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KeyCorp halfway to completing merger expenses

KeyCorp is about halfway through the $550 million in acquisition expenses the bank expects to incur from buying First Niagara Financial Group.

Key expects to complete the rest of its acquisition-related spending by the end of 2017, after recording $207 million of those costs in the third quarter.

The next big expenditures on the horizon for Key: closing 36 Key branches by year's end, and exiting technology contracts that First Niagara had outsourced to vendors, said Beth E. Mooney, Key's chairman and CEO.

Key has set a goal of $400 million in cost savings from the deal, and she said the bank remains confident of hitting that target -- as well as a higher internal target the bank has not publicly disclosed.

Two weeks ago, Key finished converting about 1 million First Niagara customer accounts, reopened 304 First Niagara branches as Key locations, and closed 70 other First Niagara branches. Some First Niagara customers ran into problems accessing their Key online accounts for the first time, and complained about long wait times for help from the customer contact center.

The bank apologized to those customers and spent more than $1 million in the form of $100 deposits into their accounts. Mooney described the overall switch as positive, saying there were no issues in areas such as systems conversion.

"It has been a very successful conversion," she said. "Things have gone as planned."

Key completed its $4 billion acquisition of First Niagara on Aug. 1, partway through the third quarter. First Niagara had performed well since the acquisition was announced, Mooney said.

"What you see is solid growth in loans, in deposits, and customer acquisition in First Niagara since the announcement last fall, " she said. "Sometimes what you can see when a merger is announced is people lose focus, customers go to the sidelines and the performance of the company actually slows down. We did not see that at First Niagara."

Instead, First Niagara's employee teams responded favorably, and kept growing loans, deposits and customer relationships, she said.

Key's chief financial officer, Donald Kimble, said in a Tuesday conference call with analysts that First Niagara had a "neutral impact" on Key's earnings per share in third quarter.

Key reported net income of $165 million in the third quarter, or 16 cents per common share, down from $216 million, or 26 cents per common share, a year ago.









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