Bank of Montreal (BMO) has announced the sale of a majority interest in its transportation and finance lending businesses to Stonepeak Partners LP, a New York-based alternative investment platform. The move is intended to improve capital efficiency and sharpen the bank's focus on its core markets, according to a statement released Monday.
Transaction Details
As of March 31, the loan portfolio for these businesses stood at $14.5 billion. The sale includes cash considerations and an earnout, which is future compensation contingent on the business achieving specific targets. The exact financial terms were not disclosed.
BMO will use a portion of the proceeds to acquire a 19.9% equity stake in the new Stonepeak entity. The bank also expects to record a net after-tax charge of approximately $900 million, primarily related to goodwill, in the third quarter.
Analyst Perspectives
The transportation and finance lending operations had caused "a measure of indigestion" over the past few years, according to Jefferies Inc. analyst John Aiken in a note released Monday. TD Securities Inc. analyst Mario Mendonca noted that BMO's transportation portfolio has experienced negative loan growth sequentially for four consecutive quarters. He added that provisions for credit losses (PCL) in the transportation segment were "well above" the bank's overall PCL levels.
"The sale should leave BMO with a greater mix of loan asset classes with better growth profiles," Mendonca said in a Tuesday note.
Canaccord Genuity Corp. analyst Matthew Lee observed that the businesses lacked a "one client" angle and offered limited opportunities to deepen relationships across other segments such as wealth management and capital markets.
Capital Impact
Selling these loans will free BMO from needing to reserve capital against them and is expected to boost its CET1 ratio—a key measure of capital strength—by 28 basis points. The transaction is projected to close in the fourth quarter of fiscal 2026.
"This transaction is consistent with BMO's focus on delivering sustained profitable growth, and enables us to invest in areas that deliver the full power of BMO to our clients," said Aron Levine, president of BMO U.S., in a statement.
