TORONTO — BMO Financial Group is deepening its U.S. presence with a US$16.3 billion deal to buy a subsidiary owned by French bank BNP Paribas.
BMO and its Chicago-based subsidiary BMO Harris Bank announced Monday that it was purchasing BNP Paribas’ Bank of the West to bolster its customer count and drive more growth in coveted market.
The US$16.3 billion acquisition price is estimated to be 1.5 times Bank of the West’s book value.
“With the strength of our performance and our integrated North American foundation, we have never been better positioned to take this next step in our growth strategy and to deliver for the new customers and colleagues we look forward to welcoming to BMO,” BMO’s chief executive Darryl White, said in a statement.
“This acquisition will add meaningful scale, expansion in attractive markets, and capabilities that will enable us to drive greater growth, returns and efficiencies.”
The deal, which was funded primarily with existing capital, is one of the bank’s first major cash deployments after it spent more than a year building up its coffers in the event of mass loan defaults during COVID-19.
When government spending averted some of the financial fears bankers had surrounding the pandemic, BMO and other banks were left in a prime position to spend.
BMO took the opportunity to purchase San Francisco-based Bank of the West because it offers a complementary footprint to its existing U.S. business.
Bank of the West, BMO said, was highly attractive because of its presence in the California market, where 70 per cent of Bank of West deposits stem from.
BMO estimates the acquisition will also add nearly 1.8 million customers to the bank and will expand its banking presence through 514 additional branches in key U.S. growth markets.
The deal will leave BMO with a footprint in 32 states and an estimated annual return of about 14 per cent.
The transaction has already received approval from BMO and BNP Paribas’ boards of directors.
The deal is expected to close by the end of calendar 2022, but is subject to regulatory approvals.
Upon closing, BMO will merge Bank of the West into BMO Harris Bank N.A.
This report by The Canadian Press was first published Dec. 20, 2021.
Companies in this story: (TSX: BMO)
The Canadian Press