A major hurdle cleared, and fewer ahead.
That was the message this week from John Koelmel, the chief executive of First Niagara Financial Group Inc.
The Buffalo bank said Thursday that it
The deal with KeyCorp would resolve some, but not all, the issues that had dogged the $31 billion-asset First Niagara since the HSBC deal was unveiled in July. For one, the European debt crisis
In an interview with American Banker, Koelmel discussed the KeyCorp deal, how it helps First Niagara in overcoming the challenges its bigger deal with HSBC has faced, plans to sell more branches and why he thinks investors should be reassured at this point. Here is an edited transcript:
How did the branch deal with KeyCorp come about?
JOHN KOELMEL: We're very, very pleased with the outcome, and on the heels of our capital raise 30 days ago those clouds of uncertainty are definitely clearing and dissipating. From day one we knew we'd need to divest a couple dozen [HSBC] branches here in Buffalo, and we wanted to divest more branches overall. That we were able to achieve 60% of our overriding projection, and to satisfy the [U.S. Justice Department], it's a very positive, necessary and important additional piece of the puzzle.
Do you still plan to close or sell more HSBC branches, in addition to the ones KeyCorp is buying?
We've been open about that from the get-go. Yes we do plan on acting on the remaining 40% of the plan to sell or close HSBC branches.
Do you have a time line for selling or closing these additional HSBC branches?
I'm reluctant to get too specific. Be assured that this isn't the only piece of the deal. We're still working. We wanted to get the DOJ piece out first.
Can you explain the part of the deal with KeyCorp that excludes commercial loans and deposits?
Our deal [with HSBC], as of Aug. 1 of last year, excluded commercial loans, so we have no commercial loans to pass through to Key or to any others.
HSBC has opted to retain their traditional commercial-and-industrial loan book in upstate New York. And they remain committed to servicing that market without a branch network. They never intended [to], and they didn't, sell their commercial book.
Any and all loans that we would be passing through to Key are linked to the branches themselves — talking about residential mortgages, home equity lines of credit, credit card installments, those types of loans.
Do you feel like the agreement with KeyCorp addresses some of the concerns investors had about the original HSBC deal?
This transaction strategically for us is an even better fit today than it was six to seven months ago when we announced it.
It's a better fit meaning, six-to-seven months later, how customers have responded, how [HSBC's] employees responded, how the communities' residents responded. It more than validated our expectations relative to the longer-term benefits associated with having the dominant market share across upstate New York.
Having said that, obviously to have the world and the market move literally on the heels of our announcement the way it did in terms of congressional gridlock,
This, too, shall pass. Europe can't teeter forever. The economy will be energized. We'll elect a new president. Congress will have to pass some regulations. Regulatory leaders will ultimately have to be approved. Is there short-term pain for longer-term gain? Yes. Did we expect that pain? Obviously not, but I'm confident the longer-term benefit for shareholders will be ultimately what we anticipated.