BNP to sell Bank of the West to Canada’s BMO for $16.3bn
By Jenni Reid
09:24, 20 December 2021
French bank BNP Paribas has announced it is selling its US retail and commercial business Bank of the West to Canada’s BMO Financial Group for $16.30bn (€14.46bn, £12.35bn) in cash.
BNP’s share price was up 0.6% to €56.50 at 9:30 CET on the Euronext Paris. It is up 31.25% in the year to date.
The banking group – Europe’s largest – said the deal represented around 20% of its market capitalisation and that Bank of the West currently contributed roughly 5% of group pre-tax earnings.
Shareholder returns
BNP said it would make an extraordinary distribution to shareholders through share buybacks following the closing of the sale.
It said a share buyback programme of €4bn would neutralise the earnings per share dilution resulting from the sale, based on Friday’s closing share price of €56.17.
It will use another €7bn in capital release on European growth, technology investments and bolt-on acquisitions.
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Ongoing partnership
BNP will continue its corporate and institutional banking and brokerage operations in the US.
It will also enter long-term distribution agreements with BMO over the provision of equipment finance and cash-management solutions in North America.
“This is a value accretive transaction for all sides, which emphasises the quality of the Bank of the West franchise,” said BNP chief executive Jean-Laurent Bonnafé.
Analysts at Keefe, Bruyette & Woods wrote: “Achieving this price for [Bank of the West] is a clear positive for shareholders and gives BNPP some strategic optionality, which has been a rare thing for European banks.”
BNP has struggled to compete in the competitive US retail banking market, which has seen recent exits by HSBC and BBVA.
US growth
BMO called it a “natural next step” in its North American growth strategy and would allow it to expand in the US, including the “highly attractive California market”, which holds 70% of Bank of the West deposits.
It will gain 1.8 million customers, 514 branches and commercial and wealth offices, $56bn of loans and $89bn of deposits. BMO said it was committed to retaining front-line branch employees and did not plan to close branches.
“We will deliver a highly competitive offering to new growth markets, combining the strength of our digital banking platform and a strong team of bankers to generate leading customer growth,” said BMO chief executive Darryl White.
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