There's new leadership at Bank of Montreal's capital markets division, but the plan remains the same.
Darryl White and Pat Cronin take over this week as the top two executives in the business, following on the retirements of Tom Milroy and Eric Tripp from those jobs. And as Mr. White and Mr. Cronin sat down for an interview Monday to detail what they will do, the new team actually burst into laughter at the suggestion that there will be big changes.
"The strategy isn't changing, and it isn't changing for two reasons," said Mr. White, who is now head of the capital markets business. "We think it's working, and we have lots of evidence of that. And at the same time, while we think it's working, we haven't finished running the play and we think we have a lot of room to continue to grow the business and take [market] share."
There are tweaks, sure, including a new chief operating officer role, filled by Mr. Cronin, who takes on a multifaceted set of responsibilities. There are also a suite of executive promotions designed to emphasize the ties between offices in Toronto, the United States and abroad. But the overall plan? That remains to keep the focus on improving the profitability and market share of BMO's growing U.S. and international businesses while holding onto a top-tier position in Canada.
BMO's U.S. capital markets business now generates about a quarter of the bank's capital markets profit overall, more than double what it was just a few years ago.
Still, given that the head count is closer to 50-50 in Canada and the U.S., that earnings performance is not as strong as it should be.
If the U.S. can keep gaining, BMO's capital markets return on equity should start to move higher from its current performance of about 20 per cent. That's in the middle of the pack among Canada's big bank-owned firms.
While the U.S. performance isn't there yet, Mr. White argues there is no reason to shift focus away from the mid-market in the U.S., says Mr. White. At home, BMO aims to serve companies of all sizes, but the U.S. strategy is to look for business from companies that are $200-million (U.S.) to $5-billion in size. Though the build-out of offices and hiring of new bankers is largely done, the execution of the strategy isn't yet, he says.
There is enough business in the U.S. that if BMO can win the market share battle, it could be bigger in the U.S. some day than in Canada. As Mr. White points out, the U.S. mid-market – even after subtracting the share of business that the biggest U.S. investment banks get – is two to three times the size of the whole Canadian investment banking market.
As BMO grows outside Canada, the focus shifts increasingly to ensuring that those offices work together.
Mr. Cronin's job as COO is to ensure that BMO has a central command in capital markets for eight key areas, which include risk control, balance sheet oversight, liquidity risk management and management of international operations. The COO's role is not to displace functions such as the parent bank's chief risk officer, but to augment them.
"The time is right to have a centralized capability within capital markets," Mr. Cronin said.
In addition to the COO's mandate, the bank is making a raft of promotions from within, shifting experienced bankers around from office to office to drive home the international connections.
Perry Hoffmeister, who has been running investment and corporate banking in the U.S since 2010, succeeds Mr. White as global head of investment and corporate banking. He already has some global experience, having run European investment banking for Lehman Brothers before joining BMO. He will split his time between New York and Toronto.
Peter Myers, who had been head of investment and corporate banking in Canada as well as internationally, moves to BMO's big Chicago office to run investment and corporate banking in the U.S. And Dan Barclay moves from head of Canadian mergers and acquisitions to head of Canadian investment and corporate banking. John Armstrong becomes head of Canadian M&A, replacing Mr. Barclay.
On the trading side, with Mr. Cronin moving up, Luke Seabrook becomes global head of trading products.
It's not the most exciting transition, but those are rarely the ones you want, because it usually means something was going wrong.
"We are going to stay the course because we like the way the course looks," said Mr. White.