BNP Paribas, France's biggest bank by market capitalisation, said it had agreed to sell its US unit Bank of the West to Canada's BMO Financial Group for around $16.3 billion.

BNP Paribas has been struggling to keep up with larger rivals in the US retail banking market, while the sale will also strengthen BMO's foothold in the US.

"This is a value accretive transaction for all sides, which emphasises the quality of Bank of the West franchise," BNP Paribas chief executive Jean-Laurent Bonnafe said today.

BNP Paribas said it would use proceeds from the sale to fund more share buybacks and to finance relatively small, bolt-on acquisitions and further develop its presence in Europe.

The French bank said it would also consolidate and further develop its activities in the US.

BNP Paribas had bought Bank of the West in 1979 before merging it with French Bank of California. The unit had been BNP Paribas' largest business outside of Europe.

BMO said the acquisition would bring in nearly 1.8 million customers and would further extend its banking presence through 514 additional branches and commercial and wealth offices in key US growth markets.

BMO said Bank of the West, founded in 1874, would also give the Canadian company approximately $56 billion of loans and $89 billion of deposits.