Bank of Montreal (JETU)

Bank of Montreal was chartered in 1817, making it the oldest continuously operating bank in North America and one of the founding financial institutions of what would become Canada. Its founding preceded the establishment of the Canadian nation by fifty years and reflected Montreal’s role as a merchant and financial centre during the British colonial era. The story of Bank of Montreal is, in many ways, the story of North American financial development: a small institution that survived the transition from colonial economy to industrial capitalism, through war, depression, and boom, adapting its operations to remain relevant across two centuries.

From merchant bank to national institution (1817–1960)

Bank of Montreal opened its doors in 1817 with the dual purpose of serving merchants and facilitating trade. Montreal was the fur-trading capital of British North America, and the bank provided credit lines for the fur trade—financing trappers, traders, and merchants who moved goods between Europe, Montreal, and the interior. The bank also accepted deposits, which it held in reserve or deployed into lending.

The bank grew as Montreal and then Canada itself grew. Following Confederation in 1867, Bank of Montreal became a natural anchor for a newly independent nation’s financial system. The bank opened branches across the territories and provinces as settlement expanded westward. By the late nineteenth century, it was the largest bank in Canada. When gold discoveries in the Yukon and British Columbia accelerated western expansion, Bank of Montreal financed mining operations and the merchants who supplied them.

The twentieth century brought consolidation of the banking industry. Hundreds of small, regional banks founded across Canada in the late 1800s failed or merged into larger institutions. Bank of Montreal, being large and well-capitalized, absorbed smaller competitors and strengthened its position. By the middle of the twentieth century, Bank of Montreal and four other large banks—Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, and Canadian Imperial Bank of Commerce—dominated Canadian banking.

The bank survived the Great Depression of the 1930s, though like all banks it faced deposit runs and borrower defaults. Its size and diversified customer base allowed it to withstand the crisis better than thousands of smaller institutions that failed. The Depression was a reminder of the bank’s vulnerability to economic shocks and the importance of maintaining strong capital reserves.

Expansion into the United States (1960–2000)

Throughout most of its history, Bank of Montreal’s operations were primarily Canadian. However, in the second half of the twentieth century, as the US economy grew and became increasingly important to Canada, Bank of Montreal established a foothold in the United States. Initially, this meant opening correspondent relationships with US banks and establishing offices in New York and other major financial centres to facilitate trade finance and foreign exchange transactions.

As US banking deregulation progressed in the 1980s and 1990s, Bank of Montreal explored larger acquisitions. The bank acquired Harris Bancorp in 1984, gaining a network of branches and customers across Illinois, giving it a material presence in the US Midwest. The Harris brand became the vehicle for Bank of Montreal’s US retail and commercial banking operations. Through the 1990s, the bank grew this platform organically and through smaller acquisitions, expanding across the Great Lakes and into adjacent states.

This US expansion was strategically important. It diversified Bank of Montreal’s earning streams away from a maturing Canadian market and exposed the bank to higher US interest rates during much of the 1980s and 1990s. It also created operational complexity: the bank now had to manage two regulatory regimes, two currency exposures, different lending practices, and different economic cycles.

The Marshall & Ilsley acquisition and modern era (2000–present)

Bank of Montreal’s largest US acquisition came in 2011 with the purchase of Marshall & Ilsley Bank, a Milwaukee-based regional bank. This $4.1 billion deal significantly expanded the bank’s US footprint and customer base. Marshall & Ilsley had been a respected regional bank for decades but suffered heavy losses in the 2008–2009 financial crisis when Wisconsin real estate and commercial lending deteriorated sharply. Bank of Montreal acquired it at a depressed valuation, betting that the franchise would recover once the crisis ended.

This acquisition, in hindsight, exemplified both the opportunity and the challenge of regional banking in the US. Bank of Montreal did integrate the bank successfully and it contributed to earnings. However, the US regional banking market became increasingly competitive as larger megabanks consolidated and fintech companies began eroding share in consumer lending and payments. Marshall & Ilsley, rebranded as BMO Harris, operates competently in the midwest and parts of the US south, but in an industry that is gradually consolidating.

Parallel to US expansion, Bank of Montreal transformed its wealth management business. In the 1980s and 1990s, managing money was a peripheral activity for most commercial banks. However, as banks realized they could charge higher margins on investment management than on lending, they began building wealth management operations. Bank of Montreal acquired investment management firms and advisors, building BMO Global Asset Management into a significant manager of investment funds and institutional portfolios. This segment has become increasingly important as a source of fee income, particularly in low-interest-rate environments where net interest margins compress.

The digital transition and contemporary challenges

Since the 2000s, Bank of Montreal has faced the same technological disruption that has challenged all traditional financial institutions. Digital banking, initially a supplementary channel, became central to customer expectations. Mobile banking apps, online account opening, and digital payment platforms became table stakes. Non-bank fintech companies began attacking the bank’s business model: peer-to-peer lending platforms, robo-advisors, and digital payment companies took customers and transaction volume that banks had previously dominated.

Bank of Montreal responded with significant investment in technology and digital channels, reducing branch footprints and migrating customers to self-service platforms. This investment is ongoing and necessary to compete. However, it required the bank to manage the cost of legacy systems and the transition away from them while simultaneously building new capabilities—a difficult multi-year exercise.

The bank also faced new regulatory requirements following the 2008 financial crisis. Higher capital requirements, stress testing, liquidity regulations, and resolution planning all increased the cost of doing business and constrained how much capital the bank could return to shareholders. In the post-2008 era, Bank of Montreal, like all large banks, became more capital-intensive and more heavily regulated.

Bank of Montreal today

By the 2020s, Bank of Montreal had evolved from a Canadian bank with US operations into a true North American institution. Its Canadian Banking segment remained the largest profit contributor but was mature and facing low growth. Its US Banking segment contributed material earnings but operated in a fiercely competitive, consolidating market. Its Wealth Management segment was growing and generating high-margin fee revenue. The bank maintained a large retail presence through branches and digital channels, a significant commercial banking business, and a growing institutional and investment banking franchise.

The bank’s strategy for the 2020s centered on digital transformation, cost reduction, and positioning wealth management and investment banking as growth engines. This strategy makes sense: traditional net-interest-margin banking faced structural headwinds from competition and regulation, while high-margin, capital-light wealth management offered better return prospects.

Yet Bank of Montreal also remained vulnerable to economic cycles. A recession in Canada or the US would damage loan portfolios and profitability. Real estate market downturns, given the bank’s large mortgage exposure, would materially harm earnings. And the long-term challenge of fintech competition and the shift toward capital-light, fee-based businesses meant the traditional banking model was gradually becoming less important as a share of the financial system.

How the institution endures

Two centuries is a remarkable lifespan for a financial institution. Many banks failed or were acquired. Bank of Montreal survived because it was large, well-managed, conservative in risk management, and willing to adapt. It survived the depression by not over-leveraging. It survived the digital revolution by investing in technology rather than denying its inevitability. Its longevity is a testament to the power of scale, brand, and customer relationships in banking—advantages that persist even as the competitive environment changes. Whether it will survive the next century is an open question that depends on management’s ability to navigate the next wave of disruption in financial services.