BMO to buy Bank of the West from BNP Paribas for $16.3B

Dive Brief:

Bank of Montreal (BMO) has agreed to buy San Francisco-based Bank of the West, the U.S. retail presence of French lender BNP Paribas, for $16.3 billion, the banks said Monday.
The deal, expected to close by the end of 2022, would merge Bank of the West into BMO’s existing U.S. retail footprint, Chicago-based BMO Harris, the Canadian bank said in a press release. Bank of the West would add $105 billion in assets to BMO Harris’s $166 billion, creating the U.S.’s 13th-largest bank, according to Federal Reserve figures.
The transaction would also act as a gateway to California for BMO. The state is home to about 70% of Bank of the West’s $89 billion in deposits, and would give BMO a foothold in the San Francisco and Los Angeles markets.

Dive Insight:

With the deal, BNP Paribas would become the latest foreign lender to retreat from U.S. retail banking.

Japan’s Mitsubishi UFJ Financial Group agreed to sell its U.S. banking arm, MUFG Union Bank, to Minneapolis-based U.S. Bank in September in an $8 billion deal that similarly gave a Midwest institution access to the West Coast.

Britain’s HSBC agreed in May to sell 80 of its 148 U.S. branches to Providence, Rhode Island-based Citizens Bank, and 10 West Coast branches to Los Angeles-based Cathay Bank.

And Spain’s BBVA sold its U.S. retail arm for $11.6 billion to Pittsburgh-based PNC in a deal first announced in November 2020.

BNP Paribas’s exit from U.S. retail banking had been rumored as early as last month, with BMO listed among potential suitors because of the bank’s capacity to offer a cash deal. Bank of the West’s spinoff value at the time was estimated between $12 billion and $15 billion. Monday’s price tag exceeds even that, making it easily the most lucrative deal in the U.S. banking sphere this year.

Along with Bank of the West’s $105 billion in assets and $89 billion in deposits, BMO looks to pick up $56 billion in loans and 1.8 million new customers.

BMO said it would fund the Bank of the West acquisition with excess capital. The Canadian bank said the deal would involve $1.3 billion in pretax merger and integration costs but that it should save up to $664 million.

The bank said it was not planning any branch closures, meaning BMO stands to gain 514 branches. BMO Harris, with 549 branches, already has the second-largest U.S. footprint of any Canadian-owned bank (TD has 1,157.) Adding Bank of the West would give BMO Harris 1,063 — still second but much closer.

"This acquisition will add meaningful scale, expansion in attractive markets, and capabilities that will enable us to drive greater growth, returns and efficiencies," BMO CEO Darryl White said in a Monday press release.

The Canadian bank already derives about 38% of its revenue from its U.S. division, according to The Wall Street Journal. That’s up from about 28% three years ago, White told investors last month. Earnings for the bank’s U.S. unit jumped 58% in the fourth quarter, compared with a 42% increase among its Canadian operations, the Journal reported. The bank has said it wants to lean harder into its U.S. wealth management business for growth.

Monday’s BMO press release gives no detail as to plans for Bank of the West’s current C-suite. However, Bank of the West CEO Nandita Bakhshi said she is "excited for what this new opportunity will bring for our customers, our employees and our longstanding community partners."

"Combined with BMO's suite of products and capabilities we'll be able to help even more customers achieve real financial progress," she said.

BNP, meanwhile, said it would put €4 billion in proceeds toward share buybacks once the deal is closed. The French bank also expects to deploy €7 billion in organic growth, technology investments and bolt-on acquisitions.

"This is a value accretive transaction for all sides, which emphasizes the quality of the Bank of the West franchise," BNP Paribas CEO Jean-Laurent Bonnafe said Monday. BNP put the sale price at 1.72 times tangible book value.

The French bank said it would maintain a U.S. presence in corporate and investment banking. But otherwise, the deal frees it to concentrate on Europe, where it has acquired equity and prime brooking businesses from Deutsche Bank and Credit Suisse in the past two years.

BNP Paribas said it would give further details at a March investor day as to how the spinoff would affect its 2025 strategic plan.

Despite adding $105 billion in assets, BMO is expected to remain Canada’s fourth-largest bank after the deal, behind Royal Bank of Canada, TD and Scotiabank.