By Jeff Bater
Feb. 10 — The governor of New York is urging the Federal Reserve to reject KeyCorp's proposal to buy First Niagara Bank, saying a merger would reduce competition in the upstate region and push consumers toward payday loans and check cashing.
Gov. Andrew Cuomo sent a letter dated Feb. 10 to the regulator airing “significant antitrust concerns” over the proposal announced in October by KeyCorp to buy First Niagara Financial Group Inc. in a $4.1 billion cash-and-stock deal.
KeyCorp is based in Cleveland, and First Niagara is headquartered in Buffalo. The companies are publicly traded.
In a regulatory filing in late 2015, KeyCorp said it had around $95.4 billion in assets. First Niagara said in a filing that it had $39.9 billion in assets at the end of the year.
In his letter, Cuomo cited a storied metric used by the government in evaluating acquisition applications to determine whether any deal would result in unhealthy market concentration, and said the formula, the Herfindahl-Hirschman Index, suggests the proposed merger “would lead to Key Bank having an anti-competitive market saturation of approximately one third of the total deposits in the Buffalo area.”
Cuomo's letter raised the chorus of concern over the proposed acquisition. Rep. Brian Higgins (D-N.Y.), whose district includes Buffalo, raised objections to the proposed merger in a Dec. 7 letter to the Justice Department and the Federal Trade Commission . He expressed worry over possible job loss.
Furthermore, Sen. Charles Schumer (D-N.Y.) said in a news release Dec. 20 that the proposed purchase should be “a giant red flag” for federal regulators and that he wanted the Fed to give the public additional opportunity to provide input on the deal. Three days later, the Fed announced it was extending the comment period through January .
Cuomo wrote that the proposed acquisition by Key Bank would reduce retail banking competition by limiting consumer access in the upstate New York region to an unacceptably low level. “The consolidation is expected to result in thousands of lost jobs at the corporate and branch levels, with little hope these individuals will find alternative work in the retail banking field due to the oversaturated market conditions,” he said. “In addition to the loss of jobs in local communities, consumers will face further limitations on branch access. As it stands, tens of thousands of Buffalo area residents do not have access to reliable bank deposit services. Eliminating branches will only exacerbate the existing problem.”
Cuomo said that further limiting upstate New York consumers to access the financial services and products offered by banks “will likely push consumers to rely on non-bank alternatives, such as payday loans and check-cashing, which come with higher consumer transaction costs.”
The regional bank space has been buzzing with activity over the past year.
The Fed on Dec. 24 approved BB&T's request to acquire National Penn Bancshares. M&T Bank Corp. received Fed permission in September to complete its three-year quest to buy Hudson City Bancorp. In July, the Fed said it approved the bid by CIT Group Inc. to acquire IMB Holdco and, indirectly, its subsidiary OneWest Bank. Also that month, the Fed granted BB&T's request to buy Susquehanna Bancshares.
During a webinar sponsored by Bloomberg BNA in January, an adviser to financial firms on mergers and acquisitions said industry conditions continue to signal that consolidation among small and midsize banks will continue in 2016 . Joseph Stangl, a principal in the investment banking group Sandler O’Neill & Partners, said about 300 transactions occurred in 2014 and 2015, and nearly all involved community and small regional banks. Despite recent stock market volatility, deals are still being announced, he added.
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The letter is available at http://src.bna.com/cz4.
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