Flip back the calendar a few years, and the Buffalo Niagara region’s banking scene looked a lot different.
HSBC Bank USA still had branches around here and occupied the city’s tallest building with its logo at the top. First Niagara Financial Group was buying up banks and injecting new life into Larkinville. M&T Bank had yet to strike a deal with Hudson City Bancorp.
The landscape for financial services has altered since then, and more changes are coming.
Observers long wondered if First Niagara might put itself up for sale, as its stock price dragged along below $10 per share. Some thought the board would give the turnaround effort more time, but that turned out not to be true.
M&T finally got regulators’ consent to acquire New Jersey-based Hudson City, after more than three years of waiting. What started out as a $3.7 billion deal in August 2012 ended up a $5.3 billion deal, as M&T’s share price kept climbing in the interim.
HSBC may not be in the downtown tower anymore. But last year, the bank finished $35 million worth of upgrades to its other two area locations. Even without upstate branches, HSBC still has 3,000 employees here. And Patrick Burke, CEO of HSBC USA, offered a vote of confidence, saying he likes the results the bank gets from the Buffalo area.
Put together M&T, First Niagara and KeyCorp account for thousands of jobs in Western New York. What the picture will look at the end of this year is not so clear.
Some of the job news so far is upbeat. HSBC says it will add about 150 net jobs locally. M&T is trying to fill about 550 jobs in Western New York, on top of the hiring binge it went through to beef up its compliance systems. Citi’s financial hub in Getzville could add 100 to 150 jobs this year.
And then there is First Niagara. The bank grew to a size probably no one imagined when it was still called Lockport Savings Bank and based in Niagara County. First Niagara’s growth brought with it a flood of new jobs, not to mention financial fuel for redeveloping the Larkinville neighborhood and more money for charitable causes. Today, First Niagara has a regional work force of about 2,300 people.
But its ambitious growth plans came with risks. Investors’ expectations increased, as did pressure on First Niagara’s leaders to deliver. The price First Niagara paid for the HSBC branches turned out to be too steep. Over time, the bank that built a reputation as an acquirer – before putting the brakes on more deals – became a logical candidate for acquisition. And just like that, its Buffalo-based bank headquarters looked vulnerable.
This is where Cleveland-based KeyCorp came in, as the prospective $4.1 billion buyer. Key is a known quantity here, with its regional corporate office, customer contact center and branches. But two banks that overlap too much sets the stage for cost cuts. It’s a painful reality of bank mergers, not unique to this one.
KeyCorp has already pledged to keep 300 jobs connected to First Niagara’s mortgage operations intact. But there are more decisions to come, especially with so many Key and First Niagara branches located so close to each other around here. Redundant branches are a financial burden that banks won’t shoulder.
The region has lost prominent banking names before. Marine Midland, Goldome and Empire of America come to mind. First Niagara is poised to join the list. The question is, how much of what First Niagara built up goes with it?