Bank of Montreal CEO Seeks More U.S. Deals

Others have taken the same path as Bill Downe and failed, but the Bank of Montreal chief executive is undeterred.

The Toronto company has big plans to build on its purchase this week of Marshall & Ilsley Corp. Bank of Montreal wants to make more acquisitions, broaden its wealth management business and attract more stateside investors, Downe said in an interview.

Canadian banks have had mixed success in the U.S., however. Royal Bank of Canada recently agreed to sell its troubled retail franchise based in Raleigh, N.C., to PNC Financial Services Group Inc. of Pittsburgh. Bank of Montreal and Toronto-Dominion Bank have been getting bigger here, and the success of their efforts is still to be determined.

Only so much should be read into previous efforts, Downe says.

Those that have had "uneven progress in the past" did not have a "clear strategy," he says.

The U.S. is a natural growth market for Canadian banks given its proximity and the trade relationship between the two countries, he said.

Bank of Montreal closed its $4.1 billion purchase of M&I on Tuesday. It is phasing out the M&I brand and merging the 150-year-old institution with its Chicago subsidiary, Harris Bank. The combined company, BMO Harris Bank, has 700 branches in Wisconsin, Illinois, Indiana and four other states.

The integration is expected to take 18 months.

Bank of Montreal, which has $429 billion of assets, may do "tuck-in" acquisitions in the U.S., Downe says. It could buy other banks in or near the existing territory of BMO Harris, now the 12th largest U.S. commercial bank by assets, he says.

BMO Harris also has "many opportunities" to attract wealth management and business clients in the Midwest, which Downe says is poised for a rebound.

Its parent company has committed to lend $5 billion to small and midsize U.S. business over two years. Bank of Montreal's investment banking and wealth management arms give BMO Harris a competitive edge, he says.

"We have salespeople in London, Hong Kong," Downe says. "It's a much deeper set of capabilities."

From a markets standpoint, Bank of Montreal is hoping to build its U.S. "shareholder base" by attracting more U.S. investors with its higher profile here, Downe says.

It has one of the highest and steadiest dividends in North American banking, he says.

The $50 billion-asset M&I agreed to sell itself in December after deep losses on construction loans in Arizona and Florida.

The sale moves it past those issues. Bank of Montreal can absorb M&I's future losses and invest in new business. It returned M&I's $1.7 billion in federal aid on Tuesday.

An $18 million golden parachute due to former M&I CEO Mark Furlong, now the head of BMO Harris, stirred controversy on both sides of the border when the deal was announced. The deal's completion brought another round of critical media coverage.

Downe described the payout as "a contractual agreement" and said he had no "update" on the matter.

"What is really important is we have been able to draw on great leaders from both companies," he says. "We're really looking forward to tomorrow."

Marshall & Ilsley was Wisconsin's deposit leader and largest bank. It continued losing money, loans and deposits in the first quarter as delinquent loans decreased.