The Bank of Montreal (BMO), currently Canada’s third-largest bank, announced on Saturday that it will be tapering its retail auto finance business and focusing more on other niches. This move will impact these dealings in Canada and the United States, and result in several job cuts.
Bank of Montreal scaling down retail auto finance business
Poor debt provisions in retail trade spiked to C$81m, compared to a C$9m recovery a year earlier, according to the latest quarter-end results. This performance signifies the increasing pressure flowing from rising borrowing costs.
In a communication shared with Reuters, the Bank informed automotive dealers that new agreements are off the table as of 15 September. However, the institution wi
l fund agreements submitted and approved before the cut-off date. In a statement to Reuters, the Bank of Montreal said:
By winding down the indirect retail auto finance business, we have the ability to focus our resources on areas where we believe our competitive positioning is strongest.
In terms of the existing agreements, the bank financed car dealers instead of car buyers. During the third quarter, gross loans attached to the retail auto business increased by roughly 34% to C$17.36m, making up about 2.7% of the organisation’s total loans.
Fast-rising interest rates go hand-in-hand with bad loans and forced BMO to dig up roughly C$492m to cover debt losses. This is a significant increase from the previous year’s C$136m.
Don’t miss out the latest news, subscribe to LeapRate’s newsletter
BMO looked toward the United States for new growth possibilities and spent $16.3bn on its Bank of the West acquisition. This gave it the foothold to expand into 32 states. At present, the United States makes up two-thirds of the bank’s profits.
