BNP Paribas has agreed to sell its San Francisco-based Bank of the West to Bank of Montreal for $ 16.3 billion, becoming the last European lender to leave retail banking in the United States.
The Canadian bank, also known as BMO Financial Group and the eighth-largest bank in North America by assets, said it would primarily fund the cash transaction through excess capital. It is already present in several American states. BNP initially bought Bank of the West in 1979.
European banks have gradually pulled out of the US market, having struggled to compete with major domestic lenders such as JPMorgan Chase, Bank of America and Wells Fargo.
Spain’s BBVA struck an $ 11.6 billion deal in November last year to sell its US operations to Pittsburgh-based PNC, while HSBC sold its North American unit to Citizens.
The sale of Bank of the West is expected to close by the end of 2022, the banks said.
BNP has announced that it will repurchase 4 billion euros once the transaction is completed. He said he would use the remainder of the sale – about $ 2 billion more than some analysts had expected – to invest in its operations, including technology, and through acquisitions. .
“BNP will likely want to target transactions in innovative, high-growth areas, particularly in Europe,” said Flora Bocahut, analyst at Jefferies, in a note.
BNP recently invested in a mobile consumer credit company in France called Floa Bank, Bocahut added.
Citi analysts said investors would also focus on the prospect of higher earnings for shareholders, above the 50 percent average of profits BNP usually pays. The bank must organize an update of its strategy in February.
The French lender has made great efforts to gain market share in other areas of its activity, in particular in corporate and investment banking, where it will always be present in the United States.
It aims to get ahead of its European rivals by expanding its equity division and expanding loans to new clients during the pandemic. He also jumped on the withdrawal of rivals Deutsche Bank and Credit Suisse from the blue chip brokerage market.
The sale of Bank of the West will increase BNP’s Tier 1 capital base ratio – a measure of balance sheet strength – by 110 basis points after the share buyback.
The deal will give the Bank of Montreal more than 500 bank branches and wealth management offices, and 1.8 million customers, the majority based in California, which has been relatively economically resilient during the pandemic.
Managing Director Darryl White said in a statement the acquisition would add “significant scope [and] expansion into attractive markets ”.
The group said it did not plan any branch closures. He added that the deal would involve C $ 1.7 billion ($ 1.3 billion) in pre-tax merger and integration costs, but provide up to C $ 860 million in savings. pre-tax costs, and that it would immediately increase the profits of the Bank of Montreal. per share.
BNP and Bank of Montreal will also form a partnership with the Canadian bank which will provide equipment financing and cash management services to BNP clients in North America.
Shares of Bank of Montreal fell 2 percent in morning trading in Toronto on the news.