Bank of Montreal buys the American unit of BNP Paribas
The cash transaction would facilitate Bank of Montreal’s expansion into the United States, where it has worked to strengthen its presence in recent years. Together, the banks are said to have some $ 870 billion in assets. The deal is expected to be finalized in 2022.
Bank of the West operates commercial and consumer banking segments, in addition to financing and other specialist services. The San Francisco-based bank has about $ 89 billion in deposits, assets of about $ 105 billion, and about 500 branches in the Midwest and West. It has belonged to the French BNP since 1979.
BNP said it remains engaged in its business and institutional banking activities in the United States. The West Bank has accounted for around 5% of the bank’s pre-tax profits in recent years, he said.
The French bank has announced its intention to repurchase shares to compensate shareholders for a dilution of its earnings per share. It will also use the proceeds of its growth in Europe for technology investments and acquisitions. The bank’s stock rose 1.1%, outperforming the Euro Stoxx Banks index, which fell around 1%.
The Wall Street Journal reported on Sunday that BNP and BMO, as the Bank of Montreal is called, were in advanced talks and a deal could be reached as early as this week.
The Bank of Montreal is the fourth largest bank in Canada. Its U.S. division now generates around 38% of the bank’s revenue, up from around 28% three years ago, chief executive Darryl White said on an investor call earlier this month. Profits for the US division of the bank rose 58% in the fourth quarter, compared to an increase of 42% for its Canadian division.
In the United States, BMO operates commercial, retail, wealth management and capital markets operations. The bank said it sees a major opportunity for growth in its wealth management business in the United States.
BMO opened its first branch in the United States in 1818, about a year after its founding. In the 1990s, it became the first Canadian bank to be listed on the New York Stock Exchange. The company has a market value of approximately $ 69 billion.
For large Canadian lenders looking to expand, limited domestic options for growth have made them look across the southern border.
Royal Bank of Canada,
the nation’s second-largest lender, bought Los Angeles-based City National Corp. for $ 5.4 billion in 2015. Canada’s largest bank, Toronto-Dominion,
now operates more branches in the United States than in Canada.
European lenders who planted flags in the United States from the late 1980s have failed to gain much ground. Royal Bank of Scotland Group PLC sold to Citizens Financial Group Inc.
in 2015. HSBC Holdings PLC announced last year that it would close a third of its branches in the United States.
BBVA from Spain agreed to sell its US branch about a year ago to PNC Financial Services Group Inc.
for roughly $ 11.6 billion in a deal that created the fifth-largest retail bank in the United States
While major bank mergers have been rare since the 2008 crisis, there have been more of them this year than at any time since then.
But federal financial regulators have expressed interest in stopping the wave of mergers. In recent weeks, Democratic members of the board of directors of the Federal Deposit Insurance Corporation have been pushing to review regulations regarding large bank mergers. Banking officials fear that such scrutiny by the FDIC or other regulators, namely the Federal Reserve and the Office of the Comptroller of the Currency, could result in tighter controls on larger transactions.
The continued consolidation of financial institutions leaves consumers with fewer banking options and lessens competition, argued progressive policymakers. Regional banks see joining forces as the best way to tackle paltry loan profits and the ever-increasing spending needed to keep pace with technological improvements at the biggest banks.
Bloomberg reported on Thursday that BMO had initial talks about buying the BNP unit.
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