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KeyCorp weighs where workforce will be allocated

KeyCorp is assessing where it would make the most sense to handle work once Key’s operations are combined with First Niagara Financial Group’s, said Key’s Chairwoman and CEO Beth E. Mooney.

“We are looking at the proximity of the two markets and where and how we perform work,” Mooney said in a Thursday conference call with analysts. “There are moves afoot to look at leveraging both lower-cost space, a very attractive workforce in terms of skills and tenure, as well as an attractive labor market from a cost point of view.”

Cleveland-based Key still aims to complete its deal for First Niagara – now valued at $3.5 billion – in the third quarter, pending regulators’ approval. Shareholders of both banks have approved the deal.

Mooney responded to an analyst’s question about how Key could take advantage of upstate New York’s low-cost labor environment. “We are looking at balancing out where and how work gets done, as well as some of the efforts we had underway,” she said. For instance, Key has said that it will keep intact First Niagara’s full-fledged mortgage operations, initially representing about 300 jobs.

“We will be building upon that in Buffalo,” Mooney said. “So we’re doing a variety of things where we look at how to optimize the portfolio of locations and skills in a way that I think will be beneficial to our cost synergy.”

Meanwhile, she said, the two banks’ integration teams continue to look at how to bring other operations together.

Key recorded $24 million in expenses related to the acquisition in the first quarter, up from $6 million the quarter before. Last October, Key said it expected its total acquisition-related costs to reach $550 million.

“That’s still our current estimate, and we would expect that to accelerate between now and especially the systems conversion and bank consolidations which we would expect to occur later this calendar year,” said Donald R. Kimble Jr., Key’s chief financial officer.

Two big questions about the merger – how many branches will be divested and how many jobs will be cut in Western New York – are yet to be answered.

The Department of Justice has the final say on branch divestitures, to address anti-competitive concerns. “It will be ultimately their decision,” Mooney said in an interview. “When it is final, we will announce it.”

The Key-First Niagara deal needs approval by the Federal Reserve and the Office of the Comptroller of the Currency, which is on track, Mooney said. “Nothing we know at this point suggests that our applications aren’t proceeding as planned,” she said.

As for staffing decisions, Mooney said the integration teams, with representatives from both banks, are researching how each bank does everything from systems and processes to policies and products. The next task will be determining to bring everything together. “That’s a very complex and detailed process, and that’s kind of where they are,” she said.

Mooney said that it was hard to specify when the teams would finish their work. “The third quarter is less than 90 days away, so somewhere very, very soon, we will be with our folks in Buffalo and our teams as they finish the work, making a series of announcements designed – we call it ‘the new Key’ – to really leverage the capabilities, serve the clients and support the communities,” she said.

Key reported quarterly net income attributable to common shareholders of $182 million, down by 18 percent from a year ago, due partly to acquisition-related costs.

It reported net income attributable to common shareholders of 22 cents per common share, down from 26 cents a year earlier.

email: mglynn@buffnews.com