Dominion Bond Rating Service has confirmed its debt ratings and outlook on the Bank of Montreal, following a review.

DBRS reports that it is confirming all the debt ratings and trends “reflecting BMO’s solid positioning in its domestic retail franchise — particularly business banking, execution of its U.S. expansion strategy, solid credit risk profile, and maintenance of a respectable financial risk profile.”

“Expanding the U.S. platform through Harris/Chicagoland Bank has come from opening new branches and infill acquisitions. Although BMO has a well-entrenched U.S. retail banking franchise, future meaningful growth will be more challenging as competitors are making major investments to expand their distribution capabilities in Chicagoland, including aggressively building branches,” it says.

“In the near term, DBRS expects Harris/Chicagoland Bank to maintain the current expansion strategy, as the competitive landscape is very fragmented. Longer term, the acquisition of Bank One Corp. by JP Morgan Chase & Co., a direct competitor of Harris Bank, could alter the competitive landscape dramatically, given the strength of the combined entity,” DBRS says. “Integration issues in the near term could present Harris/Chicagoland Bank with opportunities to make some gains.”

“BMO’s conservative business culture has contributed to its ongoing consistent performance, as it has avoided significant capital markets deterioration and serious asset quality problems over the past three years. With a strategic focus on earnings stability, DBRS anticipates the credit and financial risk profiles will remain relatively unchanged in the near term,” it concludes.