BMO Financial Group Prioritizes Organic Growth in the U.S.

• Key insights: BMO Financial Group discussed its decision to focus on organic growth in the U.S. rather than pursuing acquisitions.
• What’s going wrong: The bank aims for a return on equity of at least 12% in this market.
• Future outlook: CEO Darryl White emphasized that the bank’s strategy of organic growth is essential to meet its ROE target.

BMO Financial Group is concentrating on enhancing its presence in specific markets within the U.S., preferring not to use its excess capital for bank acquisitions. The Canadian bank is committed to growing its U.S. business through organic means, which it sees as the fastest way to achieve key financial goals.

White discussed how capital could be deployed for initiatives like building new branches. He highlighted potential areas where BMO could expand its market share during a recent earnings call. The bank has set a goal of reaching a 12% return on equity in the U.S. within the next three to five years. In the quarter ending October 31, BMO’s U.S. segment contributed about 37% of the firm’s total profits; however, it hasn’t fully realized the expected revenue benefits from acquiring Bank of the West earlier this year.

Some analysts questioned White about the rationale behind prioritizing organic growth over acquisitions, especially given that U.S. regulators have made it easier to approve mergers and acquisitions.

White responded, saying, “We have a solid strategy to maximize our chances of achieving our return on equity. We need to make progress in America quickly. If an appropriate small acquisition opportunity arises, we won’t hesitate to consider it.” He added that there are other initiatives to pursue if no suitable options are available.

BMO is not the only Canadian bank choosing organic growth over acquisitions. On Wednesday, Royal Bank of Canada’s CEO, Dave McKay, also downplayed immediate acquisition interests, stating that share buybacks and accelerating organic growth continue to be top priorities.

Similarly, Bank of Nova Scotia’s CEO, L. Scott Thomson, acknowledged the focus on organic growth in the U.S. but mentioned that they might consider smaller acquisitions related to their wealth management business.

During 2025, BMO restructured its U.S. operations significantly. In May, it announced a plan to divest parts of its less profitable loan portfolio and reduce reliance on higher-cost deposits to enhance its profitability in the U.S. This restructuring also involved the sale of its U.S. credit card portfolio and exiting certain loan lines that did not meet profitability benchmarks.

In July, BMO onboarded former Bank of America executive Aaron Levine, who now oversees U.S. banking services, which were previously managed separately. In August, the bank outlined an investment strategy focusing on talent acquisition, technology, and branch locations in the U.S. Two months later, it announced plans to divest 138 branches while aiming to open 150 new branches in strategic U.S. markets, including parts of California.

The U.S. operations reported a net income of $582 million in the latest quarter, significantly up from $210 million in the previous year. The division’s return on equity improved to 8.5% as of October 31, or 9.2% when excluding specific acquisition-related costs, compared to just 3.1% from last year.

Like many banks, BMO has substantial excess capital, with a common stock Tier 1 ratio of 13.3% by the end of October, well above the target of 12.5%. BMO’s Chief Financial Officer, Tayhun Tuzun, noted that 22.2 million shares were repurchased throughout the fiscal year, with plans to continue buybacks into 2026.