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Western New York’s banks prepare for reshaped landscape

The region’s banks generated lots of headlines last year, and this year looks like it will be just as active.

KeyCorp aims to complete its $4.1 billion deal for First Niagara Financial Group in the third quarter. M&T is steadily bringing Hudson City Bancorp’s operations into its fold. And HSBC Bank USA plans to add local jobs.

Meanwhile, smaller banks hope to capitalize on “disruption” caused by the Key-First Niagara deal by snatching customers.

Banks of all sizes are coping with a low-interest rate environment, as well as the cost of regulations.

KeyCorp and First Niagara: Their combination – if approved – will transform the local banking scene.

The deal would combine the region’s No. 2 (First Niagara) and No. 3 (Key) banks – measured by deposit market share, creating a stronger No. 2 behind No. 1 M&T. Absorbing First Niagara’s operations across four states would vault Cleveland-based KeyCorp to No. 13 among U.S.-based banks.

For the Buffalo Niagara region, the impact would be intensely local. KeyCorp will decide how many of First Niagara’s 2,300 Western New York jobs to retain. KeyCorp has already pledged to keep First Niagara’s mortgage operations in Buffalo intact, safeguarding about 300 jobs.

Customers are also bound to see changes. Nearly one of every three First Niagara branches is within two miles of an existing KeyCorp branch. Regulators will surely want branch divestitures to alleviate concerns about a negative impact on competition. The deal could be completed by the third quarter.

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M&T Bank: M&T is finally ready to capitalize on its $5.3 billion purchase of Hudson City, converting a network of 135 branches in New Jersey, Connecticut and downstate New York. It is also building out its commercial banking capabilities in the new territory, including small business, middle market, commercial real estate, mortgage, securities and wealth advisory businesses.

The deal transformed M&T in an unexpected way. The bank spent more than $200 million in the past two years, staffing up extensively to strengthen anti-money laundering and Bank Secrecy Act programs that regulators found inadequate. And M&T’s hiring continues: in December, the bank held a career fair to promote about 550 job openings in Western New York, and more than 700 people showed up to learn about them.

M&T said it will look for opportunities in its legacy markets, as deals involving other banks unfold in those areas. “We’re now seeing a period of consolidation in the industry, with most of the biggest deals occurring in our footprint,” said C. Michael Zabel, group vice president of corporate communications. “Whenever there’s disruption in the banking industry, it’s natural for some employees and some customers of acquired banks to consider their options, and we want to be a top choice for any of those looking for a new bank.”

Meanwhile, Zabel said M&T will continue to build its compliance and risk management infrastructure, saying that is “not a short-term endeavor.” And the bank will continue to make technology investments, to enhance its Web banking, mobile banking, digital wallet products and core systems.

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Bank of America: Bank of America ranked No. 4 in deposit market share in the Buffalo Niagara, with 5 percent, but it attracted nowhere near the same level of attention locally last year as the three banks ahead of it on the list.

Even so, the Chawrlotte, N.C.-based bank has about 800 employees at its various operations in Western New York, said Kevin Murphy, Buffalo market president. “We’ve been very stable in this market for several years and growing very nicely. We like this market.”

As for opportunities to gain customers due to “disruption” from the KeyCorp-First Niagara deal, Murphy called Bank of America “an interested observer. We’ll have to see how it plays out. We have plenty to do on our end.”

Business clients in the Buffalo area are showing signs of confidence by taking steps like hiring workers and investing in equipment, he said. “There’s a level of optimism that’s measured, but it’s there.”

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HSBC: Even without upstate New York branches, HSBC remains a major employer here, with about 3,000 people. That means about one in five of all of HSBC’s U.S. employees is based in the Buffalo Niagara region.

“It just speaks to the quality of the talent we’re able to recruit and retain here. It speaks to the legacy of the business in this market,” said Kevin Quinn, who is HSBC’s top locally based executive.

HSBC has essentially wrapped up $35 million in renovations to its two area locations, in the downtown Atrium and Depew. The employees work in areas including legal, human resources, information technology, risk and operations.

Quinn said the Buffalo market is attractive for a host of reasons: its proximity to Canada, its cost efficiency, and its deep labor pool, given how many financial institutions operate here.

HSBC expects to add 150 net jobs locally, after accounting for some other jobs being eliminated.

HSBC has operations in more than 60 countries, and promotes its widespread presence to companies that are interested in doing business internationally. “We continue to see large, mid-size and large businesses expand on a global level,” Quinn said.

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Citi: Citi doesn’t have branches here, either, but the bank employs about 1,700 people at its sophisticated financial services hub in Getzville.

“I usually tell people, we’re kind of a microcosm of what we do in New York City,” said Anthony Vazquez, the site president, referring to Citi’s headquarters. The 265,000-square-foot Getzville site is still close enough to New York City that top Citi officials can conveniently visit when necessary.

The Getzville site projects adding 100 to 150 jobs this year, as it grows some of the business groups operating there, including risk and finance, Vazquez said.

Citi has found success recruiting new employees through partnerships with area universities. Vazquez said that continues to be the case, and Citi has created links with additional area colleges.

The site plans to have a summer intern class consisting of 32 young people who are entering their senior year of college, and anticipates receiving 1,500 to 2,000 resumés for those positions.

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Smaller banks: While the big banks attract most of the attention, smaller banks will also look to grab market share stemming from the planned Key-First Niagara deal. Hamburg-based Evans Bancorp has already run ads playing off that theme.

Northwest Bank plans to open a new branch in Orchard Park this year. And Warsaw-based Five Star Bank wants to make greater inroads in Western New York: its parent company bought Courier Capital in a deal that ultimately could be worth as much as $14 million.

email: mglynn@buffnews.com

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