Bank of Montreal is selling its municipal bond sales, trading and origination business to Piper Jaffray Cos. Inc., but the Canadian lender is making it clear the sale does not signal a retreat from its U.S. capital markets business.AARON HARRIS/Reuters
Bank of Montreal is selling its municipal bond sales, trading and origination business to Piper Jaffray Cos. Inc., but the Canadian lender is making it clear the sale does not signal a retreat from its U.S. capital markets business.
"We have a better opportunity to use the resources, that have supported the business to date, in other strategies that we are pursuing for growth in the U.S.," Luke Seabrook, head of global trading products at BMO Capital Markets, said in an interview.
Neither BMO nor Piper Jaffray disclosed the financial terms of the deal for BMO Capital Markets GKST. However, 125 BMO employees are affected by the sale, representing about 5 per cent of the bank's 2,300 employees in the U.S. capital markets arm.
"This certainly in no way, shape or form has any impact or commentary on our U.S. capital markets growth strategy," Mr. Seabrook said.
BMO's U.S. capital markets business has been growing at a quick pace in recent years, with a particular focus on mid-market companies that range in size from $200-million up to $5-billion. However, the bank has been working to increase its operational efficiencies.
BMO installed new leadership in its capital markets division late last year, with the arrival of Darryl White as head of capital markets and Pat Cronin as chief operating officer. Mr. Seabrook is new to his role as well.
The changes are part of a corporate reorganization – and the new leadership has brought slight tweaks to the bank's strategy for growth opportunities.
Still, the divestment of BMO Capital Markets GKST comes as the U.S. Securities and Exchange Commission has increased its regulation of the $3.7-trillion (U.S.) U.S. municipal bond market in recent years, insisting on enhanced disclosure policies and procedures.
Last month, 36 financial firms settled allegations from the SEC that they sold U.S. municipal bonds using materially false statements or omissions. BMO and Royal Bank of Canada were among the firms that settled.
"Those aspects didn't form the conclusion that we had come to, with regards to divesting this particular business," Mr. Seabrook said.