Key Bank to buy First Niagara
Steve’s breakdown: These two banks have spent $5 or$6 million/year each. Right now they are using the line “Better Together”. I think every bank merger ever has used that so get in their and get creative. BTW: Key has no AOR.
CLEVELAND, OH & BUFFALO, NY: Keycorp, a Cleveland-based banking company, says this morning it has agreed to pay $4.1 billion, or $11.40 in cash and stock, for Buffalo-based First Niagara Corp. and its nearly 400 branches in Eastern states, including 58 branches in the Philadelphia area, where First Niagara took over the former Harleysville National Bank in the last recession. . Statement here.
Although First Niagara was well-known to be looking for a buyer, the move still surprised analysts like Matt Schultheis at Boenning & Scattergood, West Conshohocken, who told clients last week that the bank would have a tough time finding a new owner at an attractive price. Schultheis also noted First Niagara had been upgrading its technology (the “Common Rails” initative) and boosting loan growth (he projected 7.5% annually) through its “Common Rails” initiative.
The sale price is below First Niagara’s highs from last year and siginficantly below its pre-recession trading price, and in the range where the stock has traded since the company was first reported to be looking at what bankers call “strategic alternatives” last month.
The stock had lately traded at a higher price than similarly low-profit peers, but a discount to the earning power of its assets (“tangible book value”), Schultheis wrote. He added that the bank faced a “steady grind” if it were to boost profits and remain independent.
First Niagara, like other regional banks, has been squeezed between low interest rates, sluggish loan demand in its upstate New York and Pennsylvania markets, and impatient activist investors who would rather cash out now than gamble on growth after years of low bank profit.