New branches to boost Key in upstate New York

The acquisition of 37 HSBC branches in the Buffalo and Rochester areas will strengthen KeyBank’s business in upstate New York, KeyCorp (NYSE: KEY) Chairwoman and CEO Beth Mooney said in a conference call Jan. 24.

Increasing market share and its physical presence in markets over time helps the bank add new clients, increase revenue, and enhances its business operations, Mooney said during the call on Key’s fourth-quarter results.

Cleveland–based Key will acquire the 37 branches later this year for a deposit premium of $110 million.

The locations are among those involved in First Niagara Bank’s planned acquisition of HSBC’s upstate New York branch network. First Niagara agreed to sell 26 of the branches located in Erie, Niagara, and Orleans counties as part of an agreement with the Justice Department in November.

The remaining 11 branches are located in Monroe County.

First Niagara, based in Buffalo, announced plans in July to acquire 195 HSBC locations in upstate New York, Westchester County, and Connecticut. The deal is expected to close in the second quarter.

The new branches will give Key $2.4 billion in new deposits and loans of about $400 million. Key is paying a deposit premium of 4.6 percent. First Niagara sold additional branches to Community Bank System and Five Star Bank as well.

Key plans to offer jobs to HSBC employees at the branches involved in the deal.

KeyBank is number two in the Syracuse–area deposit market with 28 branch offices, more than $1.7 billion in deposits, and a market share of more than 16 percent. In the Utica–Rome area, Key has two branches, more than $64.4 million in deposits, and a deposit market share of more than 1.7 percent.

Nationwide, Key has more than 1,000 branches in 14 states and assets of $89 billion.

Earnings

For the fourth quarter, net income from continuing operations attributable to common shareholders at KeyCorp (NYSE: KEY) totaled $201 million in the fourth quarter, down from $292 million a year earlier.

Earnings per share for the period totaled 21 cents, down from 33 cents in the fourth quarter of 2010. A $24 million charge resulting from an announcement by Visa of a planned litigation escrow deposit pushed fourth-quarter profit lower, according to Key. 

For the full year, net income from continuing operations attributable to common shareholders was $857 million, or 92 cents a share, up from $413 million, or 47 cents a share, in 2010.

“Despite industry headwinds, we’ve positioned Key to win in the marketplace and continue to make progress on financial goals,” Mooney said.

Loans totaled about $49.6 billion as of Dec. 31, up from $48.2 billion in the third quarter, but down from $50.1 billion a year earlier. Deposits totaled about $62 billion, up from $61 billion in the third quarter and $60.6 billion a year earlier.

Net interest income for the period was $563 million, down from $635 million in the fourth quarter of 2010. Noninterest income was $414 million for the fourth quarter of 2011, compared to $526 million a year earlier.

Key continued to see improving asset quality during the quarter, CFO Jeffrey Weeden said.

Net charge-offs in the quarter totaled $105 million, down from $256 million in the same period of 2010. The provision for loan losses was a credit of $22 million for the fourth quarter of 2011, compared to a credit of $97 million a year earlier.

Nonperforming loans as of the end of 2011 totaled $727 million, down from $1.07 billion a year earlier.

Noninterest expense was $717 million for the fourth quarter, down from $744 million for the same period in 2010. The drop was partially the result of a decline in premiums paid to the Federal Deposit Insurance Corp and reduced operating lease expenses.         

Contact Tampone at ktampone@cnybj.com