First Niagara Financial Group said Monday it expects to close, consolidate or sell as many as half of the 195 branches it has agreed to acquire from HSBC Bank USA, as a result of government-imposed divestitures, voluntary sales and overlap.
One day after announcing it would pay $1 billion to acquire all of HSBC's branches in upstate New York -- as well as a dozen in the lower Hudson Valley and in Connecticut -- the top executive of the Buffalo-based bank said it may give up as many as 100 of those offices that it doesn't need, doesn't want or won't be allowed to keep by regulators.
President John R. Koelmel said he doesn't expect the number will be more than that -- and he said he still hopes it will be less -- but some of that is out of his control. First Niagara hopes to make a decision on the branches it will close or sell within six to eight weeks; the fate of branches in the Buffalo Niagara region that federal antitrust regulators will order First Niagara to sell likely will take several months to clarify.
"We want to minimize disruption," he said. "Clarity is good for everyone. Anxiety is not."
Koelmel estimated that federal antitrust regulators may force the bank to sell about 20 to 30 branches in Western New York, including their deposits, because otherwise First Niagara would control too much of the local market share. The bank will also sell branches in rural upstate communities, such as in the North Country, where it does not currently operate and has no desire to do so.
He noted that while there was only "a short list of us that can compete for a billion-dollar deal," there are "a lot of community banks that would love to have a bite of the apple" by snapping up a few branches. "The phones are ringing off the hook," he said.
First Niagara also will shutter offices that are too close to one another, citing Eastern Hills Mall, where both banks have a branch with just a parking lot in between them. In all, of the offices that First Niagara would give up, about 60 percent will be sold and the rest closed, Koelmel estimated, though officials would be careful "not to inconvenience customers."
First Niagara still plans to retain most of the deposits -- $11 billion of $15 billion -- as well as the loans and customers, especially in upstate New York's four major metro areas.
It also reiterated its expectation that most of the 1,900 jobs in the branches will be retained, either by First Niagara or by other banks that will buy some of the branches. HSBC has 71 offices in Western New York, all of which are part of the deal.
"We're a growth-focused company," Koelmel said. "You won't see us try to wring cost-savings out of this. In fact, you'll see the opposite. We'll work with our HSBC team and do our best to be all that we can be."
"We're here to stay, we're here to play, we're here to win," he said.
Meanwhile, even with the sale, HSBC executives said they plan to maintain a big presence in upstate and especially Western New York. In particular, HSBC still will have about 4,000 employees upstate, mostly in downtown Buffalo.
Those employees are concentrated in the One HSBC Center tower downtown, where the bank leases 653,000 square feet, and in the nearby HSBC Atrium. Plans call for the Atrium to house 2,000 employees, up from 1,200 now, while the bank has not said whether it will stay in the tower. Its lease expires in October 2013.
"We have some wonderful employees and some wonderful customers in upstate New York. This has not been a decision that has been taken lightly," said Irene Dorner, president and chief executive officer of HSBC Bank USA. "This is not us moving away from upstate New York completely. We are very much interested in the future of upstate. We are very well connected to the community, and we have no intention of changing that."
London-based HSBC Holdings Plc, parent of HSBC Bank USA, announced early Monday morning that it would slash 30,000 jobs globally by 2013 in a massive cost-cutting move -- even as it reported higher first-half pretax profits that surprised an investment community that was expecting a drop.
The bank said it had already begun taking a series of steps worldwide that would result in 5,000 fewer jobs, and Stuart Gulliver, group CEO of HSBC, said in a news conference that about 25,000 more jobs would be cut by 2013 -- about 10 percent of its global work force.
Officials did not elaborate on those plans or specify where those cuts would fall. Gulliver said on a later conference call with analysts that those job cuts don't include businesses that are sold -- such as the upstate New York branches -- and the final numbers could be lower in the end if the bank grows more in faster-growing emerging markets or higher if it succeeds in closing more unprofitable businesses and reducing costs.
But Dorner said during a news conference Monday morning that the 1,900 branch jobs are not included in those numbers, and the rest of HSBC's Buffalo work force won't be impacted.
Buffalo is widely considered one of the company's global operations hubs, with support functions for a range of business lines and functions, including accounting, legal and human resources. Many of those jobs serve HSBC operations nationwide, and some -- particularly technology roles -- are global in nature.
First Niagara said Sunday that it would acquire HSBC's upstate retail branch network, with $15 billion in deposits, $2.8 billion in small business, mortgage and consumer credit card loans and $4.3 billion in investment assets. First Niagara will gain more than 1 million accounts, more than 650,000 retail customers and more than 250,000 consumer credit card accounts.
The deal instantly catapults First Niagara into the top ranks across the state, tied with M&T Bank Corp. for No. 1, with more than 22 percent of the total deposits in the four major metro areas combined.
It also doubles its branch network in upstate New York, while strengthening or cementing its position in the Buffalo, Rochester, Syracuse and Albany markets. And it extends its market downstate while linking with its new Connecticut branches.
Koelmel acknowledged that "we're growing up very fast," but he and other top executives told Wall Street analysts and investors Monday that they are confident in the bank's ability to complete and smoothly integrate its $1 billion purchase of the branches, even though it's the bank's biggest deal yet and its fourth big purchase in a row.
Koelmel and First Niagara Chief Financial Officer Gregory W. Norwood said this deal has minimal risk because executives already know the territory. Unlike the bank's last three deals -- two in Pennsylvania and one in New England -- this purchase doesn't add new markets but rather bolsters the bank position in its home turf.
"We won't get ahead of ourselves," Koelmel said. "We know our own limits."