The continued success of Canadian banks and financial services companies will be affected by their ability to grow and succeed in the United States, according to Al McNally, chairman and CEO of Harris Bank and vice chair of Bank of Montreal. He also outlined BMO’s strategy for Harris Bank.
McNally told the Canadian Club in Montreal today that expansion in the U.S. is key to ensuring that Canada continues to grow as an important financial services provider.
“While getting it right at home in Canada is necessary and terribly important, it’s not sufficient for Canadian banks and financial services companies,” he said.
The North American financial services industry has been transformed by information technology, demographic shifts, consolidation and globalization, increasing specialization, the power of capital markets and deregulation, according McNally.
He said seven of the top 10 financial institutions in the world, as measured by market capital, are American. In addition, consolidation is dramatically reshaping dramatically the U.S., North American and global financial services industry. “In this environment, Canadian financial institutions can’t stand still — and we are not,” said McNally.
According to McNally, the financial services reform legislation currently before Parliament will bring a new and modern regulatory framework that will ensure a strong, sound and competitive Canadian financial services industry.
McNally, who is a Quebec City native now based in Chicago, said the rapid consolidation in the U.S. and the integrating continental marketplace will lead American financial institutions to increasingly target foreign markets, including Canada.
“Just like in hockey, the best defence is a good offence,” said McNally. “That is why today Bank of Montreal is the leading Canadian bank in the United States; the leading Canada-U.S. financial services organization that is aggressively pursuing growth and targeted expansion in the U.S., while continuing to invest in our Canadian franchise.” The bank earns 31 per cent of net income in the U.S.
McNally outlined the three components of BMO’s U.S. growth strategy:
- Become the dominant full-service bank in Greater Chicago;
- Leverage the Harris Bank franchise to become the premier U.S. mid-market corporate/investment bank centred in the Midwest and build on BMO Nesbitt Burns North American strengths in high growth areas likeenergy, and media and telecom; and
- combine the longstanding strengths and expertise of Harris Bank’s private banking and BMO Nesbitt Burns full-service brokerage to expand the bank’s private client franchise in the U.S. sunbelt and other fast-growing, affluent urban centres across the U.S.
McNally touched on the success of BMO’s strategy with Harris Bank in Chicago. In 1993, the bank established a goal to triple the Harris Bank by the year 2002 and is right on track, meeting or exceeding all its targets. “Earnings have more than doubled from US$110 million in 1994 to US$243 million in 2000, representing 16% average annual compound growth in earnings,” noted McNally.
He said success in the U.S. requires selectivity and focus, bringing real strength and true competitive advantages to those markets and a North American understanding of the realities of the integrating continental marketplace.