WNY banking scene sees a new 'normal'
By ALLISSA KLINE
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The banking industry in Western New York is settling into a new normal following the departure earlier this year of HSBC Bank USA N.A.'s retail branch operations.
The once-dominant deposit-taker stepped away from consumer banking as part of a global cost-cutting initiative.
The move made room for other players in the region to grow - through new branches, new deposits or some combination of both.
KeyBank N.A. expanded its physical presence when it purchased 37 HSBC branches in the Buffalo and Rochester markets.
Post-acquisition, it is pulling in more deposits, more business banking opportunities and more brand awareness than it was a year ago, according KeyBank's Western New York District president, Gary Quenneville.
"The retention of business has been very strong," he said. "I would say it has exceeded our expectations across all the different portfolios. And by that I mean the small-business portfolio we acquired, the public-sector portfolio we acquired and the HSBC Premier portfolio we acquired.
"The retention of all that business has been very good," Quenneville said.
The withdrawal of a banking giant as large as HSBC doesn't happen often in a marketplace.
Those in the industry have pointed to the uncommon opportunities that presented themselves in the months after First Niagara Financial Group Inc. announced in July 2011 that it would buy HSBC's entire Upstate New York branch network - namely, the chance to gain new customers who were displaced by the disruption.
The nearly billion-dollar deal between HSBC and First Niagara closed in May. It was followed by three other transactions in which about half of the 195 branches First Niagara acquired were sold off to KeyBank, Community Bank System Inc. and Five Star Bank.
M&T Bank assumed HSBC's long-held position as the largest bank in the region, according to the Federal Deposit Insurance Corp.'s new deposit market share report. First Niagara Bank then moved ahead to the No. 2 position.
The changes also opened doors for community banks, Quenneville said. Evans Bank N.A., a 14-branch community bank, took advantage of the changes, unleashing a marketing campaign directed at customers searching for a new bank.
The bank's efforts appear to be working. Brand recognition is expanding, assets are rising and net income for the first nine months of the year is 26 percent higher than it was for the same time period in 2011, said Evans president and CEO David Nasca.
He views HSBC's departure as an opportunity to compete even further in a marketplace that doesn't often undergo significant change.
"The market doesn't often reassess itself in terms of banking and Western New York is a historically loyal market," he said. "There are not many chances in a lifetime to get a wholesale reassessment of financial institution relationships like we had last year."
The upheaval didn't change Cattaraugus County Bank's long-term strategy, President and CEO Sal Marranca said.
The community bank is quietly tucked into the Southern Tier of the state and celebrated its 110th anniversary this year.
Like many banks, it is dealing with low loan demand and increasing regulatory burdens.
"I don't want to overstate that the HSBC departure was significant ... but it has settled down," Marranca said. "It wasn't a magic pill for any one particular bank."
Now that much of the integration necessary to merge one bank into another is wrapping up or complete, banks are looking forward to the next year as a time to get used to the new environment.
Quenneville said KeyBank will "digest" the HSBC acquisition and "continue to work at the retention of employees and clients" acquired as part of the deal.
He expects the bank to rise next year to the No. 3 spot among deposit-takers in Western New York.
"As the market share and deposit share through FDIC tracking settles down, we'll be pretty well solidified in that third spot, which is important to us," he said.
At Evans, officials will focus on expense management and revenue generation,according to Nasca.
The bank is wrapping up a three-year strategic plan and working on another to carry the bank through 2016, he said.