KeyBank is starting to build on the business lines it added from First Niagara Bank as part of the acquisition, Key's CEO Beth E. Mooney said Thursday.
Acquiring business lines like residential mortgage, auto lending and insurance has allowed Key to tap into new opportunities, keeping them based in Buffalo but reaching a broader territory, Mooney said. In the mortgage business, Key is “staffing up, we have a new head of mortgage sales."
Similarly, the bank is extending what had been First Niagara’s auto lending business into other Key markets. That rollout is unfolding in stages, most recently expanding into the Midwest.
“We will keep going west" with auto lending, she said.
Key completed its $4 billion deal for First Niagara last August and converted the branches last October. But some work remains. The bank recorded $81 million in merger-related charges in the first quarter. And the bank now expects its total cost savings from the deal to reach $450 million, up from the $400 million target it has shared publicly until now.
The additional savings will come from reduced expenses for corporate office space and computer systems like servers, as well as exiting vendor contracts for technology that First Niagara had. Key has estimated its total acquisition-related costs would reach $550 million. But chief financial officer Don Kimble now expects those acquisition costs to go higher. That's because the bank will spend more in the short term to achieve the long-term savings. For instance, the bank might pay to break a lease for office space it is moving out of.
Mooney said she feels the First Niagara deal has lived up to Key’s expectations.
“I always told our employees, we staked our credibility and our reputation on this,” she said. “We’ve asked our shareholders for $4 billion, we asked our board to support us in this, we’ve gone very public that we believed we were the best and right partner for First Niagara, and that we could do this well.”
At the same time, Mooney said she thinks shareholders have not yet experienced the “full value and benefit” of the deal. She believes that is a matter of the bank continuing to deliver results quarter after quarter.
“You can see that this has been a successful transaction for Key, and some piece of where we were a year ago was more in the ‘show me.’” she said. “It was a large transaction by industry standards. It was certainly a large transaction relative to anything Key had done. It was all on the 'if-come', and now it’s a more a matter of making sure people can see what we’ve accomplished.
"There is credit to our investors for the investment they made by allowing us to do it," Mooney said. "I think this quarter went a long way in addressing the momentum is real."
Key's stock priced closed at $18.21 per share on Thursday.
KeyBank named Buffalo its “market of the year” for 2016. Mooney was here for an employee town hall meeting on Thursday, after which the employees were to be treated to a party at the Larkinville headquarters.