BNP Paribas to Sell US Banking Business to BMO Financial for $16.3B

BNP Paribas is making an exit from retail and commercial banking in the United States as it has agreed to sell Bank of West to Canada-based BMO Financial Group for a total consideration of $16.3 billion.

Announced on Monday, the two parties are expecting to close the acquisition deal, which will be scrutinized by regulators and antitrust agencies, over the course of 2022. If approved, the total transaction will be made in cash.

“This is a value accretive transaction for all sides, which emphasizes the quality of Bank of the West franchise,” said Jean-Laurent Bonnafé, Director and CEO at BNP Paribas Group.

The total consideration of the deal is 1.72 times the tangible book value of the Bank of West and represents 20.5 percent of the total market capitalization of the French parent, the official announcement detailed.

With this deal, BNP Paribas will generate a one-off capital gain, which is estimated at around €2.9 billion ($3.26 billion). Furthermore, it will strengthen the group’s Common Equity Tier 1 (CET1) ratio by approximately 170 basis points.

The “BNP Paribas’ set-up in the United States remains a strategic pillar for the development of our Corporate and Institutional franchise. With this transaction, BNP Paribas also reaffirms its commitment to deliver value to all its stakeholders,” Bonnafé added.

Share Buyback

Moreover, the French lender is planning for an ‘extraordinary’ buyback program to compensate shareholders for the expected dilution of earnings-per-share from the deal. Furthermore, Bank of West has contributed around 5 percent of BNP Paribas’ pre-tax earnings on average over the past few years.

“As an indication, a share buy-back program of approximately 4 billion euros would fully neutralize the EPS dilution (under current assumptions and based on 17 December 2021 closing share price, that is 56.17 euros),” the announcement stated. “Net of these share buy-backs, the increase in the Group’s CET1 ratio would be of approximately 110 basis points.”