Montreal Trust

"To expand Montreal Trust by building new branches in new lo¬ cations would have been so expensive and time consuming that the fully staffed new branches would have come on stream slowly, at a prohibitively high unit cost. So, in a characteristic Desmarais-inspired move, Montreal Trust executives, with the consultative aid of Power staff, looked around for a “storefront” financial-services operation that needed a new owner, or was redundant to the existing owner. Every middle-ranked financial institution was examined. Even some of the smaller Canadian banks that were closed or merged in the unfortunate failures and near-failures of 1984, 1985 and 1986 were examined for purchase and merger with Montreal Trust, but couldn’t pass muster because of their outstanding liabilities and potential for future trouble. The eventual object of Montreal Trust’s affections became Credit Foncier, a subsidiary of Montreal City District Savings Bank, which had been for sale for about a year because it didn’t fit the bank’s plans. The deal raised Montreal Trust’s asset base from $3.27 billion to $6.28 billion and gave it 22 additional “storefront” branches. Credit Foncier brought with it a clean balance sheet, good earnings and a healthy mortgage portfolio, an important consideration given that most of the domestic problems faced by financial institutions since 1981 have sprung from their real-estate loan portfolios. Credit Foncier was quickly integrated into Montreal Trust’s oper¬ ations, and its branches soon carried Montreal Trust’s green and white logo."

"This isn’t to say that Desmarais didn’t have his sights set on a spot at the pinnacle of Canadian business; but he wasn’t ready, and the opportunity still hadn’t presented itself. The moves he made to di¬ versify his interests put him in the mainstream of Quebec and Canadian business. From here he could observe the players, learn the game, define opportunities and learn about what was worth buying. He was acting on the military principle that time spent in reconnaissance is time well spent. Montreal Trust provided him with a vantage point. He bought enough shares in the staid, old-line financial institution, having all the cachet of the “right” history and the “right” connections, that he was invited onto its board of directors in 1962. It was an ideal spot from which to conduct a reconnaissance of Canadian business."

"So, most of Power’s growth during the 1970s had occurred through quiet purchases by its subsidiaries of other, complementary companies that increased their value on the market and to Power, rather than through spectacular coups. Consolidated-Bathurst acquired its sub¬ sidiaries in glass container and packaging products this way; Montreal Trust expanded by buying other trust companies; Investors grew by acquiring other mutual and investment funds, though it also set up more of its own funds; and Canada Steamship Lines grew by pur¬ chasing trucking and courier operations."