First Niagara Bank sold to KeyCorp
KeyCorp, the No. 13 U.S. bank, said Friday that it would pay $4.1 billion, or $11.40 in cash and stock, for Buffalo, N.Y.-based First Niagara Bank and its nearly 400 branches, including 58 in eastern Pennsylvania.
KeyCorp, the No. 13 U.S. bank, said Friday that it would pay $4.1 billion, or $11.40 in cash and stock, for Buffalo, N.Y.-based First Niagara Bank and its nearly 400 branches, including 58 in eastern Pennsylvania.
KeyCorp, the Cleveland-based owner of Key Bank, hopes to cut $400 million from First Niagara's $1 billion in annual expenses.
In a conference call, KeyCorp chairman and CEO Beth Mooney told investors that 120 of First Niagara's 400 branches (many in Upstate New York) are within two miles of a Key branch; many will close, and some may be spun off to another bank to comply with federal antitrust concerns and preserve competition. After regulatory approval, the regional banks expect to close the deal by September 2016.
The Philadelphia area will likely see less effect, as First Niagara has stripped its operations here in previous cutbacks. According to Federal Deposit Insurance Corp. data, First Niagara has 43 branches with $2.1 billion in deposits in the Philadelphia area as of June 30. That's down from 62 branches and $3.2 billion in deposits that First Niagara's local predecessor, Harleysville National Bank, reported to the FDIC in mid-2009, before First Niagara bought the troubled company.
Harleysville also had branches in the Reading, Allentown, and Poconos areas. First Niagara has shrunk there, too.
In agreeing to sell, First Niagara directors agreed to a price below its 2014 high and well below its pre-recession value. On Friday, the stocks of First Niagara Financial Group Inc. closed at $10.35 a share, down three cents, while KeyCorp closed at $12.42 a share, down 96 cents.
Given First Niagara's modest profit and growth, the deal was cheap and reasonable considering its size, analyst Matt Schultheis at Boenning & Scattergood in West Conshohocken told clients Friday.
In a report last week, Schultheis noted that even though First Niagara was widely known to be for sale, the bank faced a shortage of likely buyers, and had been upgrading its technology and boosting loan growth as if it planned to stay in business.
Like North Carolina-based BB&T Corp., which is buying its way into Pennsylvania through its acquisitions of Susquehanna Bank and National Penn Bank, Cleveland-based KeyCorp hopes to add clients cheaply, at a time when local bank stocks have been depressed by years of slow loan and profit growth.
First Niagara, like other regional banks, has been squeezed by low interest rates, sluggish loan demand in its Upstate New York and Pennsylvania markets, and pressure from investors who would rather cash out now than gamble on growth after years of low bank profits.
Banks with expensive branch networks have been seeking to cut costs as more customers do their business through smartphones and online.
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