U.S. tax cuts a boon so far to BMO, but not Canada as whole: CEO

TORONTO The Bank of Montreal is reaping the benefits of increasing consumer confidence and tax cuts in the United States, but the lender’s chief executive says there are signs Canada as a whole may not be so lucky.

In his first shareholder meeting as CEO, Darryl White told reporters that the new U.S. tax regime is already starting to sap investment dollars from Canada. “I would say we are seeing some departure of capital as a result of the regime,” White said Thursday after the meeting in Toronto.

“I wouldn’t say it is profound at this stage, but I would say that in real-time, we are seeing the early stages of a decision that’s being made to invest, at the margin, in the United States before Canada with some of our customers.”

While a migration of capital southward could become a drag on the Canadian economy, BMO appears to be well positioned to benefit.

During his speech to shareholders, White said that BMO’s U.S. businesses now generate more than 25 per cent of total profits, and will continue to grow faster than the rest of the bank.

“Our business mix is well matched to the constructive economic environment in the U.S.,” White said. “In personal and commercial banking, we’ve seen steady growth as we take advantage of rising consumer confidence and the effects of lower taxes.”

The bank’s U.S. commercial banking business is still growing its footprint and the lender is delivering higher returns from its investment in its U.S. capital markets unit, said White, who succeeded Bill Downe as CEO last year.

Overall, he added, the U.S. businesses contributed $1.43 billion to its bottom line last year. BMO reported a profit of $5.35 billion for 2017, an approximately 16-per-cent increase from 2016.

“With each improvement in our U.S. business, we become that much more relevant to our Canadian customers,” White said. “We have a distinct competitive advantage.”

White’s comments followed those of Royal Bank of Canada CEO Dave McKay, who said in a recent interview that a significant shift in investment from Canada to the U.S. was underway.