On Friday, British banking giant
HSBC Holdings plc
) concluded the sale of its 195 branches, mostly located in the
upscale New York, to First Niagara Bank, N.A., a wing of
First Niagara Financial Group Inc.
), for approximately $1 billion in cash. The sale was a part of
HSBC's strategic revamp.
Last year, HSBC had outlined a strategy to restructure its
business and curtail costs up to $3.5 billion by 2013. The strategy
involves a paradigm shift from retail banking to commercial and
corporate banking and targets investment in high growth
HSBC's American banking operations are also undergoing a major
overhaul. The bank has already sold most of its New York branches.
Capital One Financial Corp.
) has bought its credit card operations for $31.3 billion in cash.
Following the acquisition, the company assumed $28.2 billion of
credit card receivables and $0.6 billion in other net assets.
As for First Niagara, this deal would further strengthen its
position in its home ground and bolster its consumer base along
with significant increases in deposits. Moreover, it would catapult
First Niagara among the top banks in the Northeastern U.S, pitting
against the leading banking powerhouse
M&T Bank Corporation
Synopsis of the Deal
The deal was inked back in July 31, 2011. It included 195
branches along with $15 billion in deposits, $15 billion worth of
assets, $2.8 billion in consumer and mortgage loans, and $4.3
billion in retail brokerage assets under management. It also had 1
million accounts along with 500,000 customers and a 1,200 strong
workforce across the region.
The consideration for the deal was justified at the rate 6.67%
premium to the market value of deposits. The deal was exclusive of
HSBC's corporate, commercial and investment banking along with
private banking business operations in the region. First Niagara
will absorb all the staff of the acquired units.
However, in January 2012, First Niagara had announced to sell 64
of the acquired branches to
Community Bank System Inc.
) and Five Star Bank - a subsidiary of
Financial Institutions Inc.
The main reason behind First Niagara's divestiture is to satisfy
antitrust concerns raised by the Department of Justice and also for
non-alignment of these branches to its growth plan.
Keycorp has agreed to acquire 37 branches by paying 4.6% or $110
million premium on deposits of nearly $2.4 billion. This deal will
be executed following the closure of First Niagara-HSBC deal. Until
then the branches in concern will operate as HSBC branches. The
dates for the conversions of other branches acquired by Community
and Five star banks are uncertain, but likely to follow KeyCorp
The sale of retail branches by HSBC marks a concrete step by the
company towards achieving its strategic goal of minimizing loss
making businesses to enhance concentration on fundamental
activities and curtail cost. It must be mentioned that this sale
will substantially reduce HSBC's footprint on the American soil.
However, the bank continues to serve relentlessly to the needs of
its American consumers through its commercial and corporate banking
Shares of HSBC currently carry a Zacks #2 Rank, which translates
into a short-term 'Buy' rating. Considering the fundamentals, we
also maintain a long-term 'Underperform' recommendation on the
COMMNTY BK SYS (CBU): Free Stock Analysis
CAPITAL ONE FIN (COF): Free Stock Analysis
FINANCIAL INST (FISI): Free Stock Analysis
FIRST NIAGARA (FNFG): Free Stock Analysis
HSBC HOLDINGS (HBC): Free Stock Analysis Report
KEYCORP NEW (KEY): Free Stock Analysis Report
M&T BANK CORP (MTB): Free Stock Analysis
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