Bank of the West

Bank of the West was a prominent regional bank in the United States, with deep roots stretching back to its 1874 founding in San Jose, California. For decades, it was a familiar name in communities across the Western and Midwestern states. For much of its modern history, the bank operated as a U.S. subsidiary of the French banking giant, BNP Paribas. However, the Bank of the West story reached its final chapter in 2023 when it was acquired by Canada's BMO Financial Group (often known as Bank of Montreal). Following the acquisition, all of Bank of the West's operations, branches, and accounts were merged into BMO's existing U.S. subsidiary, now known simply as BMO. This marked the end of the Bank of the West brand. For investors, its history is a fantastic case study in global banking strategy, the dynamics of mergers and acquisitions (M&A), and how even well-established companies can become strategic assets in a larger corporate game.

Bank of the West's journey is a story of evolution and international ownership. It grew steadily for over a century, building a solid reputation and a strong deposit base. In 1979, it caught the eye of BNP Paribas, one of Europe's largest banks, which acquired it to establish a significant retail banking foothold in the United States. For over 40 years, Bank of the West operated under the BNP Paribas umbrella. This relationship provided the U.S. bank with the financial backing and global reach of a massive parent company. However, it also meant that its ultimate fate was tied to strategic decisions made thousands of miles away in Paris. For a global behemoth like BNP, a regional U.S. bank, even a large one, can eventually be deemed non-core to its primary objectives. This is exactly what happened, setting the stage for one of the biggest U.S. bank deals in recent years.

In late 2021, BMO announced its intention to acquire Bank of the West from BNP Paribas for a staggering $16.3 billion in cash. The deal was finalized in early 2023. From an investor's perspective, this transaction is rich with valuable lessons.

A value investor always asks “Why?” In this case, BNP's decision to sell wasn't a reflection of poor performance by Bank of the West. Rather, it was a strategic pivot.

• Refocusing on Europe: BNP decided to double down on its home turf. Selling the U.S. subsidiary freed up an enormous amount of capital that could be reinvested in its European operations, where it has a more dominant market position and sees greater growth potential. It was a classic case of a company returning to its circle of competence.
• Cashing In: The sale generated a huge one-time profit for BNP, which it could use to fund share buybacks or issue special dividends, directly rewarding its own shareholders.

For BMO, the acquisition was a game-changer. While BNP saw a non-core asset, BMO saw a golden opportunity to dramatically accelerate its U.S. expansion.

• Instant Scale: Buying is often faster and less risky than building. The deal instantly added over 500 branches and 1.8 million customers to BMO's U.S. operations, particularly in the lucrative California market where BMO had very little presence.
• Chasing the Big Dogs: The U.S. banking market is dominated by a few giants. To compete effectively, regional players need scale. This acquisition vaulted BMO into a much stronger competitive position against larger American banks.
• Cost Synergies: When two banks merge, there are significant opportunities to cut costs by eliminating redundant back-office functions, combining technology systems, and closing overlapping branches. BMO projected it could achieve major cost savings, boosting the profitability of the combined entity.

The end of Bank of the West provides timeless insights for managing your own portfolio.

1. Know the Whole Story: If you own shares in a subsidiary, you must also pay attention to the parent company. The parent's strategy can change on a dime, and your investment can be sold right out from under you.
2. M&A Creates and Destroys Value: When a company you own makes a big acquisition, it's crucial to assess the deal. Did they pay a fair price? A common metric in banking is the price-to-tangible-book-value ratio. If the acquirer overpays, it can destroy shareholder value for years. If they get a good deal, it can be a massive catalyst for growth.
3. Consolidation is Constant: Industries like banking are always consolidating. This means well-run, smaller banks can become attractive takeover targets, which can lead to a nice premium for their shareholders. Understanding these broader industry trends is a key part of smart investing.