Bank Of Montreal Ends Car Loan Business
Bank of Montreal (BMO) is getting out of the car loan business as debt levels in Canada rise and cash strapped consumers struggle with high inflation.
Over the weekend (September 16), Bank of Montreal announced that it is closing its indirect retail automotive financing business.
Through that business, Bank of Montreal had worked with car dealerships in both Canada and the U.S. to arrange financing for buyers who then made monthly payments to the lender.
The change comes as Bank of Montreal's provisions to over potentially bad loans recently rose to $492 million from $136 million a year earlier in a sign of growing stress among consumers who are struggling with high interest rates that are used to lower inflation.
In a letter sent to car dealers, Bank of Montreal said financing for automotive loans ended on September 15, but the bank will continue to fund all contracts that had been submitted and approved before that date.
At the end of July, BMO's consumer loan portfolio stood at $104 billion, and included $54.7 billion in home equity loans and lines of credit.
The remaining loans in the consumer portfolio are primarily automotive loans, as well as loans for boats, recreational vehicles, and motorcycles.
Data from the Bank of Canada indicates that delinquency rates for vehicle loans are now higher than they were before the Covid-19 pandemic, highlighting consumer financial strains.
Increasingly, Bank of Montreal has been targeting the U.S. for growth opportunities. America now accounts for more than one-third of BMO's annual profits.
The stock of Bank of Montreal has declined 6% over the last 12 months to trade at $120.38 per share.
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