It's official: M&I is absorbed by Canada's BMO

By Paul Gores of the Journal Sentinel

July 5, 2011 |(26) Comments

Marshall & Ilsley Corp., Wisconsin's largest bank, was officially absorbed into the Canadian parent of Harris Bank on Tuesday after finding itself unable to recover from staggering losses in Sun Belt real estate markets it had pursued aggressively in recent years.
The closing of the $4.1 billion all-stock deal with Toronto's BMO Financial Group ended M&I's run as a Milwaukee-based bank that began in 1847. Although the M&I name will be around for another 18 months or so while BMO merges the bank into its systems, M&I eventually will join Marine, Firstar, State Financial and St. Francis in the growing graveyard of bank brands that once called this area home. The new brand name will be BMO Harris Bank.
"It's a sad day for Wisconsin that you lose what had been the crown jewel of banks," said Kenneth Brusda, a Menasha money manager who has followed M&I for years.
But from another perspective, the acquisition pumps new vitality into a bank that had been slumping for several years as it dealt with billions of dollars in bad loans.
In announcing the closing of the transaction Tuesday, BMO said it is committed to making an additional $5 billion in credit available in small- and medium-sized business loans in its U.S. markets in the Midwest, Arizona and Florida to help with the nation's economic recovery.
"(While) some companies are finding it difficult to procure financing, this would be a message to the contrary," said Mark Furlong, who was M&I's chairman and chief executive and now is president and CEO of BMO Harris Bank.
Bill Downe, president and chief executive of BMO Financial, was in Milwaukee for the closing Tuesday and participated in an employee barbecue that raised about $25,000 for the United Way. He said the combined bank will stress customer service.
"With the introduction of BMO Harris Bank, we are ready to set a new standard for excellence in banking. We are a strong Midwest-rooted, socially responsible bank that puts customers first and is deeply committed to the communities in which our employees live and work," Downe said.
Downe said in an interview that M&I's 21-story office tower in downtown Milwaukee "is our Wisconsin headquarters and will be our Wisconsin headquarters."
Although some employees have lost their jobs as a result of the merger, Furlong said it was too soon to say how many. He said other BMO jobs will come to Wisconsin as the company grows over the next four or five years.
The head of M&I's wealth management unit, Ken Krei, is among those who will continue to operate from Milwaukee as global head of private banking for BMO. M&I chief investment officer Tommy Huie and a team of portfolio managers and analysts also will continue working in Milwaukee, Furlong said.

Deal reduces risk

M&I had labored under the weight of real estate loans that went bad, particularly in Arizona, where home values have plummeted in the last four years.
M&I posted a loss of more than $2 billion in 2008, followed by a loss of $859 million in 2009 and almost $617 million last year. Its struggles - and the prospect of more quarterly losses to come - set M&I's board on a search late last year for a buyer. BMO, which had been looking to expand in the Midwest, outbid another unidentified bank to acquire M&I. The deal was announced in December.
As part of the acquisition, BMO - known in Canada as the Bank of Montreal - agreed to repay M&I's $1.7 billion Troubled Asset Relief Program, or TARP, investment from the U.S. Treasury. It made that repayment Tuesday.
Brusda, president of North Star Asset Management, said he thought M&I could have survived and, in a few years, been worth more than BMO paid.
"But it's a quality entity and certainly reduces the risk there," Brusda said.
John Rickmeier, who analyzes the strength of banks as president of IDC Financial Publishing Inc. in Hartland, said there was no guarantee M&I would have remained independent in the long run.
"They might have left anyhow," Rickmeier said. "If they were successful, if they had not got into loan problems, with the consolidation that's going on in America, M&I might have been the choice of another large institution to broaden their base."
Rickmeier called the Harris Bank franchise "a very strong banking group."
"The Canadian firms simply didn't get involved in the difficulties in this country, in terms of delinquency, and they certainly didn't in Canada. They didn't blow up their housing system like we did here and create a bubble," he said.
Downe said BMO intends to be a strong corporate citizen, as it has in its other markets. Some evidence of that occurred last week, when BMO said it was extending by five years M&I's commitment to sponsor a major stage at the annual Summerfest event on Milwaukee's lakefront.
On Tuesday, he said the company plans to be a major supporter of local United Way organizations.
"The United Way and its agencies are vital community institutions which we can be counted on to stand behind," Downe said.
One benefit for M&I shareholders who opt to stay as shareholders of BMO will be cash dividends.
M&I slashed its quarterly dividend to a penny from 32 cents in 2008 as it tried to preserve capital. BMO has paid dividends continuously since 1829, most recently about 70 cents per share quarterly.
"You do get a significant boost to your cash dividend, which is a plus," Brusda said.

***

BMO Financial Group

Founded: 1817
Headquarters: Toronto
Assets: $413 billion
Employees: 38,000
Canada's fourth-largest bank

Marshall & Ilsley Corp.

Founded: 1847
Headquarters:
Milwaukee
Assets: $49.6 billion
Employees: 9,100 (4,300 in southeast
Wisconsin)
Wisconsin's largest bank

~Milwaukee Journal Sentinal

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