Wells Fargo agreed on Tuesday to buy the North American energy loan business of the French bank BNP Paribas, helping to bolster its capital reserves.
Under the terms of the agreement, Wells Fargo will pick up BNP’s North American business, concentrated largely in the United States. Based in Houston, the unit currently holds about $9.5 billion worth of financing commitments, with about $3.9 billion that has actually been lent out.
Terms of the deal, including the price paid by Wells Fargo, were not disclosed.
The sale is aimed at shoring up the financial strength of BNP Paribas as Europe’s banks continue to be tested by new capital rules and the battering of the Continent’s debt crisis. Such institutions have been looking to shed their lending commitments, in particular.
BNP has already laid off 1,400 employees as part of its goal to sell off $92 billion in risk-weighted assets by the end of the year.
Despite the size of the North American energy business, the deal will increase BNP’s Tier 1 capital ratio, a measure of a bank’s ability to weather financial shocks, by only 0.05 percent.
“Though it was a difficult decision, we are pleased to have secured a premium on the sale of the business,” Everett Schenk, the head of BNP’s North American operations, said in a statement.
The transaction, meanwhile, will allow Wells Fargo to continue growing as rivals retrench. The firm, which emerged from the financial crisis as one of the country’s stronger banks, reported a 20 percent gain in quarterly profit last month. That has helped underpin an expansion effort that includes buying a number of businesses that extend Wells Fargo’s corporate lending reach.
“The acquisition of this established and well-managed business is a unique opportunity for Wells Fargo to continue to grow its industry-leading energy banking business,” Mike Johnson, the head of Wells Fargo’s corporate banking group, said in a statement.
BNP Paribas was advised by Lazard and the law firm Skadden, Arps, Slate, Meagher & Flom.