Bank of Montreal sees buy opportunities in U.S. woes

By Nicole Mordant

VANCOUVER, British Columbia (Reuters) - Bank of Montreal (BMO.TO) expects the tough economic environment in the United States to create acquisition opportunities for its U.S. operations for at least the next 12 months, executives at Canada's fifth-biggest bank said on Tuesday.

"We believe with the current environment, there will be more opportunities at better prices than in the past and we are monitoring these very closely," said Ellen Costello, chief executive of Harris Bankcorp, BMO's U.S. retail bank.

Costello said several banks in the U.S. Midwest, Harris's key market, were either in trouble because of their exposure to problem areas of the real estate market, or were preoccupied with internal issues.

"All of these things represent opportunities for us that are unprecedented," she said during a half day of presentations to investors and analysts in Toronto.

Asked if BMO and Harris were interested in National City Corp NCC.N, a troubled Midwest bank that is effectively on the sales block, BMO Chief Executive Bill Downe told Reuters: "We have an active group that is constantly talking to other banks, so when something pops up in the newspaper I am pretty confident that we have done background work...It is a matter of degree."

Downe said there was no rush to make a purchase as the opportunities coming out of this tight credit cycle were likely to be around for at least a year.

The Wall Street Journal reported last week that Bank of Nova Scotia (BNS.TO), Canada's third-biggest bank, had jumped into the bidding for National City, a Cleveland, Ohio-based lender that is suffering from mortgage-related losses in the hard-hit Ohio and Michigan real estate markets.

Downe said that with 8,000 banks in the United States, there will certainly be consolidation. The Midwest is also a more fragmented banking market than many other areas.

Harris and BMO have experienced a rise in provisions for credit losses because of exposure to the weakening U.S. housing market, but executives said the hit was much lower than at their competitors.

"Our exposure to U.S. developer and investor-owned real estate is well below the peer group, which should help us as we move through the cycle," said Tom Flynn, BMO's recently appointed group chief risk officer.

BMO is also scouting for small acquisitions in private banking and asset management in the United States, Gilles Ouellette, chief executive of BMO's private client group said.

In Canada, wealth management prospects are hard to find and tend to be expensive, he said.

BMO shares were down 29 Canadian cents at C$45.78 on the Toronto Stock Exchange on Tuesday afternoon, falling slightly more than their peers.

($1=$1.02 Canadian)

(Reporting by Nicole Mordant; Editing by Peter Galloway)