Why M&T Didn't Pursue HSBC Upstate Branches

March 11, 2013 Updated Mar 11, 2013 at 6:46 AM EDT

By Allissa Kline, Buffalo Business First

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Why M&T Didn't Pursue HSBC Upstate Branches

March 11, 2013 Updated Mar 11, 2013 at 6:46 AM EDT

M&T Bank Corp. was interested in acquiring HSBC Bank USA N.A.'s Upstate New York branch system, but ultimately worried about whether the bank would be able to successfully digest the 195-branch franchise.

In his most recent letter to shareholders, board chairman and CEO Robert Wilmers acknowledges that it was "tempting" to buy the offices and accompanying $15 billion in deposits, but bank officials had serious concerns about the likelihood of mandated branch divestitures and the ability of M&T to turn newly acquired deposits into loans in regions where the bank already has a solid presence.

"More importantly, we were worried about customers' propensity to choose a new home amidst such large market disruption," Wilmers wrote. "We were less confident about the benefits of such an acquisition, and in the end, fell short of the eventual pricing."

On Friday, M&T officials declined to say whether the bank placed an actual bid for the franchise.

"We think the letter speaks for itself," spokesperson Chet Bridger said. "So we see no reason to elaborate."

M&T routinely does not confirm or deny rumors.

Another Buffalo bank - First Niagara Financial Group Inc. - wound up paying approximately $900 million last May for HSBC's branches and deposits. The parent of First Niagara Bank, which has been criticized by some who think the bank paid too much for the deal, has retained about half of the branches.

The rest have either been closed or scooped up by KeyBank N.A., Community Bank System Inc. and Five Star Bank. All three of those deals closed during the summer of 2012.

The transactions helped make M&T, based on deposits, the largest bank in Buffalo.

Although M&T did not make a direct acquisition, it has benefited from the "once in a generation opportunity" made available by HSBC's exit from retail banking by attracting new customers who were displaced as a result of the market disruption, Wilmers wrote.

"What we had come to regard as a slower-growth, high return segment of our franchise has, instead, proved to be one temporarily characterized by high growth, as we have acquired customers, made loans and received new deposits at a pace unseen in upstate New York for a very long time," he wrote. "These markets accounted for 36% of overall commercial loan growth and 44% of deposit growth. This contributed markedly to our overall 2011-2012 growth in deposits, which at 11.3 percent, was more than double the industry average of 5.0 percent."

The full text of Wilmers' wide-ranging letter to shareholders, which covers the bank's overall performance in 2012, the "astronomical levels" of executive compensation and the trend away from accounting clarity - is available here, under "Latest News" link.

M&T's annual shareholders meeting is slated for Tuesday, April 16 at the bank's downtown Buffalo headquarters.

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