BNP Paribas is working with advisers to explore the sale of its Bank of the West subsidiary in the United States as it prepares to exit the American retail banking sector after struggling to compete with larger and better-capitalized rivals.
According to three sources familiar with the situation, the French lender, which last year overtook Britain’s HSBC to become Europe’s largest bank by assets, is considering selling its San Francisco-based retail banking arm in a deal for up to $15 billion.
JPMorgan and Goldman Sachs are handling the sale and have been working closely with BNP to evaluate interest from potential bidders.
They stated that discussions are still in the early stages and that no agreement is certain.
Following the story, BNP shares surged as much as 5.5 percent to 62.55 euros and were 3.4 percent higher in early afternoon trading.
JPMorgan was the first to gain a mandate from BNP this summer, after representing Spain’s BBVA in the $11.6 billion sales of its U.S. business to PNC Financial Services Group Inc, a deal BNP aims to emulate.
BNP did not respond to a request for comment right away. Goldman Sachs and JPMorgan Chase both declined to comment.
With $99.2 billion in assets as of June 30, Bank of the West is BNP’s largest operation outside of Europe.
According to the sources, a sale would provide cash for Chief Executive Jean-Laurent Bonnafé to invest on the continent, where the European Central Bank is urging regional lenders to merge because they have lagged behind their American and Chinese counterparts in profitability and size since the 2008 financial crisis.
The 147-year-old Bank of the West is based in California, but it has retail locations in 19 West and Midwest states. BNP purchased it in 1979 and merged it with its local subsidiary, the French Bank of California.
Bank of the West offers a variety of retail banking products and services to individuals, small businesses, and corporations, as well as a strong presence in specialized finance areas including agriculture and farming.
FIELD OF BIDDING
BNP would have to overcome a lot of obstacles in order to sell the company successfully.
While the retirement of Randal Quarles as the Federal Reserve’s vice chair for supervision and the uncertainty surrounding Jerome Powell’s future as chair has cast doubt on banking consolidation, US President Joe Biden has urged for more examination of bank mergers.
Dealmakers who spoke to reporters on the condition of anonymity said the Fed’s approval of large bank acquisitions has been effectively halted, making it harder for bank boards to sanction fresh purchases.
“BNP needs to find a partner that will fight tooth and nail to get regulatory permission,” stated the first source.
BBVA has long viewed PNC as an excellent suitor for Bank of the West, and its sale attempts have been bolstered by the purchase price PNC paid for BBVA’s U.S. Company, which valued it at 20 times its 2019 earnings.
However, because PNC is now integrating its most recent acquisition, BNP is left with a small pool of potential bidders, which includes Canadian banks and several smaller US companies.
Two sources stated that Toronto-Dominion Bank and Bank of Montreal are potential suitors, as is Ohio-based KeyCorp.
The $26 billion sales of broker-dealer TD Ameriprise to Charles Schwab Corp have provided revenues to TD Bank, which has retail operations along the US East Coast. Bharat Masrani, the bank’s CEO, stated in May that the bank was open to M&A options that made financial sense, with a concentration on its current presence.
BMO officials have shown a desire to expand the bank’s presence in the United States, and the bank would be able to add capital to fund a potential deal, but KeyCorp would have to pursue an all-stock merger.
Royal Bank of Canada which controls City National Bank, California’s ninth-largest bank by deposits, could be interested in buying Bank of the West.
PNC and KeyCorp declined to comment, while TD, BMO, and RBC were unavailable at the time of publication.
