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Globalization hits home in HSBC selloff

This much you can bank on: The sale of HSBC Bank's upstate branches will end badly for the Buffalo Niagara region.

No matter who buys the branches, be it a local bank like M&T Bank or First Niagara Financial Group or a new player, it's a virtual certainty that it will cost the jobs of some of the more than 5,000 people HSBC employs in the area.

Just how many remains to be seen and will depend on which bank buys the branches. But any buyer already will have its own banking infrastructure in place, so it won't need to assume everything HSBC has in its local operations center. And any buyer will be looking for ways to squeeze out every last cent to make the newly acquired branches more profitable than they were before.

So overlapping branches will be closed, especially if the buyer is one of the local banks. Back office work will be consolidated. Management positions will be combined.

"I see no way of spinning this as good news for the region," says George Palumbo, a Canisius College economist. "There's a reduction in employment. There's a reduction in income. There's a reduction in competition."

Andrew J. Rudnick, the president of the Buffalo Niagara Partnership, has the same feeling.

"Employment won't go from what it is today to zero," he says. "But there's no doubt there will be a contraction in HSBC retail banking employment. There will be some overhead that's contracted."

Even more worrisome, the administrative and support jobs that might be in jeopardy tend to pay pretty well, which will heighten the economic blow with every position that ends up being eliminated.

"It can't be good for the local economy, especially if we lose the supervisory jobs, which are more highly paid," Palumbo says.

It's all the result of a banking company that has forsaken the solid, home-grown bank mentality of Marine Midland for the go-for-the-growth bent of HSBC. While that approach led to the disastrous acquisition of Household Finance in 2003, HSBC is now moving away from the solid-and-steady upstate markets for the hot growth potential of the Far East.

"This is globalization come home to Buffalo. That's really what it is," said Bruce Fisher, the director of the Center for Economic and Policy Studies at Buffalo State College,

"It is the fate of a branch office town that decisions made by executives far, far away can have important consequences," he says.

"The fate of HSBC is decided in London, not like it was at Marine Midland, where the fate was decided by the Knox family and its board," Fisher says. "When the local owners sell out, they put the business in the hands of owners who don't have a stake in the community."

That's why it's so important to nurture the home-grown businesses that remain. They're more likely to support local community events and cultural activities. They feel they have a stake here. If those top executives cut local jobs, they have to look their neighbors in the eye the next day.

Thomas Kucharski, the president of the Buffalo Niagara Enterprise economic development and marketing group, says HSBC's decision to sell won't hurt the push to tout the region as a good place for back-office work. "We have a pretty good reputation for productivity," he says.

Palumbo agrees. "It's less of a statement about Buffalo than it is about the rate of return outside the United States," he says.

In short, HSBC thinks it can make more money in the Far East. So it's cutting ties with its main U.S. roots.

Palumbo put it best: "I guess they really weren't our hometown bank, were they?"


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