that's the bank conversion. If I go back even a month or so before, we did the same with other systems as well. Some systems went earlier, mortgage system went earlier, our investment platform went earlier, the brokerage platform went earlier, our HR system. So again, we had practice, but the big one is always the banking platform. And yes, it was NASA-like control center, and there was constant communication with people all over the country just making sure that we're doing the right level of testing. At the same time we had people in our branches making sure that all the equipment was working and making sure that the conversion was landing the right way. And then we also had already put up signage, but since we hadn't converted, we had covers. So literally there was physical work that had to happen to every branch as well.
Chana Schoenberger (11:39):
We're lifting the covers off the signs,
Darrel Hackett (11:43):
We were lifting the covers off, the signs off the ATMs, you name it. We were trying to make sure that our standard BMO blue, which you see in the background, was plastered all over the branches. And that people not just solve, but felt the difference. They felt that they were at BMO.
Chana Schoenberger (12:03):
So I'm sure something went wrong. What went wrong and how did you guys fix it?
Darrel Hackett (12:09):
Look, a lot of things always go wrong, but fortunately we had teams that were jumping on everything. I wish I could say it was totally smooth. What we got through our training and our practice was we were prepared for anything that didn't happen in a timely manner. And I can't give you a complete list of those things Hana, but you can imagine if you're looking at the control center, you can see systems that are on and ready to go. Some of 'em were on early, some of them just took a little bit more time. And you have to understand, we could see what was happening before we went live, so we had plenty of time to make sure that we could get it right before things actually went live. We do have to remember though, it's a different experience for people when they come over into our apps or even into our environment, and that's different for employees also. But in that first week, the highly active digital clients, we already had 90% of them successfully converted onto our new mobile platform, which I think is a really great accomplishment.
Chana Schoenberger (13:23):
So what's different now for clients who used to belong to Bank of the West, now that they're BMO clients?
Darrel Hackett (13:32):
Beyond going from green to blue, what I think is different is that we have an incredibly robust platform, and I really have to answer the question on a line of business by line of business basis, but as a whole, we're an incredibly significant institution both to BMO enterprise, and I told you we're 45% of net income, but also in the us we're one of the 10 largest. And that scale, that capability, it allows us to do things for our clients that Bank of the West in some cases. And we see that through our wealth management offering. We see that through our commercial banking offering, and we see that through some of our digital capabilities as well. And Bank of the West had a lot of these capabilities that is being part of a bank that has a $1.3 trillion balance sheet. We've been able to invest in these capabilities and make sure that we have scale.
(14:38):
The other thing I think clients see is, look, we've been out on the market and for any of you on the call that are out on the west coast, particularly in California or Denver or some of the newer markets where we have critical mass, we spend a lot of time telling our story, and we think that's as important as getting the system conversion. We want people to know who we are, and I think we've done really well there. If you've been in the markets, and it's both been really creative and witty advertising that also has received a lot of external recognition. For those of you that are familiar with the BMO guy who's an actor named Lamorne Morris, he's been fantastic. He also was a guest host recently this past week on Jimmy Kimmel, and people introduced him as the BMO guy. Hopefully it helped clients feel like they're a part of something that was even bigger. And aside from the marketing itself, sponsorships, I've mentioned BMO Stadium a couple times. The message we were trying to send was, look, we might be new to the market, but we're not new to the game. We've been doing this for 200 years and we're here to make a difference.
Chana Schoenberger (15:56):
So as a top 10 bank, you're really a super regional or a mega regional, or it's the category of really, really big regional banks at this point, giant regional banks. And after 2023 when there was a banking crisis, which really affected some regional banks and was a challenge for others, what is the pitch for why a client should use a regional bank and not a giant global bank at this point?
Darrel Hackett (16:31):
So first of all, to your point, there's definitely tiers in terms of the size, even when you get to the regionals. And for those of you that are on this call, you probably know there's the four gibs and then there's basically the group of the next six are the super regionals emerging nationals. And I actually think that's a really fantastic place to be, for one, this group has grown pretty quickly. We have ability to do some things that the GIPS can't do, such as acquire Bank of the West, which was significant for us. And at the right time in the right place, we could do something like that again. But we're also small enough here and scrappy enough and close enough to the client that it feels like a very personal experience. But we're also different than the other super regionals. While we are one of the 10 largest in the US, we do have a 1.3 trillion balance sheet when you look at our North American parent. So that gives us a different platform and a capability to do some things that even our peers and the super regionals can't do.
Chana Schoenberger (17:47):
That makes sense. So if you're talking to a client, either a personal client or a wealth management client or a business client in one of the new areas that you've just acquired, why do that with you? And so that's the argument not to go with a gsib. What's the argument not to go with a community bank that may have been in the community for a long time, maybe they have a more personal relationship, but is obviously a lot smaller.
Darrel Hackett (18:15):
Yeah. Look, I don't want to argue against a community bank or any other bank, but I'll tell you why I think clients should go with us. We are a different type of bank, and we start with leading with our purpose, which is to boldly grow the good in business and a life, and we are supportive of a thriving autonomy. We make sure that we are pushing for inclusive society and sustainable future. And that's the heartfelt part of the equation because community does matter to us, and we do want to make a difference. And we're in this for more than just banking. We do really want to do good, but from a capability set, as you look at those competitors that are larger and that are smaller, we have capabilities that are smaller competitors couldn't imagine having just because of the scale that we have. And again, even versus the super regionals, we also have capabilities that they don't because we're just built differently.
(19:19):
Since I spent so much time in LA, I, I'd say they're all not like us. We have a really fantastic national capital markets business in our wealth business. We have an incredible family office offering that rivals the larger global institutions. So versus the global institutions, what I'll tell you is yes, we have scale, we have capabilities, we also have really great people, and our senior people spend a lot of time with our clients on the front line. And there's nothing better to us than sitting down with clients and hearing clients tell their stories about how we were there for them in times of uncertainty, how we were there for them when they were starting. And that means a lot to us and our senior leaders do spend a lot of time in the field.
Chana Schoenberger (20:10):
Do you have a story like that you can share?
Darrel Hackett (20:14):
Yeah, yeah. We have a lot of 'em. I mean, one of my favorite, and I will stay away from the names, but before I was in this role, I led our wealth management business and we have a great client that we were helping through another acquisition that he was doing. But he tells a story on how he early in his career, got his first mortgage through BMO. At the time in the US it was Harris and how he used that home and that equity first with something as simple as a home equity line to start his business and how his business grew. And we were his bank. So he told a story of how we were there for him in every step of the way. And this particular client is actually a billionaire now, but he remembers these times. He remembers when we were there. And even with his business, because he's been with us over decades in certain markets where it was more uncertain, he also gave us a lot of credit for just being there and being steady and not overreacting based on the environment. And he knew he could depend on us. And look, those are the stories that matter the most.
Chana Schoenberger (21:29):
Yeah, that's a story about loyalty. You hear those a lot.
Darrel Hackett (21:33):
Yeah, absolutely.
Chana Schoenberger (21:36):
So when you join two banks, like the two that you just did, how do you convince the people who worked at Bank of the West that they're going to be happy at BMO, that they have career opportunities? How do you start promoting them and how do you start unifying the two organizations? Even if as you say, the cultures are similar, obviously there must be some differences.
Darrel Hackett (22:01):
Yeah, I think that's a fantastic question. And it's also a simple yet complicated question you want to believe. Everybody would just say, BMO's coming and we're going to be happy about it. But we do really spend a lot of time articulating our strategy, the reasons that we actually did it. We also had really open and transparent conversations in regards to what we wanted to do, opportunities for people. And through any integration like this, there's roles that go away, but there's also roles that we really want to emphasize and grow. So some of it is time and over time how you build any relationship is based on trust, and you build that trust over time. And in the conversations, I think people could see it. They could see that not only are we aligned in terms of culture, but we really care. And I think that shows through.
(23:01):
At the end of the day, we wanted to make sure that we really knew each other and we put in the time. One good thing in regards to the prolonged period between announcement and actual close was that we actually had more time to spend with one another and to talk strategy and where we're actually going. The other piece, if I just think about Bank of the West specifically, bank of the West was a much smaller contributor to the overall success of BP Paraba, which is in Europe here, we're not just a significant US institution. We're incredibly critical to the growth strategy of BMO. And that's meaningful. And as we came together, people could see it and they could see that power. We also spent a lot of time just making sure that everybody understood both the BMO story, but our collective story now because we're a different institution and in terms of our size and stature, even amongst the Fed category of banks, we went from a category four institution to a category three, which is the category that houses our competitors set in terms of the super regionals. But that took time and work, and it just takes time. It takes time and trust and real conversations.
Chana Schoenberger (24:26):
It was also interesting, and I did
Darrel Hackett (24:43):
And they're both incredible, incredible colleagues and happy to work with Ernie every day, and
Chana Schoenberger (24:56):
That's great. So for your next acquisition, what did you learn from this one that you'll do differently?
Darrel Hackett (25:07):
Wow, that's a great one. For our next one. Gosh, what would we do differently? I'm not a hundred percent sure how to answer that question. It went really well. But what I think about the most is what things can we be doing now to make the process even easier? Because when you go through a conversion process abundantly clearly who you are and what your strengths are and the things that you can scale and the things that you might want to think about updating for the next one. So I think it's just a question of readiness, and I'll spare you the details because it's really too much, but we go through our integration playbooks and we have those conversations all the time, and we have a list of things that we're working on before the next one. And we have a list of things that we'll probably take care of during the integration process and the system conversion the next time we do this again.
Chana Schoenberger (26:15):
Do you have a timeline for when you'd like to do another acquisition?
Darrel Hackett (26:20):
No, we don't. We don't. But what I'm excited about is that today we have an incredible opportunity to continue to grow. We have an incredible platform and can't tell you how excited we are to keep growing in our current markets. But we didn't go in the west coast just to go there. We're there to grow and to be significant. And corollary for me is 40 years ago we acquired Harris. We weren't one of the largest institutions here. Now there's only one bank that has more market share than us, and we're the largest institution that's based here. We'd like to tell those same stories out west as well, and maybe in some other markets. So time will tell.
Chana Schoenberger (27:05):
That's really exciting. Well, congrats on reaching 20 years. I hope that they gave you a gold watch or something
Darrel Hackett (27:13):
Like that. I appreciate it, and thanks for the time, Chana.
Chana Schoenberger (27:17):
Great. Thanks for coming in. Take care.
