BMO plans to use the proceeds to meet increased regulatory requirements. Credit: Erik Mclean on Unsplash.

Canada’s Bank of Montreal (BMO) has announced plans to raise C$3.15bn ($2.33bn) in capital via a public offering and a concurrent private placement of shares.

The share sale comes after the Office of the Superintendent for Financial Institutions (OSFI) increased the amount of capital systematically that important banks must have on hand. 

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Last week, the OFSI said that as of 1 February 2023, the domestic stability buffer (DSB) level will increase by 0.5% to 3%. 

In addition, the regulator increased the DSB’s range from 0% to 4%, from the previous range of 0% to 2.5%.

BMO plans to use the proceeds to boost its capital position to meet increased regulatory requirements and for general corporate purposes.

The lender is targeting a Common Equity Tier 1 ratio at or above 11.5%.

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As per the share sale plan, the bank aims to raise approximately C$1.4bn ($1.03bn) by issuing and selling 11,805,000 common shares in a public offering for C$118.6 ($87.57) per common share.

BMO plans to raise C$1.75bn ($1.29bn) in a private placement by issuing and selling 14,755,477 shares at the same price to a group of investors. 

Caisse de dépôt et placement du Québec, OMERS, Alberta Investment Management Corporation, Healthcare of Ontario Pension Plan, Public Sector Pension Investment Board, Canada Pension Plan Investment Board and BNP Paribas SA will be joining the private placement. 

Last December, BMO signed a $16.3bn deal to buy BNP Paribas’s commercial and retail banking operations in the US.