BNP Paribas exits US retail banking with $16.3 billion sale

Bye. Farewell. Don’t let the door bump into you on the way out.

On Monday, France’s biggest bank, BNP Paribas, became the latest in a line of European lenders to exit the US retail banking space as one after another failed to impress US consumers.

loss games

Many foreign banks have tried their luck in the US retail banking market, attracted by the high margins of US lenders and the vigorous growth of the world’s largest economy. But European banks in particular underperformed, unable to match the brand prestige – let alone the talent and client lists – of JPMorgan and Bank of America.

Last year, Spain’s BBVA bailed out when it sold its US operations to Pittsburgh bank NPC for $11.6 billion. Then HSBC, the British global banking giant that is a powerhouse in Asia, sold its North American unit to Citizens Bank earlier this year. On Monday, BNP Paribas – the French banking titan with a market capitalization of $70 billion – became the latest to throw in the towel:

  • BNP has agreed to sell San Francisco-based Bank of the West to Canada’s Bank of Montreal (BMO) for $16.3 billion.
  • BMO – which will try to replicate the American success of its Canadian rival Toronto-Dominion (TD Bank as it is popularly known) – is adding more than 500 bank branches and wealth management offices with 1.8 million customers mainly based in the Economically resilient California.

BMO shares fell 2% in morning trading on the Toronto Stock Exchange, with some analysts concluding the acquisition price was a bit high. But BMO said the deal would immediately boost its profits, despite $1.3 billion in merger costs.

Exception to the rule: A European bank that proved the asterisk (yes, it’s the asterisk in Spanish): the Spanish Santander. The bank’s subprime auto loan business, Scusa, has seen astronomical growth due to Santander’s strategy to not compete with the big American banks. Instead, it targets customers with lower creditworthiness who have been rejected by traditional banks. Santander’s US operation now makes more profit than its units in Spain, Brazil and the UK.

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