First Niagara Financial Group Inc. and M&T Bank Corp. are playing it cool on whether they plan to bid for HSBC's branches in upstate New York — but they aren't discouraging speculation, either.
Executives of the Buffalo-based banks made it clear to analysts in discussing second-quarter results that they have the wherewithal to close big deals.
"It's the type of opportunity that we've anticipated, the type of opportunity — in addition to some of the bank transactions we've done and others that we think might be available — we've prepared ourselves for," John Koelmel, First Niagara's president and chief executive, said on a conference call Thursday with analysts.
HSBC Holdings PLC of London is exploring the sale of about 175 branches from Syracuse to Albany as it refocuses its U.S. strategy on urban areas. First Niagara and M&T have been pegged by investors and analysts as among the handful of banks with the financial strength and interest in acquiring them.
They are both serial acquirers. First Niagara closed its purchase of NewAlliance Bancshares Inc. of New Haven, Conn., in April. M&T completed its purchase of Wilmington Trust Corp. of Delaware in May.
When asked about HSBC's sale, Rene Jones, M&T's executive vice president and chief financial officer, said the company is open to doing more deals.
"Well, we're always sort of around. And to the extent that somebody's interested in doing something and we tend to look at everything, but today we're very focused on Wilmington and doing what's at hand. And, you know, if good things come along, we'll take a look at them," Jones said.
When an analyst pressed him about whether purchasing HSBC's franchise would make financial sense, he said: "We don't speculate about future stuff. We don't do future earnings, we don't speculate about acquisitions. What we do is we talk about our history, right? And our history sort of speaks for itself, whether it's doing M&A transactions or whether it's managing our capital."
Potential buyers of the branches have been a source of speculation since
The branches are the legacy operation of Marine Midland Bank of Buffalo, which HSBC acquired in the 1980s and is selling because it now just wants to do business in major U.S. cities. HSBC is a top-three deposit holder in most of the region's crucial markets, making the branches a valuable source of cheap funding, experts have said.
Buying the branches would let M&T corner its hometown market of Buffalo, where it ranks No. 2 in deposits, according to the most current data.
But it would fare well if others won the prize, too, some experts have said. It would avoid the inevitable antitrust issues and damage to its local reputation if it cuts jobs. Plus, it could still increase its roughly $10 billion of deposits poaching customers. Another buyer would have to rebrand branches and probably close some, events that often lead customers to change banks.
The ideal move for M&T might be to acquire pockets of HSBC branches in markets where the Justice Department would not have an issue, such as Syracuse or Albany.
But HSBC's ideal is to find a single buyer. There are a handful of other large banks strong enough to do a deal, experts say, though whether they want to expand in a relatively slow-growth market is a question mark. This group includes Toronto-Dominion Bank, People's United Financial Inc. of Bridgeport, Conn., and New York Community Bancorp Inc.
If it were the sole buyer, M&T would face anti-competition issues in at least four markets that make up the bulk of HSBC's area of operations, according to regulatory data: Buffalo, Rochester, Jamestown and Binghamton.
There would be market disruption in a sale to First Niagara, which would also face complications as the sole buyer. It would have to make divestitures in Buffalo, too. It would also have to prove to regulators and investors that it could handle two large and potentially distracting integrations at the same time. It bought NewAlliance Bancshares Inc. of New Haven, Conn., in April.
