BNP Paribas is done with its conquest of the American West. The French banking giant announced, Monday, December 20, that it had reached an agreement with the Bank of Montreal (BMO Financial Group) to sell it its Californian subsidiary Bank of the West for an amount of $ 16.3 billion ($ 14.4 billion). billion euros), in cash. This sum represents around 20% of BNP Paribas’ market capitalization, while Bank of the West has contributed on average around 5% of the group’s pre-tax income in recent years.
BNP Paribas thus puts an end to an adventure of more than forty years. Bank of the West, headquartered in San Francisco, fell in 1979 into the hands of the French bank. The latter then bought a structure of around forty agencies, in order to obtain a deposit base to finance loans to French companies in America. A small local Californian bank, it has become, through successive acquisitions, a regional bank, geared towards individuals and SMEs, established in the American West and Midwest. The fourth regional bank in terms of deposits in California, it boasts 1.8 million customers and a strong presence with winegrowers in Napa Valley.
Consolidation movement
Low interest rates, however, hurt US regional banks, which embarked on a consolidation movement to save money and compete with the retail banking activities of large Wall Street institutions. With this transaction, BNP Paribas is withdrawing from the American retail banking market, where it was struggling against larger and better capitalized rivals, and will concentrate its forces in Europe. However, the establishment remains present in the United States, New York, in corporate and investment banking.
Other foreign banks initiated this movement before it: in 2020, the Spanish BBVA sold its American banking activities to the Pittsburgh group PNC for 11.6 billion dollars (10.3 billion euros) and, in September , the Japanese Mitsubishi UFJ Financial Group has decided to sell the retail branch of its American subsidiary, MUFG Union Bank, to US Bancorp, for 8 billion dollars (7.08 billion euros).
BNP Paribas has already indicated how it would use this new financial income. It plans to make an extraordinary distribution in the form of share buybacks after the completion of the transaction, in 2022, “In order to offset the expected dilution of net earnings per share”, said the establishment in a press release, while the sale of Bank of the West will result in lower returns for shareholders. “As an indication, a share buyback program of around 4 billion euros would completely neutralize [cette] dilution “, she specifies.
For the rest, the group intends to use this windfall to grow “organically” (without business acquisitions) in Europe, to invest “In innovative technologies and models”, and to achieve “Targeted acquisitions”.
