Bank of Montreal is strengthening its presence in the United States by acquiring a subsidiary of French bank BNP Paribas for US $ 16.3 billion.
The bank and its Chicago-based subsidiary BMO Harris Bank announced on Monday the acquisition of Bank of the West, which will allow the Canadian bank to increase the number of customers of its U.S. operations and boost growth in this coveted market. The purchase price of $ 16.3 billion is estimated to be 1.5 times the book value of the Bank of the West.
“Thanks to the strength of our performance and our integrated bases in North America, we have never been better positioned to take the next step in our growth strategy and serve the new customers and employees we look forward to welcoming.” within BMO, ”Bank of Montreal Chief Executive Officer Darryl White said in a statement.
“This acquisition allows us to grow, expand our business in attractive markets and develop capabilities that will allow us to continue to grow and increase our returns and efficiency. “
The deal, which was funded mostly with excess capital, is one of the bank’s first major liquidity deployments, which has spent more than a year replenishing its coffers in the event of massive default during the crisis. of COVID-19.
When government spending eliminated some of bankers’ financial fears about the pandemic, the Bank of Montreal and other banks found themselves in a privileged position to spend.
BMO seized the opportunity to purchase San Francisco-based Bank of the West because it offered a complementary presence to its existing US operations.
“Strategic pillar”
The Bank of Montreal – established in the United States for more than a century – has been looking to increase its presence in the country for about a decade. During its 2021 financial year, which ended at the end of October, it generated more than a third (36%) of its turnover in the United States.
“This operation creates value for all parties; it emphasizes the quality of [la] Bank of the West ”, summarized Jean-Laurent Bonnafé, director and general manager of BNP, quoted in the press release.
The Bank of the West was very attractive because of its presence in the California market, where 70% of its deposits come from, the Bank of Montreal explained.
The acquisition should also bring nearly 1.8 million new customers to Bank of Montreal and allow it to expand its presence with 514 additional branches located in key growth markets in the United States. The deal will leave Bank of Montreal with services in 32 states and an annual return of around 14%.
The transaction has already received the approval of the Boards of Directors of Bank of Montreal and BNP Paribas. The deal is expected to be concluded by the end of calendar year 2022, subject to obtaining the usual regulatory approvals. Upon closing, Bank of Montreal will amalgamate Bank of the West and BMO Harris Bank.
“In addition, the establishment of BNP Paribas in the United States remains a strategic pillar for the development of our corporate and institutional franchises. With this transaction, BNP Paribas confirms its commitment to creating long-term value for all of its stakeholders, ”said Mr. Bonnafé.
The French group will notably enter into long-term distribution agreements with BMO, its new partner, “as part of cross-border cooperation and the provision of equipment financing and cash management solutions in North America”.
With Agence France-Presse