BMO sends a warning to brokers

Brokers, consider yourselves warned, with a BMO exec laying out explicit plans to grow the number of mortgage specialists, needed to “take business” from competitors in a slowing market.

“We’ve been … pretty clear about our objective, which is — we’ve been at 2 per cent mortgage growth for quite some time now and our expectation is we can grow that a little faster,” Thomas Flynn, the bank’s CFO told analysts at a conference call this week focused on first quarter financials. “We’re going to have to take some business from others as the market is slowing around us.

“We plan on doing that through the activation of the investment in our sales force, our mortgage specialist sales force, which continues to grow.”

The comments come on the heels of the big bank’s release of financial results for the three months ending Jan 31. And while BMO saw its overall profits spike by 34 per cent from the year-ago period, much of that growth came courtesy of U.S. operations and lower losses on bad loans.

Profit from its Canadian book actually shrank, with higher volumes across most products “more than offset by a less than favourable mix and lower net interest margin.”

That’s perhaps the most concrete analysis the bank is willing to offer on the success of its special January rate. Analysts are suggesting  that limited-time offer – 2.99 per cent on a five-year fixed – likely helped to grow BMO’s mortgage market share in the first quarter, but at the expense of profitability, in that it further narrowed interest rate spreads.

It also saw the bank increase mortgage originations as a portion of its book, said Flynn.

“New versus renewal this past quarter was a little unusual because we did go out for this limited-time offer on our low rate product, the 2.99 per cent offer,” he said Tuesday. “So we saw an increase in new in the first quarter. It was about 50-50 from an application perspective.”

The bank is aggressively looking to add to its overall market share, with a beefed-up team of mortgage specialists.

It means that brokers will likely see the rate wars of 2011 further heat up as the all-important spring market hits.

Still, there may be less emphasis on rate this year, with the blanket of BMO road reps focused on talking up the features of their mortgage products.

“We think that this product that we’ve been pushing for the last couple of years fits right into the sweet spot of what we need in the country and it will help our balance grow as we move forward,” said Flynn.