BMO Financial Group is preparing to cut well over 300 jobs in the Chicago area as part of a companywide cost-savings initiative.
Executives with the Toronto-based parent of BMO Harris Bank announced the new cost cuts as they posted the bank’s earnings for its fiscal fourth quarter, ended Oct. 31. The cuts will hit 5 percent of BMO Financial Group’s total workforce of 45,513 and will be spread roughly evenly across all of the bank’s businesses.
BMO employs about 7,700 in Illinois, more than 7,000 of whom work in the Chicago area, a spokesman said. Five percent of that Illinois figure is 385.
BMO Financial took an after-tax charge of 357 million Canadian dollars against fourth-quarter earnings, primarily to cover severance costs. It expects to save CA$375 million annually by the time the cuts take full effect in fiscal 2021.
The cost-cutting wasn’t anticipated because BMO had taken a hatchet to its capital markets group earlier this year. But executives determined the company’s ratio of expenses to revenues was too high.
BMO Financial CEO Darryl White said he expected this to be the last significant cost-cutting move for a while. “This is a sizable move; this is 5 percent of the bank’s global population that’s in scope,” he told analysts on the quarterly earnings call.
For local banking professionals, the unexpected bad news caps off a year in which bank profits grew but headcount fell. Cincinnati-based Fifth Third Bank eliminated nearly 500 local jobs this year following its acquisition of MB Financial.
As of Sept. 30, there were 2,600-plus fewer jobs at Illinois-based lenders insured by the Federal Deposit Insurance Corp. compared with a year earlier, a decline of 3.7 percent, according to the FDIC.
While bank profits are rising generally, lenders are under pressure from the Federal Reserve’s moves to lower interest rates. The margins reflecting what banks pay for deposits and collect on loans are narrowing, putting pressure on managers to contain costs.
In BMO’s case, more of its profits are being generated south of the Canadian border than ever before. In fiscal 2019, the U.S. contribution to earnings was 34 percent, up from 28 percent in 2018 and 24 percent in 2017, White said. He attributed the success in the U.S. to making “good strategic choices in a favorable environment.”
That said, bank executives expect economic growth to slow next year in the U.S.
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December 04, 2019 at 03:47AM
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BMO Harris parent cutting more than 300 local jobs - Crain's Chicago Business
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