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TORONTO, Sept 17 (Reuters) – Bank of Montreal (BMO) (BMO.TO) is winding down its indirect retail auto finance business and shifting focus to other areas in a move that will result in an unspecified number of job losses, Canada’s third-largest bank said.
The bank, which announced the move on Saturday, has conducted this business in Canada and the United States. The move comes after BMO’s overall bad debt provisions rose to C$492 million, compared with C$136 million a year earlier, for the quarter ended July 31 in a sign of growing stress consumers face from a rapid rise in borrowing costs.
Under the indirect retail auto finance business, the bank works with car dealerships to arrange financing for buyers, who make monthly payments to the lender.
“By winding down the indirect retail auto finance business, we have the ability to focus our resources on areas where we believe our competitive positioning is strongest,” BMO said in a statement to Reuters.
The bank is working closely with employees who will be affected by job cuts to provide support, it said.
In a letter sent to car dealers and seen by Reuters, the head of the business Paul Hunsley said the termination of the dealer agreement would be effective as of Sept. 15, but the bank would fund all contracts submitted and approved prior to the date.
At the end of July, BMO’s consumer installment and other personal loan portfolio stood at C$104 billion, and included C$54.7 billion in home equity loans.
The remaining loans in this portfolio are primarily auto loans, but also include other loans, including loans for boats, recreational vehicles and motorcycles, Edward Jones