First Niagara Merger in Works; KeyCorp Is Expanding into Pittsburgh with a $4.1 Billion Deal to Buy First Niagara Financial Group, a Move Expected to Ramp Up Competition for Business Banking in the Region. [Derived Headline]

By Fleisher, Chris | Tribune-Review/Pittsburgh Tribune-Review, October 31, 2015 | Go to article overview

First Niagara Merger in Works; KeyCorp Is Expanding into Pittsburgh with a $4.1 Billion Deal to Buy First Niagara Financial Group, a Move Expected to Ramp Up Competition for Business Banking in the Region. [Derived Headline]


Fleisher, Chris, Tribune-Review/Pittsburgh Tribune-Review


KeyCorp is expanding into Pittsburgh with a $4.1 billion deal to buy First Niagara Financial Group, a move expected to ramp up competition for business banking in the region.

Friday's announced merger with Buffalo-based First Niagara would establish the nation's 13th largest commercial bank with $135 billion in assets that spans the Northeast, Mid-Atlantic, Midwest and Pacific Northwest.

First Niagara customers will gain the benefits of having a larger branch network and the resources of a bigger bank, especially on the commercial side, where Key has invested more than First Niagara.

Key executives said they are excited for the opportunity to move into new markets such as Pittsburgh, where the merged entity will immediately become a top-five bank.

"We have found that our business model, with our combination of business banking, commercial middle-market, private banking and leveraging on the retail presence, but also bringing our fuller community banking model has been successful for us," KeyCorp CEO Beth Mooney told analysts on a conference call. "We are excited about our starting place in those markets."

First Niagara is the fifth-largest retail bank by deposits in Pittsburgh and has 59 branches.

Consumers are unlikely to see much difference when Cleveland- based KeyCorp takes over, but it will mean stiffer competition for business banking in Pittsburgh, analysts said.

For KeyCorp, this is an attractive market where it would be eager to build its presence, said Jared Shaw, an analyst at Wells Fargo Securities.

"Energy prices are low, but with the Marcellus shale, it's been bringing new money into Pittsburgh and Southwestern Pennsylvania," he said. "The Pennsylvania economy is doing pretty well and from the point of view of Key, this is a market that a good operator can come in and do well."

First Niagara had been growing its business banking services, such as treasury management, but was focused on smaller companies with less than $100 million in revenue. KeyCorp will bring more expansive services for those clients and compete for larger companies with revenues up to $1.5 billion, the bank said. KeyCorp offers commercial mortgage banking and investment banking services, which First Niagara never had.

KeyCorp will pose some competition to the region's dominant bank, PNC Financial Services Group, but the competitors most likely to be threatened are mid-tier institutions such as Huntington or Fifth Third, said Marty Mosby, an analyst at Vining Sparks.

"Most corporations have more than one institution that they like to do business with," he said. "If you look at those secondary providers or those other regional banks that are there, this takes First Niagara and beefs it up so that it becomes the strongest secondary provider to those corporations. …

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