Bank of Montreal

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Bank of Montreal

Background:

  • Bank of Montreal, one of the first banks established in North America, was at a cross roads in the late 1990s. Most of its strategy initiatives had been fully implemented and, while the bank had experienced strong shareholder returns for almost a decade, the path to continue providing similar returns in the future was unclear
  • Attempts to grow via acquisition and diversification had not succeeded, and competitors were beginning to erode the bank’s share in its core retail banking, commercial banking, securities and institutional asset management businesses
  • Matt Barrett, CEO at the time, initiated efforts to change the mindsets and behaviors of top management to drive major improvements in financial and shareholder performance

Actions:

  • Established a single governing objective for the company – to “maximize the creation and capture of customer value for our shareholders” – and set corresponding financial goals for the company and each business
  • Evaluated the potential shareholder value contribution of each business and the key product, customer and geographic segments within those businesses, building understanding of the concentration of available profits and the bank’s competitive advantages
  • Executive team and line management used that information to change the strategiesand redeploy capital in businesses representing over 50% of the bank’s assets
    • Invested in both organic growth and acquisitions to expand and strengthen businesses with both high returns and significant profitable growth potential
    • Improved the strategies of businesses with marginal profitability so that future growth would create shareholder value, both by shifting the mix of customers and products within those businesses and by improving pricing, risk and operating processes
    • Sold several businesses that could not be materially improved, realizing meaningful gains over their book value
  • Established a common, cohesive framework for continuing to make choices about strategies and resource allocation and to manage performance at both the line of business and enterprise level
    • Reorganized into 32 lines of business, clustered into 3 client-facing groups
    • Introduced new financial measures, a new planning and reporting process and revamped financial systems to provide more granular information
    • Revised executive compensation and employee stock ownership programs
    • Introduced a new strategic management process and formed an Office of Strategic Management to drive the change

Results: (subsequent 5 year performance)

  • 25% total shareholder returns vs 14% for peers
  • $8 billion excess value creation above peers