Bank of Montreal BMO-T has received the final regulatory approval required to take over California-based Bank of the West from BNP Paribas, creating the 15th largest commercial bank in the United States.
The U.S. Federal Reserve and the Office of the Comptroller of the Currency (OCC) announced Tuesday evening that the regulators had approved the US$16.3-billion deal – the largest-ever purchase of a U.S. bank by a Canadian lender. The combination of the banks amasses $286.8-billion in consolidated assets under the Canadian lender’s U.S. subsidiary, BMO Financial Corp, according to the Federal Reserve.
BMO expects to add 1.8 million new customers as it expands its footprint from its base in the Midwest and into California, growing its U.S. operations across 32 states.
Heightened scrutiny from U.S. regulators pushed the takeover past its original deadline. In December, BMO changed its expected closing date from the end of 2022 to the first quarter of this year. With the approvals now in hand, BMO said in a statement Tuesday evening that it expects the deal to close on Feb. 1.
To finance the deal, BMO has taken to public markets twice in the last year. In March, it raised $2.7-billion to fund the all-cash deal. After Canada’s banking regulator raised the amount of money banks must hold to sustain an economic downturn, BMO sold an additional $3.35-billion in shares in to boost its capital reserves.
Since President Joe Biden issued an executive order in 2021 demanding stricter reviews of combinations in the sector, U.S. regulators have become more critical of bank mergers.
At a July hearing, BMO faced pushback from stakeholders asking to commit to community support and boost access to credit for underserved and minority groups. Four months later, BMO unveiled its plan to commit US$40-billion to underserved communities.
“We look forward to working with communities across our expanded U.S. footprint to help drive meaningful change at the local level through a strong combination of financial and community-driven investment,” said David Casper, BMO’s U.S. chief executive officer.
Toronto-Dominion Bank’s deal to purchase Tennessee-based First Horizon Corp. is still undergoing regulatory assessment.
Stefanie Marotta