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, said it would fund the transaction for cash 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 lenders such as JPMorgan, Bank of America and Wells Fargo.
Last November, Spain’s BBVA struck an $ 11.6 billion deal 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 proceed with a â¬ 4 billion share buyback once the deal is completed and that it will use the remainder of the proceeds to invest in its operations, including technology, and through acquisitions.
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 Bank of Montreal just over 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 â.
The group said it did not plan any branch closures. He added that the transaction would involve C $ 1.7 billion in pre-tax merger and integration costs, but expected pre-tax cost savings of up to C $ 860 million, and that ‘it would immediately increase the earnings per share of the Bank of Montreal.
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.
BNP shares were down 1% in morning trading in Europe.,