BNP Paribas said Monday it is to sell U.S. unit Bank of the West to Canada’s BMO Financial Group for $16.3 billion in a deal that will give France’s biggest bank a huge step up in firepower for deals and buybacks.
BNP Paribas has been struggling to keep up with larger rivals in the U.S. retail banking market, while the sale will also strengthen BMO’s foothold in the United States.
The sale will leave BNP Paribas focused squarely on Europe, where it is growing in stature as one of the region’s biggest investment banks as local rivals stall. In the past two years it has taken on equity and prime broking businesses from Deutsche Bank and Credit Suisse.
“This is a value accretive transaction for all sides, which emphasises the quality of the Bank of the West franchise,” BNP Paribas CEO Jean-Laurent Bonnafe said on Monday.
BNP Paribas shares rose at the start of trading but fell back to stand 0.7 percent lower by 0900 GMT as world stock markets were hit by COVID-19 fears, even though analysts welcomed the sale deal. [MKTS/GLOB].
The bank said it would use proceeds from the sale to fund more share buybacks and to finance bolt-on acquisitions and further develop its presence in Europe.
It said it would also consolidate and further develop its activities in the United States, and the cash from the sale could give BNP Paribas more strategic flexibility than other European banks.
The bank said it would clarify its main strategic plans in February and March next year.
“It makes sense. Bank of the West was not that strategic for them. They were never going to be a major retail bank in the U.S., and they can focus more on their European investment banking, where they make more profits,” said Clairinvest fund manager Ion-Marc Valahu, who owns BNP Paribas shares.
Analysts at Credit Suisse and Keefe, Bruyette & Woods (KBW) also said the $16 billion sale price was higher than many analysts had forecast.
“Achieving this price for Bancwest is a clear positive for shareholders and gives BNPP some strategic optionality, which has been a rare thing for European banks,” wrote KBW.
The United States has proven an increasingly unattractive market for European lenders, with BBVA selling its U.S. operations to PNC in 2020 and HSBC earlier this year selling most of its U.S. business to Citizens.
BNP Paribas bought Bank of the West in 1979 and the unit had been its largest business outside of Europe.
BMO said the acquisition would bring in nearly 1.8 million customers and extend its banking presence through 514 additional branches and commercial and wealth offices in key U.S. growth markets.
BMO said Bank of the West, founded in 1874, would also give the Canadian company approximately $56 billion in loans and $89 billion of deposits.