Bank of the West Disposal--Great Example of Good Capital Allocation

No-moat BNP Paribas recently announced that it would sell its U.S. subsidiary Bank of the West to Canadian bank, BMO, for EUR 14.4 billion. We view the deal as a great example of good capital allocation. Bank of the West operations have little synergies with the rest of the group. It is a drag on overall group profitability. The disposal price represents an attractive 1.7 times price to tangible book multiple. However, we are disappointed that BNP intends to distribute only EUR 4 billion as a special dividend to shareholders, while the disposal will free up EUR 11 billion of capital. We expect that we will increase our EUR 63 fair value estimate.