BMO takes C$983m loss on Bank of the West merger hedges

Temporary inversion of yield curve hit swaps safeguarding target’s fair value

Bank of Montreal (BMO) was forced to swallow a C$983 million ($751 million) loss in the third fiscal quarter to keep its acquisition of Bank of the West on track, as interest rate volatility rocked hedges it put in place after the deal was announced in December.

BMO is buying the California-based lender from BNP Paribas for $16.3 billion, financed entirely through equity and representing a 50% premium to tangible book value (TBV) at the time. The difference between the purchase price and TBV is

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