BMO and BNP Paribas announce cross-border agreement in wake of M&A deal

Bloomberg

BMO Financial Group's acquisition of Bank of the West is set to result in increased cross-border cooperation between the bank's Canadian buyer and its French seller.

An agreement announced Tuesday will allow BMO's commercial customers in the United States and Canada to make use of BNP Paribas' operations in more than 65 countries, largely across Europe and Asia. On the flip side, Paris-based BNP will continue working with its former U.S. subsidiary, referring international clients to Bank of the West for transactions inside the U.S. and Canada.

BNP customers, who are concentrated in Europe, have used Bank of the West to access U.S. commercial banking services for more than a decade, said Dan Marszalek, BMO's co-head of U.S. commercial banking.

"It's not something that's a nascent effort," Marszalek said in an interview. "We already know that it works because it's already in place. We're building it to be bigger and more of a two-way system."

The arrangement is designed to benefit commercial clients that do business on multiple continents, such as a U.S. company that operates an Italian subsidiary. BNP's strong presence in Italy could help streamline the U.S. company's banking relationships in that country.

The agreement also includes a plan to partner on the leasing-services front, which could enable manufacturers, for example, with operations across the globe to work with a single bank, rather than a number of different ones.

Caroline Pez-Leferve, BNP's deputy chairwoman of One Bank for Corporates, said in a statement that the agreement will allow the French bank to provide "seamless cross-border cooperation" to its commercial banking clients. At the same time, she added, BMO's clients will have access to BNP's global footprint. 

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BMO and BNP decided on the cross-border agreement when the Bank of the West deal was first announced in late 2021. They ironed out specifics while awaiting for regulators to approve the transaction. The two banks won't be paying each other under the terms of the deal. They instead expect the additional business generated from the partnership to boost profits at both banks.

"We think we have a really good opportunity to have really good reciprocity in terms of two-way referrals," Marszalek said.

The Bank of the West deal was the latest example of a foreign bank selling its U.S. banking subsidiary, and followed similar moves by Spain's Banco Bilbao Vizcaya Argentaria, Japan's Mitsubishi UFJ Financial Group and London-based HSBC Holdings. It made BMO the 15th-largest U.S. bank and gave it entry into attractive West Coast markets.

The deal officially closed this month, and the banks have set a conversion target of September.