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More mergers 'not a priority' for KeyCorp

KeyCorp is benefiting from its deal for First Niagara Financial Group, but additional mergers are "not a priority," Beth E. Mooney, Key's chairman and CEO, said Thursday.

"We do not yet feel like we are fully complete realizing the value of First Niagara for our shareholders," Mooney said, as the Cleveland-based bank released its third quarter earnings.

Key's quarterly net income soared to $349 million from $165 million a year ago, driven by Key's deal for Buffalo-based First Niagara in August 2016. Mooney said the case Key made for acquiring First Niagara, back when the deal was announced, "is indeed coming true."

While the deal was wrapped up more than a year ago, the financial impact is still being sorted out.

The Key-First Niagara deal was completed in August 2016. (News file photo)

Key projects it will achieve $450 million in cost savings from the deal, and expects to reach the last $50 million of that total in early 2018.

During the third quarter, Key recorded $36 million in merger-related expenses; the bank expects to be finished with merger-related costs by the end of this year. And Key is still consolidating the space it uses for back-office operations in the Buffalo area.

Key will start moving its last team of employees out of a customer contact center 3920 Main St. in Amherst in the middle of November, and on Dec. 1 will start preparing the building to be returned to the landlord, said Matthew Pitts, a Key spokesman. Employees from that building are being reassigned to other area locations.

Meanwhile, Key sees potential in the residential mortgage business it acquired from First Niagara, said Christopher Gorman, president of banking.

"We think it's a significant opportunity," Gorman said. "If we just get our fair share of the 3 million clients that we have that are taking out residential mortgages, we think that can be a pretty significant growth business."

Mooney said Key is "investing more than we're realizing the benefit" in the residential mortgage business, as the bank builds up those operations and hires more mortgage loan officers. "I think you will start to see significantly enhanced revenue from residential mortgage in 2018."

Likewise, Key's private bank can tap into its own opportunities in the former First Niagara territory, Gorman said.

"If you look at the legacy First Niagara footprint, there is a lot of wealth in that footprint," Gorman said. "Our Key private banking business, we think, can do a good job penetrating that."

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