HSBC Bank USA won't be barging into the New England banking market by acquiring hundreds of branches that are being sold off because of the merger between Fleet Financial Group Inc. and BankBoston Corp.
The Department of Justice has given its approval to the biggest bank divestiture in U.S. history, requiring that Fleet Financial Group Inc. and BankBoston Corp. sell customer deposits totaling $13.2 billion as a condition of merging.
But HSBC won't be acquiring any of the branches.
Local officials confirmed that Sovereign Bancorp Inc. of Philadelphia would buy the majority of Fleet's business on sale under the Justice Department agreement, a crucial step toward completing the biggest banking merger New England has ever seen.
Under the pact, Sovereign would enter the New England market with $12.4 billion in deposits from 278 branches in Massachusetts, Connecticut, Rhode Island, and New Hampshire, and hundreds of loan accounts and a network of more than 500 automated teller machines.
The approval concludes a difficult phase of negotiations involving the merger partners, bidders for Fleet's assets, and regulators. Before the deal is closed, Fleet must also win approval from Massachusetts officials and the Federal Reserve Board. The Fed has scheduled consideration of Fleet's request for approval to merge at a meeting today.
The Justice Department became involved in the merger plan of Fleet and BankBoston, New England's largest banking companies, to ensure that competition in New England would be preserved through the sale of some business to a large, out-of-region bank.
Despite Justice's approval, some analysts questioned whether a $24 billion Sovereign would be strong enough to battle a combined Fleet/BankBoston, a behemoth with $165 billion in assets.
Assistant US Attorney General Joel Klein said, "These divestitures should ensure that customers continue to get the benefits of competition -- competitive loan rates and the best banking services."
US Representative Martin T. Meehan, a Democrat from Lowell -- echoing views expressed by other public officials in recent months -- said he would've "preferred" the single big chunk of assets be sold to a bank in Massachusetts, which would immediately be in "a position to compete." Meehan added he was "satisfied" the government had "reviewed the competitive implications" of selling Fleet's business to Sovereign.
But Meehan and other members of a Washington delegation that lobbied to ensure small banks would be allowed to bid on Fleet branches got what they wanted: Justice said 28 branches would be sold to small banks in Massachusetts, 15 of them on Cape Cod.
Once the sale to Sovereign is signed, Fleet plans to finish negotiating the sale of additional branches -- which hold about $810 million in deposits -- to numerous community banks, sources said.
Under the agreement, Justice said Fleet would sell branches in four states: 204 branches and $8.6 billion in deposits in Massachusetts; 50 branches and $2.3 billion in Rhode Island; 39 branches and $1.8 billion in Connecticut; and 15 branches and $544 million in New Hampshire. Branches being sold in Massachusetts are mainly Fleet's, while the Connecticut and Rhode Island branch sales are mainly BankBoston's.