Bank of Montreal cuts prime lending rate, must also pay US$16 million in lawsuit

The Bank of Montreal (TSE:BMO, Mkt cap 48.00B, P/E 12.04, Div/yield 0.82/4.40, EPS 6.19, Shares 644.27M) has recently cut its Canadian dollar prime lending rate from 2.85% to 2.7%, following in the footsteps of the Toronto-Dominion Bank and the Royal Bank of Canada. In the wake of the move from these three banks, the Bank of Nova Scotia and the Canadian Imperial Bank of Commerce also followed suit.

Bank of Montreal cuts prime lending rate pay US$16 million lawsuit

Bank of Montreal cuts prime lending rate, must also pay US$16 million in lawsuit

As the Financial Post reports, this decrease in prime lending rates from the Bank of Montreal and others means that consumers with variable rate mortgages will benefit. After these discounts, consumers with a floating-rate debt with the aforementioned banks will now be able to borrow at less than 2%, and five-year fixed-rate loans will also benefit from a rate of below 2.5%.

However, the Bank of Montreal has also made the headlines for another reason, as it was announced that the financial institution must pay US$16 million to bring a US lawsuit against it to a close. The lawsuit revolves around the claim that a lender bought by the bank caused two bankrupt Florida funds to lose money in the Thomas Petters Ponzi scheme.

Thomas Petters is facing a 50-year prison sentence for the US$3.65 billion Ponzi scheme, having been convicted for his part in 2009. He was found guilty of 20 charges including fraud and money laundering.

The bank issued a statement claiming that by agreeing to settle it did not accept liability. The original lawsuit was for US$23.6 billion. The two Florida funds that filed for bankruptcy are Marshall & Ilsley and Palm Beach Finance.

Bank of Montreal is a Canadian financial services company. It provides a range of retail banking, wealth management, and investment banking products and services. BMO conducts its business through three operating groups: Personal and Commercial Banking, Wealth Management and BMO Capital Markets. The Bank operates primarily in Canada and the United States. It also has operations in the United Kingdom, Europe, the Caribbean and Asia. It also serves customers through its wealth management businesses: BMO Nesbitt Burns, BMO InvestorLine, BMO Private Banking, BMO Global Asset Management and BMO Insurance.

BMO Capital Markets, its investment and corporate banking and trading products division, provides financial products and services to North American and international clients. In the United States, BMO serves customers through BMO Harris Bank, based in the United States Midwest with more than two million retail, small business and commercial customers.

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