Bank of Montreal, one of Canada's biggest, is leveraging its pristine credit ratings to attract new business from Middle Eastern sovereign wealth funds flush with cash.
Bank of Montreal plans to use Abu Dhabi as a regional expansion hub
Bank of Montreal plans to use its office in Abu Dhabi as a hub to expand its investment banking business in the region.
Canada’s fourth largest bank has spotted an opportunity as more regional sovereign wealth funds seek alternatives to the traditional havens of the United States and Europe in the developed world.
Kevin Lynch, a Bank of Montreal vice chairman, said most investment funds went into Europe and the US before the global financial crisis in 2008.
“Right now we want to grow from here and serve the region. We think this is an excellent place to be located,” Mr Lynch said last week. “What Abu Dhabi offers is a perfect match for us. We’d rather grow in one place and travel around the region.”
The Abu Dhabi Investment Authority, the UAE’s largest sovereign wealth fund, had assets of about US$405 billion, according to the financial magazine Institutional Investor.
The global financial crisis made lenders in Canada more popular as their counterparts in the US and Europe were left crippled by losses, credit ratings downgrades and fines.
Canadian banks have been ranked as the world’s strongest for five straight years by the Geneva-based World Economic Forum, while the Middle East is home to some of the world’s largest wealth funds, bolstered by proceeds from the region’s oil reserves.
That has made lenders such as Bank of Montreal, which is monitored by a stringent regulator and is well capitalised, more attractive for institutions in the region to partner with, Mr Lynch said. It has also put Canada on the investment map after years of neglect, and international investors are dipping their toes in deeper, according to Mr Lynch.
“When you invest, you start incrementally and if it’s a good experience you expand. I am surprised there isn’t more investment in commercial real estate in Canada. There’s huge investment in European real estate but not in Canada,” he said.
North American companies had also been increasing their activities in the region as the Middle East becomes a bigger transit area for trade, commerce and transportation, he said.
Bank of Montreal, which opened its Abu Dhabi office two years ago, has been growing in recent years. It made its biggest acquisition in 2011 with the takeover of the US bank Marshall & Ilsley in Milwaukee, Wisconsin.
Mr Lynch said Bank of Montreal was now focusing on getting a foothold or expanding its presence in emerging markets such as China and Mexico.