Don J. McGrath, the president and chief executive of BancWest Corp., says his San Francisco company is focused for now on organic growth, though its Paris parent, BNP Paribas, recently reiterated its interest in U.S. bank deals.
"Our primary focus is on building the business, making sure we have everything sorted out after three quick acquisitions, and … to try to drive internal growth," Mr. McGrath said in an interview Wednesday.
BNP Paribas CEO Baudouin Prot reaffirmed his desire for "add-on acquisitions" in the United States last month during a Morgan Stanley investor conference in London. Such comments, which he repeated in recent interviews have become the highly acquisitive company's standard line.
The $1.5 trillion-asset BNP announced April 11 that it had increased its stake in South Korea's Shinhan Financial Group, to 9.4%. It is also acquiring the Italian banking group Banca Nazionale del Lavoro; the European Commission approved the deal March 28.
Jon Peace, an analyst at Swiss Reinsurance Co.'s Fox-Pitt, Kelton Ltd. in London, said in an interview last week that factors working against another U.S. transaction include the size of the BNL deal, which "is going to take them a good couple of years to integrate," as well as BancWest's integration of previous acquisitions.
"They've taken a lot of small bites in the last two or three years, and though each individually is quite easy to integrate, I'm sure it does make sense for them to just work out exactly where they are," Mr. Peace said.
BancWest bought three banking companies between January 2004 and December 2005. It bought Commercial Federal Corp. of Omaha in early December for $1.4 billion, Community First Bankshares Inc. of Fargo, N.D., a year earlier for $1.2 billion, and USDB Bancorp of Stockton, Calif., in January 2004 for $245 million.
The purchases took BancWest from $38 billion of assets at the end of 2003 to $66 billion at the end of last year. Its network mushroomed from 356 branches in seven states to 739 branches in 20 states.
"All my systems guys are screaming for a little bit of a break, so they can go back and make sure we've got all the things that we deferred. I think we're looking forward to a little bit of a pause here for a few months to make sure that we've got all of our plumbing and electrical working well in the new structure," Mr. McGrath said.
BancWest said its fourth-quarter net income rose 22% from a year earlier, to $156.1 million.
The unit generated 12% of the pretax income at BNP, which in February reported fourth-quarter net income of $1.59 billion.
Mr. McGrath said BancWest is working to ensure its processes fit its expanded geographic area, so that it operates efficiently while keeping decision-making close to the branches. It is also making sure its traditional product strengths - such as agricultural and church lending - are incorporated into the expanded branch network.
He said he wants to "fine tune things over the year."
Still, he said he does not expect to remain totally out of the merger-and-acquisition game. He said he would consider "the right opportunities at the right time," but he would not give a time frame for considering deals.
Mr. Peace said that the fragmented nature of the U.S. banking industry means that for BNP, "there's a lot potentially on their shopping list there."
He said he would not be surprised if BancWest made relatively small deals - $1 billion to $2 billion - to expand quickly in certain states where its branch network is light, such as Arizona and Nevada.
"It's a big span to go from Illinois through to California, and there is a lot of infill in higher-growth states they could do in the middle," Mr. Peace said.
Mr. McGrath would not say whether he is leaning toward making deals in any particular region. "This is still an extremely attractive market for internal growth, because of the growth rates of the markets we are in."
Like many potential buyers, Mr. McGrath said acquisition targets remain expensive, but he does expect the flat yield curve to continue to put pressure on small banks to sell.
"This market is a little challenging for some smaller banks," he said. "It could be more challenging … and to the extent it is, I think you'll have more people looking at their alternatives."
