Bank of Montreal 2003 Annual Report Download - page 34

Management’s Discussion and Analysis of Operations and Financial Condition
BMO Financial Group 186th Annual Report 200330
2003 Overview
During 2003 our customers experienced a difficult environment
with such unforeseen events as SARS, a ban on Canadian beef
exports, forest fires, hurricanes and a power outage in Ontario.
We helped our customers face these challenges by offering
special lending rates and repayment options. We also launched
our Premium Rate Savings Account for business in the fourth
quarter, continued to build our cash management sales force
and launched new cash management products. These initiatives
helped expand our Business Banking market share (loans less
than $5 million) by 12 bps to 19.60% over the past 12 months.
This helped us maintain our second-place ranking and narrow
the gap relative to the market leader by over 40 bps, to 393 bps,
advancing our longer-term goal ofmarketleadership.
Commercial Banking continued to grow strongly, reflect-
ing overall success in the market and an expansion strategy
that included cash management. This success was reflected in
Business Environment and Outlook in the United States
The competitive landscape has intensified as new and existing
competitors try to capture market share; many have announced
significant branch expansion plans. Others are entering the
market with traditional or unique distribution offers or are sig-
nif icantly increasing brand marketing.
The Chicagoland market is still highly fragmented, with more
than 250 banks and only an estimated 27% personal and small
business market share for the three largest banks combined.
Although national and regional players are growing in retail and
small business banking, we are committed todefendingandgrow-
ing our position, and therefore we expect some margin pressure
Frank J. Techar
President and Chief Executive Officer, Harris Bank
“I’m excited about the opportunities we have in the market and our progress over the past year. Competition
is intensifying, but we’re taking it on and winning by focusing on our customers. Our community banks
deliver personal service built on deep local knowledge and commitment. We’re also adding branches to an
already strong distribution presence and continuing to build on the strength of the Harris brand.”
Grow market share in Chicagoland by expanding our distribution net-
work through a combination of new branch openings and acquisitions.
▪ We opened nine new branches, including seven in the fourth quarter, closed
one and had 153 locations at the end of the year, surpassing our target.
▪ On November 24, subsequent to our year-end, we announced our
intent to acquire Lakeland Community Bank in Lake County, Illinois. This
US$34.6 million acquisition is expected to close by January 31, 2004 and
will add US$171 million in assets and two locations to complement our
existing branches in the Chicagoland area.
▪Expand the reach of our branch banking franchise by adding 10 branch
locations to our network while also pursuing in-market and out-of-market
acquisitions in contiguous states and/or other high-growth markets. We
are targeting 165 locations at the end of fiscal 2004, growing to 200 over
the next four years.
Group Description and Strategy in the United States
Harris Chicagoland Banking serves personal and business clients with a full suite of financial products and services through an effective community bank
model that emphasizes local knowledge and commitment. We strive to excel at sales management disciplines, at customer service supported by a premier
network of convenient, attractive branches and at leveraging the capabilities of our Investment Banking Group and Private Client Group business partners.
Our strategic objective is to be the leading and most successful bank in all of our chosen markets.
Continue to drive improvements in productivity.
▪We improved our productivity ratio by 210 bps.
Continue to target a US$1 billion increase in retail and small business
loans.
▪ We increased loans by US$2 billion or 25% on the strength of mortgage
and other consumer loan growth. We maintained strong momentum in
a difficult market environment to produce growth of 11% in business
banking balances.
2003 Group Objectives and Achievements in the United States
2004 Group Objectives in the United States
▪Improve our cash productivity ratio by 150 to 200 bps.
▪ Continue to target a US$1 billion increase in retail and small business loans.
▪ Migrate to a single commercial deposit processing system to simplify
customer transaction processing.
Harris Chicagoland Banking
our 2003 customer survey results, which showed Commercial
Banking to be an industry leader, delivering high levels of per-
sonalized professional service that clients value highly.
2004 Focus
▪
Increase market share by continuing to build BMO Bank of
Montreal’s reputation as the bank for business banking.
▪Continue to build our cash management sales force.
▪
Improve our capabilities for serving the business, personal
and wealth management needs of our Independent Business
customer segment.
▪Build on our capabilities to serve specific professional client
groups that we find attractive, designing approaches and solu -
tions tailoredtotheirspecific needs.
▪
Continue to expand our Commercial Banking business through
our industry-leading suite of fully integrated products and ser-
vices delivered by our highly skilled account managers.