The Bank of Montreal is a diversified financial services company and the eighth largest bank in North America by assets.
It has a large portfolio of products and services in the areas of private and commercial banking, wealth management and investment banking, and serves a diverse range of clients, including more than 12 million individuals, corporations, governments and corporate clients in Canada and the United States
The bank is also present in a number of countries in Europe, Asia, the Middle East and South America. Geographically, Canada is the largest market, accounting for almost 56% of net income, followed by the US (37%) and other countries (7%).
The bank conducts its business through the operating groups: Canadian Personal and Commercial Banking (33% of net income in Q2 21), US P&C (23%), BMO Wealth Management (19%) and BMO Capital Markets (25%) . The Bank of Montreal has diversified its business across several US and Canadian banking service lines.
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Sales growth & market presence
BMO’s retail business serves customers with a wide range of products and services including savings accounts, credit cards, mortgages, etc., while the corporate business provides small businesses and business customers with a wide range of commercial products and services such as corporate loans, commercial mortgages, etc.
The bank is highly diversified by company and region. The Canadian private and corporate customer business is BMO’s flagship and is further expanding its share in key markets. The wealth management business also ranks # 2 in the Canadian ETF market.
The Bank of Montreal has an extensive network of more than 900 branches and ~ 3,200 ATMs in the US and Canada. The bank is strategically located across strong regional economies and markets around the world and is in a good position to meet the growing cross-border needs of corporate clients.
In over two centuries of existence, the Bank of Montreal has developed a thorough understanding of the needs and behaviors of its clients. The bank has a strong focus on technology deployment and is also considering building new skills that will drive customer growth in the future.
The bank’s operational performance remained resilient despite the impact of the COVID-19 pandemic. Bank of Montreal has a great opportunity to expand in the digital market and has seen 9% growth in digital sales this year.
BMO’s diversified business model and very strong operational leverage resulted in revenue growth in the last quarter. PCL was $ 60 million compared to $ 1,118 million. The Bank of Montreal’s large North American platform and its growing presence in international markets give it a competitive advantage.
The bank is well positioned to capitalize on growth opportunities in the US segment driven by strength in business, retail and capital markets. Sales have increased by over 7% over the past ten years.
The Bank of Montreal is a Canadian dividend aristocrat with a 192 year history of paying dividends. The bank has an impressive dividend yield of more than 3.3% and a reasonable payout ratio of 46%. The bank’s last dividend increase was 6% in 2019.
Dividends paid over the past five years have increased at an average annual interest rate of 5.5%. With a hard core capital ratio of 13%, it has a strong liquidity position.
Heavy investments in digital initiatives to drive customer growth, solid customer focus, and a large footprint have helped Bank of Montreal achieve solid results across the board. BMO is aiming for earnings growth of 7% to 10% in the medium term, which should easily be reflected in a dividend growth rate in the low single digits in the future. The bank has demonstrated resilient profitability. Profit has increased 4% + over the past decade.
BMO focuses on optimizing efficiency and invests in areas with favorable market positions, such as the North American wealth management business. The bank has reached a definitive agreement with Ameriprise Financial to sell its EMEA asset management business.
She also sold her private banking businesses in Hong Kong and Singapore. A well-established and profitable flagship banking business in Canada and diversified US operations enable the Bank of Montreal to capitalize on growth opportunities.
Canada’s private and commercial banking segments are highly competitive. The Bank of Montreal competes with other leading Canadian banks such as TD Bank, Royal Bank, Scotiabank, Canadian Imperial Bank of Commerce, and the National Bank.
National Bank is one of the six largest commercial banks in Canada, while CIBC serves 11 million retail, small business, commercial, corporate and institutional customers in Canada, the US and worldwide.
Scotiabank is a leading international financial services company with a rich history spanning 185 years, and the Bank of Montreal is the eighth largest bank in North America by assets.
The economies in the US and Canada are expected to recover in 2021.
The bank expects an economic recovery due to improving unemployment rates and commodity prices, as well as increased availability of a range of COVID-19 vaccines. BMO continues to strengthen customer loyalty and gain market share in important key areas.
A diversified business mix, leading market share, a reputable brand name and a strong balance sheet create a huge divide around the business. Increased investments in expanding the presence both digitally and in the USA should bear fruit in the near future.
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