KeyCorp has not set a figure for the number of jobs that it would cut in the Buffalo Niagara region if the acquisition of First Niagara Financial Group goes through, KeyCorp Chairwoman and CEO Beth E. Mooney said Thursday.
As Mooney described it, the two banks are still working through how to combine their operations in the $4.1 billion deal. So the answer to the most sensitive question hanging over the acquisition locally – how many jobs will be lost? – is not yet known.
“I always tell people that we’re going to go through a design phase that kind of determines what the end state looks like, and you’ve got to honor that work process,” Mooney said in an interview after KeyCorp released its quarterly results. The bank has formed integration teams for each of their functions, Mooney said, and “we’ve entrusted them to build that end design state which will inform how work gets done, where it gets done, and how many folks. To honor that process, no, we did not put a number (of jobs) on it.”
Decisions on staffing the combined operation are probably still a few months away, she said. The banks hope to close the deal sometime between the start of July and the end of September, though the timing depends on regulators.
“We are trying to do a number of things to make sure we optimize and maximize employment and that we continue to view Western New York – I’ve talked about it as almost an extension of our headquarters in Cleveland – (so) we can have operations and other functions in Buffalo, as well as some strong regional presence there,” Mooney said.
KeyCorp has already committed to maintaining First Niagara’s mortgage operations in Buffalo, which represents about 300 jobs.
Mooney said KeyCorp has not yet made decisions about office space the combined bank would need in the region. She toured First Niagara’s Larkinville headquarters on a previous visit, and acknowledged that KeyCorp will need space in more than one building. “The ‘what’ and ‘where’ and how much is not yet determined,” she said.
Branch divestitures are also part of the plan, but Mooney said the U.S. Department of Justice will have the final word in that area. The two banks need to satisfy the Justice Department’s concerns about the deal’s impact on banking competition.
KeyCorp estimates $400 million in savings stemming from the deal, of which about 40 percent could come in areas such as technology and vendor expenses. Mooney said First Niagara outsources a lot of its technology work to vendors outside the region or even the state; KeyCorp could bring that work in house and achieve cost savings fairly quickly.
Officials such as Rep. Brian Higgins, D-Buffalo, and Sen. Charles E. Schumer, D-N.Y., and Gov. Andrew M. Cuomo’s chief counsel, Alphonso B. David, have raised concerns about the impact the deal might have on upstate jobs. Mooney said that KeyCorp has reached out to numerous community groups since the Oct. 30 announcement and that the bank will make a “huge investment” in the state through the deal. “We will probably have, post-transition, over 30 percent of our company in New York,” she said.
KeyCorp is also trying to win over analysts who have been lukewarm about what the deal will mean for the bank. “We are confident we will create shareholder value, and we’ve had very constructive conversations with investors in that regard, as well,” Mooney said.
The financial environment has only gotten tougher since the deal was announced, but none of that changes KeyCorp’s approach to the First Niagara deal, Mooney said: “The fundamental value proposition here isn’t related to any particular market or interest rate or environment.”
KeyCorp’s fourth-quarter net income attributable to common shareholders fell by 11.2 percent from a year ago, to $220 million. During the quarter, the bank incurred charges of $4 million related to a pension settlement and $6 million stemming from its planned First Niagara acquisition. The bank recorded earnings per share of 27 cents, compared with 29 cents a year earlier.
First Niagara will release its fourth-quarter and full-year results Feb. 5.