The Bank of Montreal has been making U.S. acquisitions for four decades but is now aiming for national scope. Find out more.
Why do Santander and BMO think it is worth trying to beat the odds? Partly a lack of options and partly a belief that technology has changed the equation. Each bank needs to find new sources of growth and each thinks that digital banking can help muster the scale to make a go of the U.S. But regulatory hurdles and economic challenges await.
BMO, the fourth largest Canadian lender, has been making U.S. acquisitions for four decades but is only now aiming for national scope. Though the return on equity in U.S. banking is generally lower than at home, BMO argues that the market is a logical target. The Bank of the West purchase now allows BMO to push forward with a conventional growth plan. The deal doubles its network to more than 1,000 branches and gives it a foothold in the huge California market and 31 other states.
Santander is opting for a narrower strategy built around online banking and auto loans. It plans to strip down its retail product offerings from 314 to less than 20 and use the digital app developed for Europe to cut costs. It has stopped new mortgage lending and bought out the minority investors in its U.S. consumer unit.
“We are not going to put capital in places where we are not competitive,” says Ana Botín, executive chair. She adds that rising U.S. interest rates are helping to make retail banking more profitable than it has been in decades, and Santander can beat the odds because “we have something no one else has, global scale in auto lending”.Article content
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