BMO Expands in US by Purchasing Bank of the West
The Bank of Montreal announced plans to buy the Bank of the West, BNP Paribas’ US unit. The deal which enables the Canadian lender to expand its presence on the US market is worth $16.3 billion.
BMO has never kept its expansion ambitions secret. It has been operating in the US for almost forty years since it first acquired Harris Bank in 1984. In 2011, it took over Marshall & Ilsley Bank, and analysts are predicting that BMO’s latest deal, the bank’s biggest to date, is going to be another positive one.
The deal places more than 500 US branches and offices in the hands of the Canadian lender. More importantly, BMO is securing a notable presence among other lenders in California, with approximately 1.8 million new customers.
Meanwhile, European lenders are struggling to stay afloat on the US market. In the past two years, two major European lenders sold their businesses. BBVA sold to PNC Financial Services Group in 2020, and HSBC Bank sold most of its business earlier in 2021 to Citizens Financial Group Inc.
The deal with BMO allows BNP Paribas to focus on Europe, where it’s becoming one of the continent’s biggest investment banks. Paribas announced that the funds from the sale will go toward “more share buybacks, to finance bolt-on acquisitions and further develop its presence in both Europe and US.”
There are some concerns about the timing of the deal. US President Joe Biden has been pushing regulators to take a more robust line on these mergers over signs that a decline in competition is hurting average American consumers.
But BMO’s CEO, Darryl White, said he was confident the bank would secure the green light from US regulatory bodies.
Analysts agree that this is a good deal for BMO, especially since borrowing capacity in Canada doesn’t have as much room for growth as in the US. The $16.3 billion acquisition is more than analysts had predicted but is still considered a fair price, especially since the deal is expected to increase earnings by approximately 10% in 2024.
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