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Mandate For Growth
Notes For Remarks By Bill Downe, Chief Operating Officer BMO Financial Group At CIBC World Markets 5th Annual Institutional Investor Conference

Montreal, Quebec, October 4, 2006

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Title Slide
        Mandate for Growth

Thanks very much Darko and good morning everyone. I am always very pleased to meet with investors here in Québec.   While this is my third year at this conference, it is the first as Chief Operating Officer.  


And since the role of the COO varies so widely from one company to another, I’ll start by explaining this new role at BMO …

Slide 1           Forward-Looking Statements

  …. after, of course, reminding the audience of the usual caution regarding any forward-looking statements during these remarks and the question period.


Slide 2           Aggressive Pursuit of North American Vision

In addition to having direct line accountability for the four operating groups of the company, the Chief Operating Officer is responsible for leading an enterprise-wide drive for higher performance.   This mandate for growth implies in-depth collaboration with all of the members of the senior management team to ensure cross-business alignment in strategy development and execution.   A closely connected responsibility is leadership of BMO’s intensive efforts to build a performance-driven work environment.


This new position, and with a number of senior leadership changes over the past year, signal a sharper focus on growth at BMO.   We are positioning ourselves to deliver higher, sustainable returns in an increasingly global marketplace.


The entire management team is committed to BMO’s vision of becoming the top-performing financial services provider in North America.  And we are determined to pick up the pace of execution.  We are also determined to maintain BMO’s reputation for relative earnings consistency in the short, medium and long term.


Slide 3           Acquisition of First National Bank & Trust

Last week, Harris announced a definitive agreement to purchase First National Bank & Trust in central Indiana.


Slide 4 and Slide 12 (which you’ll find in the Appendix of the handout) summarize the shareholder-friendly agreement to acquire this 32-branch community bank.   It is a natural extension of the Harris network from its base in the Chicago area; and we are excited about the beachhead it gives Harris in fast-growing Indianapolis and surrounding communities.


Indianapolis is one of the largest markets in close proximity to Chicago and, with a population of 1.7 million, comparable in size to Canada’s largest cities.   It is one of the fastest-growing communities in the Midwest. Population is projected to expand more than 9% from 2006 to 2011 and household income is expected to increase more than 19% in the same time frame.


Special strengths Harris brings to this transaction include its differentiated brand and high customer loyalty. Harris loyalty scores for retail customers are three times better than the network players. In addition, we are optimistic that under-served small and mid-market business banking customers will welcome the Harris experience.


Slide 4           Harris: Expanding and Deepening Our Footprint

When the First National acquisition is complete, Harris will have 233 branches and nearly 600 branded banking machines in the Midwest. This is a significant step closer to its goal of becoming the leading personal and commercial bank in the Midwestern United States with a network of 350 to 400 branches.


We have made large investments in technology to give sales and service staff the tools they need to meet customer needs. And we have made large investments in the highly efficient Harris operating model with its fully integrated back office. Harris branches now operate on the same advantaged platform under the leadership of Ellen Costello. And the company is very well positioned to absorb the most recent and future acquisitions quickly and cost effectively.


Slide 5           Acquisition and Expansion Strategy

Overall, there are promising prospects for growth through both existing customers and new ones as we build out our customer base in the Midwest through a combination of aggressive organic growth, de novo branch expansion and acquisitions.


As with First National and other transactions in recent years, we will happily continue to purchase suitable properties that increase our network 15% to 20% at a time.   That being said, BMO’s experience and consistent track record, the capital we have available and our fully integrated platform give us the wherewithal and the confidence to acquire and successfully absorb properties of all sizes, from small to large.


As previously, we will continue to look at every transaction that comes on the market.   We will continue to make highly disciplined decisions, looking for a good strategic, cultural and financial fit.   And, with the sure knowledge that banks are sold not bought, we will continue to nurture relationships with attractive targets and enhance the Harris reputation as an acquirer of choice.


With a platform that is poised to deliver further economies of scale, continued expansion in the U.S. will drive higher profitability, contributing to the priority focus on improving business performance in the U.S.


Slide 6           Investing in Growth in P&C Canada

In BMO’s core personal and commercial businesses in Canada, the focus is on the existing client base.


Inspired by the impressive track record of Harris in increasing customer loyalty, we are determined to grow profitable market share in Canada.   The strategy is to grow this franchise through a customer-centric approach that fully leverages our relationships and distribution channels to meet all of our customers’ financial needs. We have great confidence in our ability to succeed under the leadership of Frank Techar, who was previously head of Harris.


We have been making very significant investments to improve sales capabilities and efficiency, including: the replacement of our entire Canadian network of ABMs by year-end to make them more customer-friendly and secure; the upgrading of 85% of our BMO Bank of Montreal branches; the recent acquisition of bcpbank Canada to increase our presence in multicultural markets in the high-growth Toronto area; and the successful deployment of 1,000 additional people over the past year to provide a higher level of service to Canadian banking customers.


P&C Canada is also adding branches in high-growth markets such as Alberta and British Columbia.


Slide 7           Targeting future growth in commercial and wealth

Over the next few years, BMO will be investing to grow disproportionately in commercial and wealth, two overlapping and complementary businesses where BMO has demonstrated strengths.


We are very good commercial bankers in Canada and the U.S., as demonstrated by leadership positions in key segments of these markets.   Commercial is an attractive market with very good growth prospects. We aim to be the market leader everywhere we compete in commercial.   Strengths include specialized front-line staff with local authority to approve commercial credit applications up to certain limits; and the deployment of concurrence officers in the field to speed up decision-making.


Having built a strong wealth management platform, we are now investing to accelerate growth in this high-growth segment while maintaining cost discipline.   Wide-ranging plans for Canada include initiatives to capture opportunities in the retirement, affluent and mass affluent segments.


In the U.S., Harris is a relatively small player in wealth but has an outstanding reputation with private banking clients for innovation in the high-net worth segment.   Growth in wealth will come from the existing Harris client base with further growth as the Harris footprint expands in the Midwest.


Slide 8           Credit Performance

A standout strength as the credit cycle progresses will be the company’s strong track record and expertise in credit risk management, which makes for consistent risk underwriting.   We are committed to extracting more value from better decision-making to maximize risk/return trade-offs.   This will help to accelerate revenue growth while maintaining BMO’s advantaged risk profile.


Slide 9           Industry-Leading Dividend Payout Target

And finally, it is worth mentioning that there has been very positive investor response to the announcement in May that BMO’s target range for dividend payouts was increased to 45% to 55%.


BMO is a pacesetter in responding to shareholders’ increasing attraction to dividends as a result of improved tax treatment, and we believe this will be reflected in the share price over time.


Slide 10      Mandate for Growth: Q&A

Let’s leave it at that for now.   Given the broad-brush nature of these comments, I would be pleased to fill in the details on any points of interest to this audience.   Thank you very much.


Q&A begins.

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