BNP Paribas rules out buying another bank using $16.3B from Bank of West sale

French banking giant BNP Paribas SA is not interested in buying another bank with the $16.3 billion it is set to receive from its sale of U.S. lender Bank of the West, CFO Lars Machenil said during a second-quarter earnings call.

BNP was reported to have suggested to the Dutch government that it would be willing to buy ABN Amro Bank NV, the Netherlands' third-largest lender, earlier in 2022. The French lender sold California-based Bank of the West to Bank of Montreal in December, promising to reinvest the proceeds in "technology, new business models, bolt-on acquisitions [and] accelerating organic growth" as it announced a new strategy in February 2021.

Analysts expressed surprise and some disappointment that BNP was considering committing what some expected to be at least €9 billion toward buying another large legacy bank. The analysts said the bank would be better off investing in digitalization and would find it difficult to make cost savings from a deal due to the lack of geographic overlap with ABN Amro's business.

"Our objective is not to redeploy [the $16.3 billion] in a bank," Machenil said.

Machenil reiterated BNP's commitment to investing the proceeds in accelerating organic growth, technology and "bolt-on" acquisitions, or the buying of small companies that complement the bank's existing operations. Such acquisitions will not target other lenders, Machenil insisted.

"We can bolt-on things — so, not a bank — but we [might] buy some activities in an area where it allows us to strengthen," Machenil said. "It has to be bolting-on, so it has to be in an area where we already have things."

Machenil was responding to a question from an analyst asking if BNP would be interested in acquiring Credit Suisse Group AG's structured products business, which the Swiss bank announced it was exiting July 27. BNP is already a significant player in the structured products business, which involves investments that meet specific investor needs with a customized product mix, such as baskets of stocks or single or multiple stock market indexes and exchange-traded funds.

Machenil did not rule out a move for the business, saying that any acquisitions must "be in an area where we already have things. It has to blend in with what we already have. And I'm frugal, so the price has to be right. [Those are] the criteria that we use, so I'll leave it at that."

BNP's investment bank, which houses its structured products business, had a strong second quarter after a record start to the year driven by "very robust client activity" in global markets trading. The investment bank, also known as its corporate and institutional banking division, grew revenues by 10.6% year over year in the second quarter to €4.11 billion. Pretax profit at the business grew by 5.3% year-on-year during the period to €1.72 billion.

The corporate and institutional banking's performance helped grow BNP's quarterly revenues by 8.5% year over year to €12.78 billion and net income group share, excluding exceptional items, by 18.5% year over year to €3.26 billion.

The results showed "a bank in the pink of health," said Machenil.