BNP hires advisers to explore $15 billion Bank of the West sale

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© Reuters. FILE PHOTO: The BNP Paribas emblem is seen at a department in Paris, France, February 4, 2020. REUTERS/Benoit Tessier/File Photo

By Pamela Barbaglia and David French

LONDON (Reuters) -BNP Paribas is working with advisers to assess a sale of its U.S. arm Bank of the West because it seeks to retreat from the American retail banking market after struggling to compete with bigger and higher capitalised rivals, sources informed Reuters.

The French lender, which overtook British rival HSBC final 12 months to turn out to be Europe’s largest financial institution by belongings, is trying to half methods with its California-based retail banking subsidiary in a deal that would worth it at about $15 billion, three sources with information of the matter stated.

JPMorgan (NYSE:) and Goldman Sachs (NYSE:) are getting ready the enterprise for a sale and have been working intently with BNP to gauge curiosity from potential bidders, the sources stated.

Discussions are nonetheless at an early stage and no deal is definite, they stated.

Shares in BNP jumped greater than 4% after the Reuters story and had been up 5.11% at 1151 GMT.

JPMorgan was first to safe a mandate from BNP throughout the summer time, one of the sources stated, having lately represented Spain’s BBVA (MC:) in the $11.6 billion sale of its U.S. operations to PNC Financial Services Group Inc (NYSE:) – a deal BNP hopes to replicate.

BNP was not instantly accessible for remark. JPMorgan and Goldman Sachs declined to remark.

Bank of the West, with $99.2 billion of belongings as of June 30, ranks as BNP’s largest enterprise outdoors Europe.

A sale would give Chief Executive Jean-Laurent Bonnafé money to make investments on the continent the place the European Central Bank is urging the area’s lenders to merge as they’ve lagged their U.S. and Chinese rivals in profitability and measurement since the 2008 monetary disaster, the sources stated.

While centred on California, the 147-year outdated Bank of the West operates 531 branches, primarily in the U.S. West and Midwest. It was purchased by BNP in 1979 and subsequently merged with its native subsidiary, the French Bank of California (FBC).

To safe a profitable sale of the enterprise, BNP would have to overcome a quantity of challenges, the sources famous.

U.S. President Joe Biden has referred to as for extra scrutiny of financial institution mergers, whereas the departure nL1N2RZ1IC of Randal Quarles as the Federal Reserve’s vice chair for supervision and uncertainty over Jerome Powell’s future as chair has forged doubt on banking consolidation.

Dealmakers, who spoke with Reuters on situation of anonymity, stated this management void has created an efficient maintain on the approval of massive financial institution acquisitions by the Fed, making it troublesome for financial institution boards to sanction new transactions.

BIDDING FIELD

BNP has lengthy seen PNC as a super suitor for Bank of the West, and its sale efforts had been emboldened by the buy value PNC paid for BBVA’s U.S. enterprise, valuing it at 20 occasions its 2019 earnings, the supply stated.

But with PNC now busy integrating its newest acquisition, BNP is left with a small pool of potential consumers, which embody Canadian banks and a few regional U.S. gamers.

Toronto-Dominion Bank and Bank of Montreal are seen as doable suitors alongside Ohio-based KeyCorp (NYSE:), two of the sources stated.

TD Bank, with retail operations alongside the U.S. east coast, has proceeds accessible from the $26 billion sale of broker-dealer TD Ameriprise to Charles Schwab (NYSE:) Corp. Chief Executive Bharat Masrani stated in May the financial institution was open for M&A alternatives which made monetary sense, with a deal with its present footprint.

BMO executives have expressed a need to develop the financial institution’s U.S. presence and the financial institution can be ready to provide BNP a money deal in contrast to KeyCorp which might as an alternative want to pursue an all-stock transaction.

Royal Bank of Canada – which owns City National Bank, the ninth-largest financial institution in California by deposits – may additionally categorical curiosity in Bank of the West, one of the sources stated.

PNC, TD, BMO, KeyCorp and RBC weren’t instantly accessible for remark.



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