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With HSBC acquisition, First Niagara grows

By: Eric Walter , Special to The Daily Record//August 8, 2011

With HSBC acquisition, First Niagara grows

By: Eric Walter , Special to The Daily Record//August 8, 2011

The First Niagara branch located in the Wilder Building at Four Corners, downtown Rochester. Todd Etshman

What does First Niagara Financial Group’s acquisition of 195 branches of HSBC Bank USA across upstate New York and Connecticut mean for the regional banking industry? More competition, according to one local expert, and more opportunities for those who can capitalize on them, said another.

British-based HSBC announced the $1 billion deal earlier in the month as part of a larger strategy to shift more closely to business, international and emerging markets banking. Buffalo-based First Niagara, which has been expanding aggressively over the past few years, will nearly double the number of branches it has across the upstate region. 

In the Rochester region alone, First Niagara will go from number nine to number one in terms of deposit market share, said spokesman Jeffrey Shoenborn. In addition to establishing or increasing First Niagara’s market presence in Buffalo, Albany, Rochester and Syracuse, the move will also introduce them to Westchester County and the Binghamton region, Shoenborn said. Across western New York, First Niagara’s market share will increase from 9 percent to 22 percent, according to company documents. 

“First Niagara started out as a regional bank but this [shows] that they have grown much bigger than that,” said Dr. Daniel Tessoni, of Rochester Institute of Technology’s Saunders School of Business.

The departure of HSBC will present opportunities for other banks, he believes.

“When a bank the size of HSBC decides to exit the arena, it’s disruptive to the customer base. That provides an opportunity to the other players,” he added.

While most current small business and consumer HSBC clients may well stay on with First Niagara, a significant number may well take the opportunity to consider switching to other banks, Tessoni said. HSBC’s departure could be a boon for banks willing to offer the right incentives, including smaller regional banks, said Tessoni, who also sits on the board of Genesee Regional Bank. 

Clifford Smith Jr., a professor at the University of Rochester’s Simon Graduate School of Business, had a different perspective. By subsuming most of HSBC’s former client base, First Niagara boosts its presence and puts pressure on the other big players, such as Chase Morgan or M&T. “I think this is going to put a lot more competition in the overall market,” he said. 

As it is in First Niagara’s interest to make the transition as seamless as possible, Smith said he doubts most customers will notice any large changes in policy, staffing or location of their nearest bank.

“From a customer perspective, especially in the short run, I think there will be little you will notice,” he said.

The deal is still pending the approval of regulators and First Niagara has not yet made any decisions as to the fate of specific HSBC branches. All told, however, they may sell off around 25 percent of the newly acquired chains to other banks, said Shoenborn. The majority of the 1,900 HSBC employees currently working in the 195 branches are expected to be kept on, Shoenborn said.

HSBC officials noted that while their consumer branches may be closing, they still plan to maintain their regional presence in the international banking, corporate banking, commercial real estate, trade services, cash management, and middle market commercial lending markets. “We’re looking to stay here and we’re looking to grow,” said Paul Cronin, HSBC’s head of commercial banking for upstate New York and the Midwest. 

Both Smith and Tessoni believe that HSBC may face challenges, however. Even wealthy people have need to step into a brick-and-mortar bank once in a while, Smith said. “You’re either going to have to find a way to bring the bank to those people or risk losing some customers.”

Tessoni said that competitors that can offer personal and small, medium and large business banking on top of the services HSBC retains will have and advantage over HSBC in that they serve a wider variety of the customer’s needs. “A competitor would say ‘why split it up?’” he added.

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