BMO CEO Darryl White sees savings, job gains buffering emerging risks

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Bank of Montreal Chief Executive Officer Darryl White said he’s optimistic about the strength of the global economy as high household savings and strong employment trends may provide a buffer against inflation and other risks.

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Russia’s war in Ukraine, the rising cost of essential goods and disruptions to global supply chains are among the mounting risks to global growth, White said in a speech at the lender’s annual meeting on Wednesday. Still, households cushioned with excess savings, strong economic growth in the first few months of the year and the lowest Canadian unemployment since 1976 provide reasons for optimism.

“I have a balanced perspective that moves from positive today to a little bit uncertain tomorrow,” White said in an interview after his speech. “But I’m not in the camp of calling for recession or stagflation or anything like that. I think it’s too early for that.”

Bank of Montreal is seeing signs that personal-banking customers are starting to spend their savings as pandemic restrictions are removed, and commercial clients “are still prepared to invest” and have capital-spending plans ready to go, he said. However, businesses are still hedging a bit in their investment plans.

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“I wouldn’t say they’re at the point where they’re putting their foot on the brake,” White said. “They’re just thinking about it a little bit more than they might have a couple months ago.”

The rising risks don’t give White any regrets about the US$16.3-billion acquisition of Bank of the West announced in December. He said that the integration planning has revealed a bank in even better shape than he expected, with a stronger bench of personnel and greater opportunities in some businesses.

I’m not in the camp of calling for recession or stagflation or anything like that

Darryl White

The acquisition “was based on a view of building a business for the next 10, 20, 200 years,” White said. “There isn’t anything that we’ve seen in the last couple of months that changes or alters our thesis.”

The Toronto-based bank’s annual meeting gave White the opportunity for something of a victory lap on his multiyear effort to improve the performance of the lender’s U.S. operations. While the business had long offered faster growth than the Canadian operations, its profitability had lagged. That trend is no longer true, and the U.S. and Canadian metrics are now comparable, he said.

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That performance is a big factor in why Bank of Montreal shares have climbed 25 per cent in the past 12 months, the best performance in the eight-company S&P/TSX Commercial Banks Index.

At the annual meeting, investors voted largely in line with the company recommendations on all shareholder proposals. Only a measure seeking an advisory vote on environmental policies garnered significant support, with 14 per cent of the vote against the company’s recommendation. Similar proposals at other Canadian banks have won comparable support.

Looking ahead, White said the focus for the U.S. operation will be continuing to execute on its priorities while preparing for the Bank of the West deal to close and ensuring a clean integration.

“After that, we’re in a really interesting position,” White said. “We’re one of the most important super-regional banks in the United States, and we’ll have to keep doing what we’ve been doing.”

Bloomberg.com