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While he said it was crucial to address “the needs of the planet for tomorrow,” Darryl White told the bank’s annual shareholder meeting that shedding oil and gas investments doesn’t take current energy needs into account. (Reuters)

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Talking point: The trend among Canadian banks and pension funds toward “decarbonization” followed U.S. firm BlackRock’s pledge to revamp its US$7-trillion portfolio to fight climate change. BMO is among the most prolific fossil-fuel investors in the country, with $56 billion of fossil-fuel financing between 2016 and 2018. In January, The Logic surveyed 13 institutional investors about their carbon-reduction strategies. BMO didn’t respond to multiple requests for comment.

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Scotiabank reported adjusted earnings of $1.83 per share in the first quarter, beating consensus analyst estimates by eight cents. BMO earnings hit $2.41, a four-cent beat. (The Logic)

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Talking point: BMO’s and Scotiabank’s reports of strong investment-banking and trading operations follow RBC announcing the same last week. The results are driven by all three banks enjoying a more stable macroeconomic environment compared to the same quarter last year. Also today, BMO named Cam Fowler chief strategy and operations officer, a newly created role for the bank’s digital services and innovation strategy. BMO is making a cross-bank digital push, including investing in venture capital funds and launching a U.S. digital bank. In December 2019, the bank said it would cut five per cent of staff while ramping up the delivery of its digital services. Though it’s trying to expand its U.S. operations, the bank’s personal and commercial division in the country dropped 21 per cent, bucking a growth trend from the past two years. Scotiabank’s domestic banking decreased one per cent this quarter compared with last year, despite announcing in January that it wanted to get 40 per cent of its earnings from Canadian banking. Wealth management increased 12 per cent $309 million, now accounting for 13 per cent of overall earnings—Scotiabank is hoping it’ll hit 15 per cent of overall earnings.

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BMO’s purchase of the New York-based firm, whose software supports about two per cent of daily U.S. stock trading, is subject to regulatory approval and expected to close in the second quarter. (The Logic)

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Talking point: BMO didn’t disclose the purchase price, but The Globe and Mail reported the bank was planning to pay about $100 million. That’s the same price TD Bank paid in 2018 for Layer 6, a Toronto-based AI firm. Each of Canada’s large banks is now spending over $3 billion annually on tech. The Clearpool acquisition is BMO’s second recent one, deepening its exposure to U.S equity markets. In September 2018, BMO acquired New York-based KGS-Alpha Capital Markets. Clearpool has over 100 institutional clients, mostly U.S. broker dealers that offer some similar services to BMO. However, BMO will put in place “information barriers” to establish a firewall between Clearpool and itself.

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The cuts will affect about 2,300 people across all parts of the bank’s operations. It reported net income of $1.2 billion for the quarter ending October 31, a drop from about $1.7 billion last year. (The Logic)

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Talking point: These are the most dramatic staff reductions by BMO, or any Canadian bank, in more than 15 years. Until now, Canadian financial institutions have largely avoided the cuts roiling global banks, which have eliminated more than 75,000 positions so far this year. BMO is looking to reduce costs while increasing its efficiency ratio, a measurement for how much it spends to create a dollar of revenue. It’s currently at 60 per cent, but it’s looking to hit 58 per cent by fiscal 2021. U.S. banks will cut over 200,000 staff in the next decade as automation allows firms to replace humans, according to an October report from Wells Fargo. That’s possible in part because of their US$150-billion annual investment in technology. Canadian banks are spending a fraction of that.

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Scotiabank raised dividends by three cents to 90 cents per share and saw two per cent overall profit growth, driven by a $262-million rise in international banking profit from 2018. BMO reported one per cent profit growth, did not adjust its dividend rate and put aside $306 million for credit losses, up from $186 million in 2018. (The Logic)

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Talking point: Scotiabank has the biggest overseas presence of the big six banks, and has recently focused on international expansion in four Latin American countries—Mexico, Chile, Colombia and Peru—including a $2.9-billion majority stake purchase of Banco Bilbao Vizcaya Argentaria in Chile, and a $130-million controlling stake acquisition in the Banco Cencosud in Peru. This focus seems to have paid off—international banking earnings are up 90 per cent from a year ago. Meanwhile, the bank is selling operations in nine Caribbean countries, and is engaged in a standoff with the prime minister of Antigua and Barbuda over the sale in the country. Meanwhile, BMO has focused on the U.S. for international growth: earnings in this division saw 1.1 per cent growth—that’s the slowest since the fourth quarter of 2017, and is largely driven by increased loan loss provisions. BMO CEO Darryl White also cited escalating trade tensions as a factor in the tepid results.

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The bank has set up a nine-person team to provide debt financing to tech startups. Devon Dayton, one of BMO’s managing directors for the group, declined to confirm the final scope of the team once it finished hiring. The bank wants to reach companies from the early stage to initial public offerings. (Globe and Mail)

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Talking point: BMO is the latest Big Five bank entering the increasingly competitive market to lend money to Canadian tech companies. BMO already counts tech companies as clients, so this could simply be a consolidation of existing clients in a new group, although the bank has brought in experienced personnel like Dayton. The move comes on the heels of Silicon Valley Bank’s Canadian banking licence, which was awarded in March. Venture debt is becoming a more attractive option to entrepreneurs; speaking to The Globe in early January, Real Ventures partner Janet Bannister said the firm’s portfolio companies are increasingly taking on debt, while banks are hoping to work with companies that can grow to be the next Shopify.

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The two major banks are joined by wholesale bank Concentra in loaning $80 million to the joint venture part-owned by Canopy Rivers Inc., the venture investment arm of Canopy Growth Corp. The funds will let PharmaHouse purchase a 1.3-million-square-foot glass greenhouse growing facility in Leamington, Ont. (Financial Post)

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Talking point: This is the second time both BMO and CIBC have backed a cannabis company. BMO co-led financing in Canopy’s $175 million raise last January, and CIBC led Canopy Rivers’ $104-million funding round in June 2018. Despite legalization, traditional banks are wary of financing cannabis companies. Canopy—both Rivers and Growth—can perhaps thank its ties with the banks for earning the institutions’ trust: Bruce Linton, CEO of Canopy Growth and its VC branch, said, “The entire team at Canopy Rivers has great pedigree. They come from CIBC, TD, OMERS, and so it wasn’t difficult for us to convince the big banks that we have something great going at PharmHouse.”