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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.”

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Canada’s fifth-largest bank is facing pressure from investors to cut costs, as it grapples with an underperforming retail division and mounting expenses, according to sources who spoke to The Globe and Mail. Christina Kramer, head of personal and small-business banking, is expected to replace Kevin Patterson as head of technology and operations; Patterson plans to retire this year. Laura Dottori-Attanasio, current chief risk officer, will reportedly replace Kramer. (The Globe and Mail)

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Talking point: The cuts—if the board approves them—will follow mass layoffs at BMO, which, in December 2019, announced 2,300 employees would lose their jobs in what amounted to the deepest cuts any Canadian bank had experienced in over 15 years. The financial institutions are the latest to join a global trend of banks shedding revenues and employees. HSBC said this week it would cut 35,000 jobs and US$4.5 billion in spending by 2022. European and U.S. banks cut 30,000 people in summer 2019, after revenues at 12 of the top banks in those markets dropped 11 per cent in the first half of that year. RBC, which reported first-quarter earnings on Friday, appears to be bucking the trend: it announced an 11 per cent rise in quarterly profit, driven largely by 35 per cent growth in its capital markets division compared to the same quarter last year and a seven per cent jump in retail banking.

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There will be some cuts to Canadian staff, but the bank was unable to say if they would result in net losses. “Canada is one of the countries that has been identified as performing well,” said Sharon Wilks, HSBC Canada head of media relations. “There will be cuts in some areas even as we will be hiring in areas that represent growth opportunities.” The bank is cutting US$100 billion in assets over the next three years as it reduces its U.S. and European footprint and focuses on Asia and the Middle East. (The Logic)

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Talking point: While the bank as a whole is struggling, HSBC’s Canadian operations are doing well. In 2018, HSBC Canada announced it was opening more branches, and HSBC highlighted Canada as a “strong performing franchise” in its 2019 annual financial results, emphasizing that its return on tangible equity in the country hit 12 per cent. By comparison, HSBC’s global net profit dropped 53 per cent in 2019. HSBC plans to combine its private-banking unit with retail and wealth management globally, but only the latter division operates in Canada. The bank has increasingly challenged the Big Six for market share. Last week, The Logic reported HSBC wants the federal government to require banks to share information with fintechs, even as other large banks urged caution. RBC, BMO and CIBC have all reported cuts in recent months.