KeyCorp.’s $4.1 billion purchase of First Niagara Financial Group will turn it into an upstate banking powerhouse and a strong rival to another Buffalo bank, M&T Bank, across upstate New York.
The deal will turn Key from being a modest force in the Buffalo Niagara market to the clear No. 2 bank in the region.
It will make Key the No. 2 bank in both Rochester and Syracuse, and cement its position as the No. 1 bank in Albany, based on its share of deposits in each market, according to data from the Federal Deposit Insurance Corp.
The deal also will give Key its first presence in the Binghamton market by taking over First Niagara’s No. 2-ranked branch network there.
Size is important because it gives a bank the economies of scale to better manage its costs – an important factor, especially at a time when low interest rates are squeezing the profitability of banks by narrowing the spread between the interest it pays on deposits and the interest it collects on loans.
Here’s how the deal will reshape the upstate banking market:
• Buffalo – Combining No. 2 First Niagara with No. 3 Key will push Key into the No. 2 spot, with 34.8 percent of the region’s deposits. That’s a big increase from its 8.9 percent share before the deal. It also will make Key a more formidable competitor to the region’s unquestioned banking leader, M&T, which controls nearly 51 percent of the region’s deposits.
• Rochester – By combining two modest players in the Rochester market, the deal will vault Key in to the No. 2 spot with a 14.9 percent market share, second only to M&T’s 24.6 percent share. Before the deal, First Niagara was Rochester’s No. 5 bank, with an 8.4 percent share, and Key was No. 6 at 6.5 percent. The deal will push Key past the region’s current No. 2 bank, Canandaigua National Bank and Trust, and No. 3 Citizens Bank.
• Syracuse – The deal will allow Key to push past Bank of America to become the No. 2 bank in Syracuse, with 17.7 percent of the region’s deposits. Before the deal, Key was No. 3, with 11.4 percent of the market, while First Niagara was No. 5 at 6.3 percent. M&T is No. 1 in Syracuse with 23.7 percent of deposits.
• Utica – The deal will turn Key from a bit player in the Utica market to a modest one. By taking over First Niagara’s 11 percent market share, No. 10 Key will move up to the No. 5 spot, with a total of 12.3 percent of all deposits.
• Albany – Key already was the king of the Capital District banking market, and the deal will make its strong position there even more dominant. By combining Key’s market-leading 25.2 percent share with First Niagara’s fourth-ranked 10.5 percent share, Key now will control 34.7 percent of the Albany market’s deposits – nearly three times more than No. 2 Citizens Bank’s 12.7 percent market share.
• Binghamton – Key isn’t a player in the Binghamton market now, but by taking over First Niagara’s 11.3 percent share of the market’s deposits, it will become the region’s second-biggest bank.