Title: Bank of Montreal Ends Retail Auto Finance Business, Job Losses Expected
Bank of Montreal (BMO), one of Canada’s largest banks, has announced that it is winding down its retail auto finance business in both Canada and the United States. This decision is expected to result in an unspecified number of job losses as the bank shifts its focus towards areas where it believes its competitive positioning is strongest.
The move comes amidst a surge in BMO’s bad debt provisions in retail trade, indicating growing stress among consumers who face rising borrowing costs. This shift in strategy highlights the bank’s effort to mitigate risks and improve profitability.
BMO is working closely with affected employees to provide support during this transition. While the termination of the dealer agreement was effective as of September 15, the bank has assured that all contracts submitted and approved prior to this date will still be funded.
Under the indirect retail auto finance business model, BMO provides financing to the vehicle seller rather than directly to the buyer. In the third quarter, gross loans in BMO’s retail auto business rose approximately 34% compared to the previous year, showcasing the bank’s significant presence in the auto finance industry.
However, the recent rapid rise in interest rates in Canada has had a dampening effect on the economy, prompting banks to set aside more funds to cope with expected bad loans. This challenging environment was a major factor in BMO’s decision to evaluate its options and refocus its resources.
BMO has been exploring new avenues of growth in the United States, with the country now accounting for over one-third of its overall profits. This strategic shift underscores the bank’s belief in the potential of the US market and its commitment to strengthening its position in the region.
As the bank forges ahead into new areas of growth, it remains determined to maintain its strong competitive advantage. The impact of these changes on BMO’s employees and the broader banking industry will be closely monitored as the transition unfolds.
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