BNP buys $2.4B U.S. bank

December 10, 2001 Posted: 0844 GMT

LONDON (CNN) -- France's BNP Paribas agreed on Monday to buy United California Bank from Japan's UFJ Holdings for $2.4 billion in cash.

UFJ, like many of its Japanese rivals, is selling assets to sure up finances and cut bad debt problems.

The banks are writing off a combined ¥6.2 trillion ($50 billion) in bad debts for this business year, which is leading to a trickle of corporate bankruptcies, such as last week's failure of midsize construction company Aoki.

For BNP, the deal strengthens its international position and gives it a bigger slice of the western U.S. banking industry. France's biggest bank by market value bought 55 percent of BancWest.

With the latest acquisition, BNP would control $31 billion of assets in the U.S. and serve 1.5 million customers in western United States. UCB, with $8.8 billion of customer deposits at 117 branches in Southern California, is the fourth-largest bank in that state.

Once the deal is completed the French bank would have a 3.3 percent share in the United States.

"This was a great opportunity for us to expand ourselves," Don McGrath, president and chief executive officer of BancWest, told Reuters. "We were waiting to enter the southern California market."

McGrath said the company saw some overlap in operations, especially in northern California, and would save $36 million in 2002. Another $82 million would be saved in 2003.

He said the company would freeze all hiring with immediate effect both at BancWest and at UCB. About 8,000 people work today between the two banks.

BNP Paribas was expected to expand its U.S. business after it offered to took full ownership in BancWest. Reflecting analysts expectations, McGrath said on Monday the BancWest-UCB combine would look for more deals.

With some 8,000 commercial banks in the United States, bankers and analysts have been predicting a consolidation for some time. But it has not taken off due to recent low stock market valuations.

Several U.S. banks are under pressure to merge due to decreased loan demand, competition for deposits and the craving to generate higher earnings.

UFJ shares ended the day down 11.34 percent at ¥297,000, a tad above a new year-low of 296,000 yen hit earlier in the day. BNP's stock slipped 0.6 percent to 99.65 in early Paris trading on Monday. The stock has risen 6.5 percent this year but is off a May high of 106.30.