The purchase of Marshall & Ilsley by BMO provides some instructive and fascinating insight into what is bad about the US Banking crisis during 2007 – 2009.

Highlights for the period 2006 – 2009:

1. Capital is relatively unchanged
2. Loans and mortgages grew $4 BN
3. Brokered deposits grew $4BN

Conclusion for M&I – recipe for disaster.  The management team should be fired and I would assume that is part of the purchase arrangement.  They had $1Bn + in TARP assistance and the above is a classic example of why.

That aside, this is a bank with a lot of history and presumably serving a group of customers in solid towns and neighbourhoods. 

There remains two questions:

1. Is the discounted price of $4BN enough of a discount?
2. Will BMO/ Harris be able to implement a sufficiently efficient integration to reap the $250 million annual cost saving projected. 

Re 1. my money is on Downe and team and their capital market background – the discount will be adequate.  

I worry more about 2.  This integration opportunity is 100% technology.  There is no opportunity to close proximate BMO and M&I branches. 

At the end of the day this feels more like a buy low and sell later at a profit kind of deal.  Time will tell.