This article was originally published in Maclean's Magazine on September 23, 2002
After the federal government vetoed, in December, 1998, a planned merger of the Royal Bank and the Bank of Montreal, BMO CEO Matt Barrett announced his resignation little more than two months later. The task of charting new strategy fell to his successor, Tony Comper. A career BMO employee, Comper, 57, is well-respected for his organizational and technological skills - he is that rare bank chief executive who can write computer software himself.
After third-quarter results in which BMO made $346 million, or 65 cents a share - despite writing off $160 million in loan losses, largely, as with other banks, to the troubled telecommunications sector - Comper says his goal of eight to 12 per cent revenue growth this year remains "within reach." A reserved figure in public with a wry humour in private, Comper's interests range from English literature to classical music to several charitable causes with which he and wife Elizabeth are involved. He discussed BMO and banking with Maclean's Editor Anthony Wilson-Smith.
How do you summarize changes in banking since you began?
When I joined the bank in 1967, we didn't have automated banking machines. We didn't have point-of-sale terminals. Today, the Bank of Montreal employs 1,000 software engineers. The whole business of financial software engineering, and using computer software technology to deliver the range of services that we have, has been an explosion.
We regularly have a little orientation session for people who have joined the bank. We'll take a group of 20 young bankers, and I'll ask each to explain what their job is. I can almost guarantee that by the time I get to the end, the 20 jobs that we just talked about didn't exist when I joined the bank.
Now that banking is so transnational, does that lead to concerns from individual clients that the bank is more focused on dealing internationally with big corporations than on their needs?
In fact, Canadians like to see their institutions succeeding on an international front. We've got $83 billion of assets in the U.S., and measured by assets, we're bigger there than the other Canadian banks. But I always remind everyone that you've got to be really good back home before you can contemplate moving out and growing into other markets.
The bank is also very active in Asia. What are your priorities for American growth vs. growth in the rest of the world?
The centre point of our growth strategy is, one, to be strong at home, but, two, selective but substantial expansion in the United States. Our position in China is more strategic, in anticipation of growth 10, 15, 20 years from now. So today vs. tomorrow, however you categorize it.
What's your overall longer-term strategy?
It starts from thinking about how we see the economic space of Canada and the U.S. evolving. Of course, the economies are closely linked. We think that inter-linkage is going to occur in the financial industry as well. So 10 years down the road, as we see continued consolidation in the U.S. financial services industry, we're going to wind up with, say, three to four mega institutions, along the lines of, say, a Citigroup. There will continue to be many smaller, community-oriented institutions. But in the middle space, where we will see about 10 to 20 - we use the term transnational, multi-service financial institutions - with significant platforms on both sides of the border, that is where we see our future.
What about bank mergers?
As you would expect, I get asked that a lot. Mergers are not strategy. You have to have a clear business strategy of where you're going. We do: it's being strong at home, and growing in the U.S. primarily. Where does a merger fit into that? As I've always said, there will be limitations on our growth aspirations. One will be the extent to which we can grow through partnering with others. The constraint is the amount of capital that you have. So if you found a like-minded partner who had a similar view of where you think the industry is going, a merger would give you twice the capital resources, so you could pursue your strategy even faster.
Why should Canadians care if their banks are domestically or foreign-owned?
Consumers want the best deal, and should expect to get it. If competition, which is terrific, can create that, that's good. The evidence is, though, that some foreign competitors that have come into our country have found it to be not quite the cakewalk they might have anticipated. There is a public policy issue here, but frankly, I believe you don't have to protect Canadian institutions against competition.
How do you feel about a shared North American currency?
It has been hugely in the interest of Canadians to have a separate currency. It acts as the first buffer against external shocks coming directly into the real economy. And having a separate currency has allowed us to have a separate monetary policy, has allowed us to have lower inflation rates in the 1990s than in the U.S.
The banks have all reported loan-loss provisions due to the downfall of companies like Enron and WorldCom. Is there a way to ensure this won't happen again?
I don't think there's any kind of a circumstance we've seen that isn't covered by one or more of the laws and regulations we have. Are there chinks in the armour? That's always a legitimate concern, and we should always be looking towards filling in the gaps, if gaps occur. But we have lots of laws, and if things are going to go wrong - accidents will happen.
The tech sector has taken the economy's greatest fall. Will there be a regrowth?
Absolutely. We had a phenomenon where we were overbuilding, particularly in telecommunications, and the bubble has come off that. There are many other parts that are solid and coming along, whether computer technology, software development, things of that nature. We will go through this consolidation, and then it will continue to grow at a more orderly pace. It got carried away.
Many people do all their regular banking now by phone, on-line, or bank machine. Are new technological developments coming?
Today, you can do the application for a loan on-line, but at the end of the process, someone will still mail you a loan agreement form. We'll start to see that being electronically transmitted and electronically signed. Within 12 to 18 months, we'll be doing electronic versions of documents that meet legal requirements and other standards.
Do you foresee an era when bank branches will be unnecessary?
No. What we do in the branches is centred much more around providing people with financial advice than routine transactions. There still is a need for face-to-face contact, particularly if people are making an important decision. You're not going to do that remotely. So our business is today, was 35 years ago, and will be 35 years from now, very much one of human relationships.
Maclean's September 23, 2002