DBRS Confirms Bank of Montreal at AA, R-1 (high), Stable Trend

DBRS has today confirmed the ratings of Bank of Montreal (BMO or the Bank) and related entities, including the Deposits & Senior Debt at AA and Short-Term Instruments at R-1 (high). All trends are Stable. The ratings and trends are supported by the Bank’s sizable domestic franchise and strong financial risk profile. Although typically not a market share leader, BMO has solid domestic consumer, commercial and wholesale businesses.

BMO’s acquisition of Marshall & Ilsley Corp. (M&I) in 2011 brings with it both opportunities and risks for the Bank’s U.S. personal and commercial banking operation. While the acquisition of M&I materially increases the scale of the U.S. operation, possibly positioning it to earn a more reasonable profit, it further exposes the Bank to the challenging U.S. economy, real estate market and interest rate and regulatory environments. In addition, it exposes the Bank to integration risk, although this risk is to some extent mitigated by BMO’s previous integration experience in the United States and deep knowledge of the regional market, thanks to its longstanding ownership of BMO Financial Corp. (formerly Harris Financial Corp.).

BMO’s long-term Deposits & Senior Debt rating of AA is composed of an intrinsic assessment of AA (low) and a support assessment of SA2 (reflecting the expectation of systemic and timely external support by the Government of Canada). The SA2 status results in a one-notch benefit to the senior debt and deposits and subordinated debt ratings.

Notes:
The applicable methodologies are Global Methodology for Rating Banks and Banking Organisations (January 14, 2010), Rating Bank Preferred Shares and Equivalent Hybrids (June 29, 2009) and DBRS Criteria: Intrinsic and Support Assessments (February 11, 2009), which can be found on the DBRS website under Methodologies.

The sources of information used for this rating include company documents. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

For additional information on this rating, please see the DBRS Limited: Banks and Banking Organisations Linking Document by clicking the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.

Lead Analyst: John van Boxmeer
Rating Committee Chair: Kent Wideman
Initial Rating Date: < 1980
Most Recent Rating Update: July 8, 2011