Bank of Montreal's Simmons Executive Director Says U.S. Economy Is Improving, Calls California a 'Strategically Important Market'

TORONTO (Reuters) - The U.S. economy is showing signs of stronger-than-expected growth and California is a strategically important market, the head of the Bank of Montreal, which is expanding rapidly in its southern neighbor, said.

Speaking to shareholders at the bank's annual meeting, Montreal's Chief Executive Officer Darryl White said the bank is well-positioned to meet the needs of its customers across the U.S. and Canadian economies in the face of changing global dynamics.

Montreal, Canada's third-largest bank by market capitalization, spent $16.3 billion last year to acquire Bank of the West, the largest deal in Canadian banking history, and has since derived about a third of its revenue from the United States.

Trade and investment between Canada and the United States is key to economic competitiveness, he said, noting that it is one of the largest bilateral trade relationships in the world.

"This relationship is significant. In context, just counting the Great Lakes region ...... (which) would be the third-largest economy in the world, almost as much as Japan and Germany combined, and employing about one-third of U.S.-Canadian labor force combined," he said.

"Add to that the state of California, which has an economy almost twice the size of Canada's, and you can see the global impact of this North-South relationship," he said.

With domestic markets saturated and opportunities limited, Canadian banks are increasingly looking to expand south of the border or in other parts of the world.

White cautioned that the interest rate environment will remain high for a long time because of high borrowing costs and weak demand. But as rates begin to loosen, the market could see "a new normal, one with fundamentally different characteristics than the environment of the last two decades," he said.

(Reporting by Nivedita Balu Toronto; Editing by Aurora Ellis)