KeyBank N.A, a wing of KeyCorp (KEY), looks to be on time for its closure of the acquisition of 37 HSBC units from First Niagara Financial Group Inc. (FNFG). The deal is anticipated to close on July 13, 2012.
Earlier in January, KeyBank N.A had signed a deal with First Niagara to purchase 37 HSBC branches – 26 in Buffalo and 11 in Rochester – by paying 4.6% or $110 million premium on deposits of nearly $2.4 billion. Upon acquisition, KeyCorp would also undertake $400 million in loans. This will expand the company’s presence in the region by bringing the number of KeyBank branches to 99.
First Niagara had acquired 195 branches from HSBC Holdings plc (HBC) for $1 billion in cash. First Niagara decided to divest some of the branches to satisfy antitrust concerns raised by the Department of Justice and for non-alignment of these branches to its growth plan. Community Bank System Inc. (CBU) and Five Star Bank -- a subsidiary of Financial Institutions Inc. (FISI) are the other banks to buy a few HSBC branches from First Niagara.
The officials at KeyCorp have been preparing to overcome the deal’s biggest hurdle: smooth consumer conversion. The conversion is set for the weekend, following the closure date. The company’s branch and call center staff will help the customers to clear anticipated confusion stemming from this complicated deal. This facility will be provided for the next couple of weeks as well.
Further, the bank plans to extend working hours on Tuesdays, Thursdays and Saturdays to assist customers’ queries. KeyCorp has already mailed information to the HSBC customers regarding their accounts and conversion in the form of ‘welcome kits.’ The bank has been working with HSBC for ensuring a fault-free conversion process to minimize customers’ troubles.
The smooth and timely completion of the deal is sure to enhance KeyCorp’s image. The acquisition would enable the company to expand its footprint in the upscale New York region. Further, this would help it to build a sound consumer base, benefiting its wealth management as well as banking business in this region.
Moreover, retention of HSBC employees would positively affect KeyCorp in the long run. This will not only guarantee a smooth customer conversion process, but also will enhance KeyCorp’s human resources as well as goodwill. Upon acquisition, KeyCorp will get its first ATMs that accept check deposits by simply scanning the image of the check.
Shares of KeyCorp currently carry a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we are also maintaining a long-term Neutral recommendation on the shares.
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