Pandemic Forces Bank Of Montreal To Axe US Oil And Gas Investment Banking Business: Bloomberg

Bank of Montreal (NYSE: BMO) is set to exit its U.S. oil and gas investment banking business to focus on Canadian assets going forward, Bloomberg reports.

What Happened: BMO has made “the financial decision for an orderly wind-down of our non-Canadian investment and corporate banking energy business,” the company said in an email to Bloomberg. 

The Canada-based lender will eliminate roughly 50 positions in its U.S. investment banking group. A handful of corporate bankers will manage BMO’s U.S. oil and gas loan book. The loan book stands at $5.4 billion as of July 31, as per Bloomberg.

Why It Matters: According to Bloomberg, BMO’s move didn’t appear to be related to ESG concerns.

The coronavirus pandemic has dented oil demand, which led to a crash in crude oil prices in March 2020. A steep fall in oil prices has pushed many oil producers to the verge of bankruptcy, leading to consolidation in the oil-rich shale patch. 

America’s shale industry has seen a wave of consolidation in recent months with low-premium mergers. ConocoPhillips (NYSE: COP) acquired rival Concho Resources in October, Devon Energy Corp. (NYSE: DVN) acquired WPX Energy Inc. (NYSE: WPX) in late September, and Chevron Corporation (NYSE: CVX) acquired Noble Energy in July 2020.

Price Action: BMO shares closed 2.70% lower at $72.72 on Monday.

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