French Bank to Buy UCB for $2.4 Billion

French bank BNP Paribas, moving quickly to expand into the Western United States, agreed Sunday to acquire United California Bank from its Japanese parent UFJ Holdings for $2.4 billion in cash.

The proposed acquisition would be the third major U.S. purchase for the French bank in a year and underscores an aggressive push recently by European and Canadian banks into the U.S. financial services sector. BNP Paribas is weeks away from completing its takeover of Honolulu-based BancWest Corp., whose unit Bank of the West operates in Northern California and elsewhere in the West. And in February it acquired 30 branches of the former First Security Bank of Utah.

BNP Paribas plans to combine the mid-size United California Bank and Bank of the West to create the state’s fourth-largest bank, with $15 billion in deposits, a staff of 8,000 and more than 350 branches in California and six other Western states, as well as Guam and Saipan. The new unit would be based in San Francisco and operate under the name Bank of the West.

United California Bank, the largest Los Angeles-based bank with $11 billion in assets and 117 branches mostly in Los Angeles and Orange counties, was created less than six months ago from the union of Sanwa Bank California and Tokai Bank of California.

That merger was part of a larger consolidation of Japanese banks to restructure the nation’s troubled financial system.

UFJ Holdings, among Japan’s largest banks, is retrenching after reevaluating all of its assets worldwide, spokesman Richard S. Lewis in New York said. The publicly traded Japanese company has been focusing more on its core consumer business in Japan.

The merger of United California Bank and Bank of the West would double BNP Paribas’ presence on the West Coast. While Bank of the West has a large consumer banking presence in Northern California and does commercial lending in Central California, UCB caters to mostly small business customers in Southern California’s Latino and Asian communities.

“We’re filling a huge gap in our network by coming to Los Angeles,” said Don J. McGrath, president and chief operating officer of BancWest and president and CEO of Bank of the West.

Bank of the West does some small-business lending in Southern California and is a leading lender among churches in the region.

For UCB, “this has to be the most advantageous combination that we could have looked at,” said Howard Gould, UCB vice chairman and chief operating officer. “In this case we don’t have a significant amount of overlap that will cause difficulties.”

The U.S. banking industry has undergone massive consolidation during the last two decades. BancWest, for example, has made 12 acquisitions since 1990. Thousands of banks have disappeared in mergers spawned by state and federal legislation allowing institutions to operate across state borders.

At the same time, European and Canadian banks have moved aggressively into the U.S. market. Attracted by strong long-term growth prospects for the industry, the foreign institutions have targeted banks, brokerages and money-management companies.

Deals have included Swiss banking giant UBS’ purchase of brokerage PaineWebber; Societe Generale of France’s purchase in April of a majority stake in Trust Co. of the West; and Bank of Montreal’s purchase of CSFBdirect, the online brokerage unit of brokerage Credit Suisse First Boston.

BNP Paribas said it plans to create a regional administrative and support headquarters in the Los Angeles area, largely staffed with United California Bank employees.

Layoffs would be likely as the company trims duplicate administrative functions and closes some overlapping branches. McGrath said both banks plan to immediately institute a hiring freeze.

BNP Paribas’ acquisition of United California Bank is expected to close by the end of March, with the merger completed by next fall.

Last week, the Federal Reserve approved its $2.5-billion purchase of 55% of BancWest shares. This will give the French bank full ownership of the parent of First Hawaiian Bank as well as San Francisco-based Bank of the West when the deal closes Dec. 20. It acquired 23 First Security Bank of Utah branches in New Mexico and seven in Las Vegas in February.

BNP Paribas, France’s largest bank, is a global retail banking and financial services powerhouse that operates in 85 countries. It has total assets of $646 billion and shareholder equity of $19.3 billion.

Bank of the West has 193 branches in Northern and Central California, Oregon, New Mexico, Nevada, Washington and Idaho.

The takeover of United California Bank further shrinks the number of Southland-based banks. One of the largest recent banking deals involving a Los Angeles bank was Detroit-based Comerica’s acquisition of Imperial Bank this year.

In California, the largest state mega-institutions such as Wells Fargo & Co. and Bank of America have long dominated the market, but many small-and mid-size banks have survived as niche players, especially in business banking.

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Times staff writer Tom Petruno contributed to this report.