BMO Is Said to Express Interest in BNP Paribas’s U.S. Banking Unit

(Bloomberg) -- Bank of Montreal has expressed interest in buying BNP Paribas SA’s U.S. banking arm, according to people familiar with the matter, a potential deal that would shore up its stateside presence. 

The Canadian lender has held initial talks about an acquisition of BNP Paribas’s Bank of the West unit, the people said, asking not to be identified discussing confidential information. 

Shares in BNP Paribas rose as much as 3.7% on Thursday. The stock was up 2.4% at 5.29 p.m. in Paris, giving the company a market value of 72 billion euros ($81 billion). Bank of Montreal shares rose almost 1%.

The French bank is working with advisers to explore a sale of the business, Bloomberg News reported last month. Bank of the West had a book value of about $13.7 billion as of Sept. 30, according to Federal Deposit Insurance Corp. data -- a rough measure of how much it could be worth in a sale. 

U.S. regulators have been slow to approve bank mergers of late, which could complicate the talks, according to the people. Other suitors, particularly in Canada or the U.S., could also still emerge to bid for Bank of the West, the people said.

Beyond Bank of Montreal, potential contenders for the business could include Toronto-Dominion Bank as well as Pittsburgh-based PNC Financial Services Group Inc., according to Bloomberg Intelligence.

Deliberations are ongoing, and there’s no certainty they will lead to a transaction, the people said. Representatives for BNP Paribas and Bank of Montreal declined to comment. 

A deal would follow a wave of foreign exits from U.S. banking, as lenders from countries including Spain, Israel and Japan take advantage of high valuations and a hot deals market to unload non-core franchises. Canadian lenders, meanwhile, have been looking to expand in the U.S. as their own banking market is stable but lacks strong growth potential. 

Bank of Montreal, one of Canada’s big five banks, already has a sizable presence throughout the Midwestern U.S. from its acquisition of Harris Bankcorp in the 1980s and a $4.1 billion takeover of Marshall & Ilsley a decade ago. San Francisco-based Bank of the West would complement that franchise and extend its reach throughout the Western U.S.

For BNP Paribas, Europe’s biggest bank by assets, a disposal could pave the way for an acquisition in Europe or Asia, or for higher capital returns to shareholders. Italy’s UniCredit SpA saw its shares jump earlier this month after Chief Executive Officer Andrea Orcel announced a massive buyback over the next few years. 

BNP Paribas has owned Bank of the West since 1979 and for most of that time considered it a key source of stable funding. The unit had $105 billion in assets as of Sept. 30 and 537 retail banking locations, primarily in the Western U.S., according to filings. 

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