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Buffalo banking is back, with recent deals adding 700 mostly downtown jobs this year and elevating Buffalo above Atlanta and Milwaukee to rank 11th among the nation's banking centers.

The growth of the banks -- primarily HSBC and M&T Bank -- has also helped strengthen the long-dormant city housing market, increased contributions to local charities and injected a little bounce into a once-moribund downtown.

Buffalo's banking sector has added 1,500 jobs since bottoming out in 1995, and is on pace to approach 13,000 total jobs next year, a level not seen since 1988, before the collapse of Goldome and Empire of America Federal Savings Bank during the savings and loan crisis.

When Buffalo's heavy industry sank, with the loss of big steel and an exodus of manufacturing jobs in search of cheap labor, banking emerged as the 1980s symbol of the city's new service-based economy.

Now, after almost two decades, the city is on the verge of becoming one of the 10 largest banking centers in the country.

HSBC Bank USA, formerly called Marine Midland Bank, and M&T are each digesting acquisitions made to increase profitability and position their companies for growth.

"At one point there, it looked like the area was going to become a banking center. Then Goldome and Empire of America disappeared, and the bloom was off the rose a little bit," said Kevin Sullivan, president of Medaille College, who spent 30 years in the local banking industry.

"Certainly it seems that HSBC and M&T have stepped up. My suspicion is that their growth is real and it has staying power," Sullivan said.

The local banks are hiring so aggressively that M&T recently distributed a companywide memo reminding employees that its finder's fee for referring a successful applicant is as much as $2,000 for some vacant positions. M&T has added 685 jobs in the past 30 months, without government assistance.

Buffalo also continues to be a popular "back office" town for other banks because of affordable office space, a cost of living that allows lower wages here than in other cities and a labor pool with plenty of banking experience.

Fleet Bank added 100 jobs at its collections center in West Seneca this year after mergering with BankBoston. Bank of America completed a new mortgage center in Amherst last year for its 670 local employees, which has enough expansion capacity to absorb more than 300 additional jobs.

The city's ascent in the financial world appears to have plenty of steam left. HSBC, a global bank holding company headquartered in London, has made no secret of its desire to continue growing in the United States.

"We're a buyer, not a seller. We're going to continue to grow," said Brian Keating, president of HSBC Bank USA's Western District.

Another major HSBC acquisition could catapult Buffalo up to the nation's seventh- or eighth-largest banking center, based on assets headquartered in the city.

Now, it's places such as Charlotte, N.C., a popular relocation spot for upstate New Yorkers, where the bloom may be browning and folks are learning what pink slips look like.

Charlotte-based Bank of America is slashing 10,000 jobs in a major restructuring. The city's other big bank, First Union, has had trouble digesting its recent mergers and is also cutting jobs.

"I think it's the first significant head wind Charlotte has faced in about a decade," First Union economist Mark Vitner told the Charlotte Observer recently.

The Observer also reported that high-end real estate sales are slowing, that the local United Way chapter has lowered its annual fund-raising goal and that the bank cuts have generally "stolen a bit of Charlotte's bravado."

Can't rely on one industry

Buffalo is not immune to seeing its banking sector gutted again. The industry is consolidating nationally as banks look to raise revenue by winning a broader market share and cut costs through economies of scale.

Western New York needs to grow other sectors of its economy to avoid relying too heavily on any one industry, said Marsha Henderson, the KeyBank district president who is also on the board of Buffalo Niagara Enterprise.

"This is an industry that's in flux and in consolidation, and we have to be mindful of that. We've been the beneficiary of that so far, and hopefully that will continue," Henderson said.

"There is a risk in having a high level of employment in an industry which, nationally, is consolidating. We don't want to go back to the days when we, for example, had way too much concentration in the manufacturing industry. I think we have to apply that lesson to the future," she said.

As long as Buffalo's banks remain buyers in the consolidation game, the industry should continue growing here. If a local bank, such as M&T, ever gets acquired, the acquiring bank could potentially slash M&T's large administrative and support staff in Buffalo.

M&T has the largest deposit market share in upstate New York, and its acquisition of Keystone Financial of Harrisburg, Pa., gives it a huge franchise in central Pennsylvania. The bank is occasionally rumored to be a target for larger banks looking to break into the Northeast market.

"The rumors have their ups and downs," said M&T Bank Chairman Robert G. Wilmers, adding that he still loves running the bank and has no aspirations to pursue a sale.

Wilmers does believe there is risk in having so much of the city linked to a large company.

"I'm more concerned that we're so big compared to other companies that are headquartered here," he said. "I think we'd all be better off if there were more companies of our size headquartered here that encouraged their people to be involved with community activities and were generous with some of those activities."

HSBC is one of the world's largest banks, and it wants to grow in the United States, so the risk of its local arm being sold is small. The city does risk relying on the subsidiary of a parent company headquartered elsewhere. The bank group is headquartered in London, and its U.S. decisions are made from the holding company's office in New York.

HSBC already relocated several top management positions, including that of President and Chief Executive Officer Youssef Nasr, to its New York City office. Wilmers believes losing the decision-makers, who once operated Marine Midland in Buffalo, to New York City is a significant blow to local banking.

Real estate rebound

Measuring the economic impact of the banking industry is difficult, particularly considering that banks finance almost every local home purchase and construction project.

The amount of money simply donated by the local banks is huge. M&T and HSBC rarely publicize information on their philanthropy, but responses to an inquiry by The Buffalo News indicate they will give a combined $5 million to local nonprofits this year.

HSBC Bank USA last year became the first corporation to donate more than $1 million, in combined corporate and employee donations, to the local United Way.

"As those banks have expanded, they have expanded their charitable giving to us, because of their employee giving campaigns. Those campaigns are very well organized, and their employees have always been very generous," said Arlene Kaukus, executive vice president of the United Way.

Bank employees, including those from local offices of other banks, also provide thousands of volunteer hours. KeyBank employees provided 1,800 volunteer hours to 47 local nonprofit agencies, including the Food Bank of Western New York, during an annual giving day last week.

From a real estate perspective, the banking industry is the heart of downtown. HSBC and M&T alone occupy almost 1.8 million square feet of downtown real estate; Fleet and KeyBank also have significant operations. Without banking to provide a need for office space, the city could have faced a crisis around 1997, when the city's office vacancy rate was about 25 percent.

The growth of M&T and HSBC has increased the demand for housing in Buffalo. Holcberg Real Estate in Buffalo has sold 20 to 30 houses in the city to bank employees this year, compared with eight all of last year, and it is having trouble finding good homes in the $100,000 to $350,000 range.

"It's a very tight market, and it's almost happened overnight," said real estate agent Carole Holcberg.

Also in short supply is good temporary housing for relocating employees, she said. Furnished apartments in area complexes geared toward professionals, readily available last year at $1,200 a month, are now running $1,400 to $1,500, she said.

The growth of the banks, the promise of 1,500 new Adelphia Communications jobs and recent state building code reforms could help spark new residential housing projects downtown.

Clover Management, an Amherst-based apartment company, is working on plans for 60 apartment units in the Cobblestone District.

"I think what we're going to see, combined with the Adelphia development, is young people living and working downtown," Keating said.

Tightening labor market

HSBC decided to shift 400 jobs here, after its $10 billion acquisition of Republic New York Corp. at the end of 1999, because of its current infrastructure in Buffalo, the low cost of living here and the quality of the local work force.

The bank added jobs here at its information technology division in HSBC Center, its customer service call center at the HSBC Atrium and its mortgage service center in Depew.

"I think they've clearly anchored themselves in Buffalo with the tremendous back-room and support capability here for their U.S. operations," said Erland E. "Erkie" Kailbourne, Fleet Bank's retired New York president and chairman of the John R. Oishei Foundation.

The bank has one of its four worldwide information technology divisions based in Buffalo and is building a $53 million computer center in Amherst. The large support centers would likely continue growing if HSBC makes another acquisition.

Banks merge for larger scale, because they expect to eliminate jobs from the acquired institution, improve their cost-to-expense ratio and increase profits, Kailbourne said.

"The existing infrastructure allows you to absorb new business incrementally with very attractive financial results," he said.

M&T could also look for additional acquisitions, and executives there have begun thinking about the potential to grow farther south into Maryland and West Virginia. The bank's new size, with assets of $30 billion after the Keystone deal closes Oct. 6, now gives it the ability to look at even larger acquisitions.

Wilmers said he will continue to look for the right buying opportunities, but the bank is now focusing on completing its acquisition of Keystone and the smaller Premier National Bancorp of Poughkeepsie.

The area's low unemployment rate has left the banks struggling to fill new jobs. Both HSBC and M&T are particularly interested in people with computer skills. The industry has become technology-driven, with the massive shift in transactions away from teller windows to ATMs, telephone banking and the Internet.

The battle for local information technology professionals could become more intense as Adelphia starts hiring.

Said HSBC's Nasr, "This is a tighter labor market than any of us expected."

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