Bank of Montreal Eyes U.S., China Acquisitions for Insurance Group

September 23, 2010

Bank of Montreal is on the hunt for acquisitions in the United States and China to expand its wealth management operations, while it sees growth in Canada coming from established operations, one of BMO’s top executives said Wednesday.

Canada’s No. 4 bank, bought AIG Canada for C$375 million ($364 million) last year, building up its domestic insurance operations, but there are not likely any other such deals on the horizon, said Gilles Ouellette, chief executive of BMO’s private client group.

“There are not a lot of acquisition opportunities in Canada, but in the U.S. and in China, we are aggressively looking to expand through M&A,” he said at an investor conference in Toronto, without giving more details about possible deals.

BMO’s private client group is made up of its North American wealth management operations: full-service brokerage BMO Nesbitt Burns, BMO Mutual Funds, U.S. wealth manager Harris Private Bank, BMO Harris Private Banking in Canada, online brokerage BMO InvestorLine, BMO Asset Management, and BMO Insurance.

Ouellette said the insurance arm is going to be a big driver of growth, especially with the aging population and the prospect of rising interest rates over time.

Looking to the AIG Canada deal, he said BMO got “really lucky” to have bought the firm, which deals with about 5,000 insurance agents across the country.

American International Group Inc. put its profitable AIG Canada unit on the market in late 2008 to raise cash during the financial crisis, when it and many other financial companies were on the brink of collapse.

With “the timing of this … insurance companies were not in a position to buy anything and so we just lucked out,” Ouellette said.

He said the business was making money and that it would grow as more Nesbitt Burns investment advisers are trained in insurance. About half of its investment advisers are currently licensed to sell insurance.

Ouellette said that BMO would be launching some new products next month that tie together its strengths in insurance and capital markets.

He also pointed to exchange traded funds as a growth area. BMO entered the ETF market last year and has already attracted C$1 billion ($970 billion) to its 30 funds.

($1=$1.03 Canadian) (Reporting by John McCrank; editing by Rob Wilson)

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