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.
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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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.
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.