UPDATE: Bank Of Montreal Sees Pickup In US Midwest Business Activity
February 02 2011 - 11:01AM
Dow Jones News
Canada's Bank of Montreal (BMO) is seeing an increase in
business activity among its clients in the U.S. Midwest, Chief
Executive Bill Downe said Wednesday.
BMO, which owns Chicago-based Harris Bank and agreed to buy
Milwaukee, Wis.-based Marshall & Ilsley Corp. (MI) in December,
is seeing a pickup in U.S.-China trade finance activity as China
"quietly" opens up access to U.S. companies, Downe said.
He was speaking at the Morgan Stanley Financials Conference in
New York.
In the last three months, "what the Chinese are doing is they
are opening up, quietly opening up access to their markets to U.S.
producers and our clients are actively engaging in that regard," he
said.
About 85% of BMO's revenues in China are from U.S. companies
doing trade finance, he said.
Bank of Montreal in October incorporated in China. Last month,
it began settling transactions demoninated in yuan for North
American corporate clients, enabling them to pay their China-based
suppliers directly in local currency.
Downe also said he's more optimistic about the economic recovery
than most economists, though commercial real estate activity in the
U.S. "is standing still."
"We're starting to see a lot more conversation around capital
expenditures," he said.
Clients are increasing their credit lines, although they haven't
started using them. But Downe expects that to change as
merger-and-acquisition activity heats up this year.
"When I look at the M&A pipeline, that's really what gives
me the optimism that the commercial banking business is going to
get some legs," he said.
It's "more evident in the U.S. than Canada," he added.
Clients in the U.S. Midwest "are thinking about export markets
very actively," and "obviously the dollar has not hurt them in the
same way as it's hurt the European manufacturers," he said.
The bank's U.S. portfolio mix is 44% consumer and 56% commercial
and corporate. Commercial real estate represents 10% of its U.S.
loan book and 2% of the bank's total loans. "There is a credit
recovery underway and we have confidence in the overall positive
trend that we're seeing," he said.
Downe said BMO will continue to make U.S. retail bank
acquisitions.
"We have a lot of fill-in opportunities where M&I is," he
said.
BMO aims to be one of the top-three banks in its markets, he
said, adding that he sees a lot of revenue growth
opportunities.
The gross domestic product of the six Midwest U.S. states where
BMO will have a significant footprint equals that of Canada's, he
pointed out.
"We have effectively doubled the size of our domestic market,"
he said.
Toronto-based BMO, which agreed to buy M&I in December in a
$4.1 billion stock swap, will have 686 U.S. branches when the deal
closes, compared to 910 in Canada. The transaction is expected to
close before July 31.
In Toronto Wednesday, BMO is up 11 Canadian cents to
C$58.24.
-By Caroline Van Hasselt; Dow Jones Newswires; 416-306-2023;
caroline.vanhasselt@dowjones.com
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