PARIS (Agefi-Dow Jones) – French bank BNP Paribas announced on Monday that it had reached an agreement with Bank of Montreal (BMO) to sell 100% of its commercial banking activities in the United States to the Canadian establishment. subsidiary Bank of the West for 16.3 billion US dollars, or 14.4 billion euros.
The amount of the transaction represents “1.72 times the value of the tangible net assets of Bank of the West and 20.5% of the market capitalization of BNP Paribas, for an average contribution of Bank of the West to the result before tax of the group in recent years by around 5%, “BNP Paribas said in a press release.
The French bank added that the transaction would generate an exceptional capital gain, net of tax, of around 2.9 billion euros and have a positive effect of around 170 basis points on its CET1 capital ratio.
The announcement of this sale enables BNP Paribas shares to resist the fall in the market. On Monday at the start of the session, BNP Paribas shares rose 1% to 56.77 euros while the CAC 40 plunged 2%, weighed down by fears about the spread of the Omicron variant of the coronavirus.
The operation should be completed in 2022, subject to the usual conditions precedent, and will be followed by a share buyback program “in order to offset the expected dilution of net earnings per share,” BNP Paribas said. The bank did not communicate the amount of this share buyback program, but stressed “as an indication” that a “program of around 4 billion euros would completely neutralize the dilution of net earnings per share” .
Net of these share buybacks, the improvement in BNP Paribas’ CET1 ratio should stand at 110 basis points, according to the bank.
The remaining proceeds from the operation should be redeployed “gradually and in a very disciplined manner, with the aim of improving long-term value creation by accelerating organic growth, particularly in Europe, targeted investments in innovative technologies and models, and targeted acquisitions in value-added activities, “BNP Paribas also indicated.
Long-term presence in the United States
At the same time, the group stressed that its presence in the United States was for the long term. “The establishment of BNP Paribas in the United States remains a strategic pillar for the development of our corporate and institutional franchises,” said Jean-Laurent Bonnafé, CEO of BNP Paribas, quoted in the press release. Bank.
BNP Paribas will also enter into long-term distribution agreements with BMO “as part of cross-border cooperation and delivery of equipment financing and cash management solutions in North America,” the bank said.
The acquisition will also allow the Canadian bank to expand in the United States. Together, BMO and Bank of the West will have some $ 870 billion in assets.
Based in San Francisco, Bank of the West operates commercial and retail banking businesses, and provides specialized financing and other services. Owned by BNP since 1979, the US bank has approximately $ 89 billion in deposits, nearly $ 105 billion in assets, and approximately 500 branches in the Western and Midwestern United States.
BMO, Canada’s fourth-largest bank, operates commercial banking, retail banking, wealth management and capital markets businesses in the United States. The bank said it discerned a major growth opportunity in its American wealth management business.
A difficult market for European banks
The European banks which launched an assault on the American market from the beginning of the 1980s have not really succeeded in gaining ground across the Atlantic. Royal Bank of Scotland Group exited Citizens Financial Group in 2015, and HSBC Holdings announced last year that it would close a third of its US branches.
Spain’s BBVA decided about a year ago to sell its American branch PNC Financial Services Group for around $ 11.6 billion, in a deal that created the fifth-largest retail bank in the United States. United.
While large mergers and acquisitions had been relatively rare in the banking sector since the 2008 crisis, 2021 saw the highest number ever since.
-Valérie Venck, Agefi-Dow Jones; +33 (0) 1 41 27 48 25; [email protected] ed: JXM
(Cara Lombardo and Orla McCaffrey, The Wall Street Journal contributed to this article)
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December 20, 2021 03:11 ET (08:11 GMT)