- September 17, 2023
- Posted by: legaleseblogger
- Category: Related News
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BMO to Close Retail Auto Finance Business Due to Rise in Bad Debt
Date Published: Sept. 17, 2023 3:26 p.m. ET
Bank of Montreal signage is pictured in the financial district in Toronto, Friday, Sept. 8, 2023. (THE CANADIAN PRESS/Andrew Lahodynskyj)
The Bank of Montreal (BMO) has announced that it will be closing its retail auto finance business due to an increase in bad debt. The decision will also lead to layoffs in Canada and the U.S. However, the exact number of layoffs has not been disclosed.
Last quarter, the bank’s bad debt provisions rose to $492 million, more than tripling compared to the same quarter of the previous year. In addition, the bank’s provisions for credit losses in its retail line increased by 800% to $81 million from $9 million in the previous year.
The surge in bad debt and credit losses highlights the financial difficulties faced by consumers, who have been struggling with higher interest rates for the past year and a half. This has started to impact lending demand and deal-making, especially in the mortgage market, as Canadian banks face intense competition and concerns about a general economic slowdown.
BMO’s retail auto loans segment, which partners with car dealerships to provide financing to car buyers, will be discontinued. However, this decision does not affect the bank’s commercial banking business, which provides inventory financing to auto dealers.
In a statement to The Canadian Press, BMO Financial Group spokesperson Jeff Roman explained that by winding down the retail auto finance business, the bank can redirect its resources to areas where it has a strong competitive advantage. The specific timeline for the end of the dealer agreement was not provided.
During the last quarter, the bank incurred $223 million in pre-tax costs related to layoffs, although the exact number of employees affected was not disclosed. BMO is committed to providing support and ensuring fair treatment to the affected employees.
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