Darryl White, CEO for Bank of Montreal.Fred Lum/The Globe and Mail
France’s biggest bank, BNP Paribas SA, is exiting the American market because it couldn’t make acceptable returns on Bank of the West, a 514-branch network it has been building for more than four decades.
Canada’s fourth-largest lender, Bank of Montreal , announced Monday it will buy that business, which spans the Western and Midwestern United States, in a $20.9-billion deal.This will be the largest acquisition ever staged by a domestic bank.
Under the circumstances, it’s logical to wonder: Why is BMO buying when the French are selling?
“That’s a good question,” BMO chief executive Darryl White said in an interview. Then he paused for a moment, but not because he didn’t have an answer. He had admitted, moments before, that he began working on this career-defining takeoveralmost as soon as he took the top job four years ago.
No, Mr. White paused because he needed to be diplomatic. One can’t say BNP Paribas is in retreat. The French are sensitive on the subject. BMO’s boss also needs to tread cautiously when discussing how U.S. and Canadian regulators will react to this deal.
So Mr. White, a CEO who typically answers questions with disarming directness, offered a nuanced response.
“I don’t want to put words in the mouths of my French colleagues, but there are fundamental differences between us, even though we are both foreign banks in the U.S. market,” Mr. White said. Then he recited a list of BMO’s strengths south of the border:its 150 years of experience in California, where Bank of the West has 70 per cent of its deposits; its track record of successfully integrating U.S. acquisitions; and itsefficient “branch-light” approach to client service.
By “branch-light,” BMO means using digital platforms to deliver products to customers who currently have branch-based relationships. These days, that may sound like basic banking. But Mr. White said Bank of the West’s online wealth management platform is at a “nascent stage” compared to what BMO offers through its existing 524-branch Midwestern U.S. network.
What Mr. White hinted at, but cannot say flat out, is that BMO is really good at U.S. commercial and retail banking. BNP Paribas, not so much.
BMO’s overall return on equity last year was 14 per cent, twice the profitability of the French bank. For BMO, bulking up in rapidly growing states such as California will turbocharge U.S. operations. The company expects its earnings per share to increase by 10 per cent, partly as a result of $860-million in cost-saving synergies, once it finishes integrating Bank of the West in 2024.
If this deal closes as scheduled late next year, BMO will become a top-10 player in cities such as Los Angeles, San Francisco and San Jose, Calif. “It takes decades to build these levels of market share,” Mr. White said.
BNP Paribas plans to use proceeds from the sale of its American business for bolt-on acquisitions in its home market, and a massive share buyback.
BMO, along with Canada’s other big banks, is currently sitting on record amounts of excess capital, in part because of regulatory restrictions imposed during the pandemic. Until Monday, there were widespread expectations these institutions would follow conservative game plans, much like BNP Paribas is doing.
“For a while now we have wondered whether Canadian banks might be better served using their historic excess capital levels more boldly, especially in the face of the rising fintech threat,” Scotiabank analyst Meny Grauman said in a report on Monday. “Well, there is no arguing that BMO is being bold choosing a U.S. acquisition over buybacks.”
Back in 1998, Royal Bank of Canada and BMO proposed a merger. John Cleghorn, then RBC’s chief executive, said the two banks had to join forces because BMO was “halfway across the lake” with its U.S. expansion strategy, and needed to bulk up to get to the other side.
The merger never happened – the Canadian government shut it down – but BMO and the rest of the Canadian banks built balance-sheet heft on their own. In bidding for Bank of the West, Mr. White has found an acquisition that gets BMO to the other side of that lake.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
:format(jpeg)/cloudfront-us-east-1.images.arcpublishing.com/tgam/5A7ZJQI6EVDIXJFUBATX3DSH64.jpg)
