BMO Capital Markets ramps up as European firms back off

TORONTO• Bank of

Montreal is gunning for the U.S. investment-bank business that’s being surrendered by European firms like Deutsche Bank AG and Société Générale SA.

The Toronto-based lender expects to reach its goal of being a “Top 10” North American investment bank “dramatically” ahead of its five-year deadline, Dan Barclay, chief executive officer and group head of BMO Capital Markets, said in an interview at the firm’s Toronto headquarters.

“The Europeans are still re-establishing what is their desire and aspirations in the U.S. and most of those are smaller, so that share is available,” Barclay said. “That’s one of the big drivers for us for actually gaining the share in the U.S.”

Executives at Canada’s fourth-largest lender by assets set the goal last October. The five-year targets include efficiency gains, U.S. revenue growth of about 10 per cent a year and doubling U.S. market share. The push comes as banks across Europe are cutting costs, with Deutsche Bank and Société Générale trimming operations abroad amid restructurings.

Barclay said the U.S. offers the best chance to “scale up,” presenting “broad-based opportunities” in areas including investment banking and trading.

BMO Capital Markets earned about 44 per cent of its $3.56 billion in revenue in the first nine months of the year from the U.S., where it focuses on mid-market clients from key offices in New York, Chicago, Houston and San Francisco. It’s shooting for 45 per cent to 50 per cent.

BMO Capital Markets is the only one of six major Canadian bank-owned investment banking platforms to post higher revenue this year, with a 10 per cent gain in the first three fiscal quarters fuelled by trading and investment-banking fees. Like its Canadian peers, overall net income in capital markets has declined, though Bank of Montreal’s 4.8 per cent profit slide is less than all others except larger rival Royal Bank of Canada.

“We’re achieving the outcomes we want, and in my mind I have high confidence that we’re going to hit those targets,” said Barclay, a former mergers-and-acquisitions banker who became group head on Nov. 1.

PETER J THOMPSON / FINANCIAL POST FILES BMO Capital Markets has built its U.S. business out of key offices in cities like Chicago and Houston.