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Bank of Montreal is one of the few lenders to provide business accounts to companies in Canada’s four-year-old medical marijuana industry, serving about a dozen firms.

Fred Lum/The Globe and Mail

Bank of Montreal is open to more deals with cannabis companies, as long as those firms can get past "traps" in the lender's due-diligence process, chief executive Darryl White said.

The Toronto-based lender became the first major Canadian bank to arrange a stock sale for a company tied to cannabis this month when its capital-markets unit helped lead a $200.7-million equity financing for Canopy Growth Corp. In his first public comments about the deal, Mr. White called the marijuana producer "a bona fide business operating within the boundaries of the law."

"This is a transaction for a good client who is focused on medical marijuana in Canada with no nexus to the United States," Mr. White, 46, said on Thursday in an interview at the World Economic Forum in Davos, Switzerland. "We put it through the same due-diligence process we would any other underwriting."

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BMO is "very conscious" of the regulatory environment in dealing with Canopy, Mr. White said, describing the Smiths Falls, Ont.-based producer as "the biggest and, in our mind, most successful company" in the industry. He said the lender would consider similar transactions, as long as they "pass all of the tests."

"We assess every single case with those traps I just described," he said. When asked if the bank plans to take on a bigger role in the marijuana industry, Mr. White said, "We'll have to see."

BMO is one of the few Canadian banks to provide business accounts to companies in the four-year-old medical marijuana industry, serving about a dozen firms. The industry is exploding as Canada moves toward legalizing pot for recreational use this year. At least 84 companies tied to marijuana are trading on the country's exchanges with a combined market value of about $37-billion.

Non-bank Canadian securities firms including Canaccord Genuity Group Inc., GMP Capital Inc. and boutique companies have been most involved with the nascent industry. While most of the country's big banks have shied away from making commercial loans, Canadian Imperial Bank of Commerce was part of a $20-million credit agreement with MedReleaf Corp. last year.

In a wide-ranging interview, Mr. White also touched on economics, saying he's noticed a "positive vibe" at Davos and in markets in Europe, Asia and North America.

"The big risk that underlies all that is trade," Mr. White said, adding that he worries about the consequences of the North American free-trade agreement disappearing or being radically reshuffled. "The question is, will all that be disrupted if we have bad news on NAFTA?"

Canada's economy is unlikely to repeat last year's 3-per-cent growth rate that topped the Group of Seven countries, he said. Still, it "won't be bad" given the country's overall strong economy and falling unemployment rate. He described Canada's housing market as facing a "supply-demand imbalance" mainly in Vancouver and Toronto, while being balanced in the rest of the country.

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"For the foreseeable future, people shouldn't be overly concerned" about housing, said Mr. White, who took over as CEO about three months ago.

Mr. White also addressed the issue of sexual harassment and the #MeToo movement, saying he expects such issues to surface on Wall Street despite long-standing efforts to clean up the industry.

"There will be problems and I think the liberalization of people feeling comfortable raising their hand is absolutely appropriate," he said. "Major financial institutions began to get this right a long time ago, so it's conceivable that despite the perceptions of Wall Street, the financial services industry – and appropriately so – was ahead of others."

Andrew Willis of Report on Business tells investors why they should be wary of buying into private pot businesses going public The Globe and Mail
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