KeyCorp Announces Purchase of First Niagara Financial Group

KeyCorp this morning said it’s buying First Niagra of Buffalo, a deal that will increase Key’s size by 40 percent and make it the 13th largest bank in the United States.

Representatives of the two banks did not immediately respond to requests for comment on Thursday.

Cleveland-based KeyCorp says it will offer a portion of its stock and $2.30 in cash for each First Niagara share. What happens is that smaller banks have a hard time doing that.

After the purchase, Key will have about $135 billion in assets and almost 1,400 branches.

It is one of the biggest bank tie-ups of the year and further solidifies 2015 as the biggest year for bank deals since the financial crisis. KeyCorp will also expand its operations to attractive markets throughout Pennsylvania, Massachusetts and Connecticut.

First Niagara has been languishing in the stock market as of late. Analysts believe a few jobs will be cut in New York.

Various media sources, including The Wall Street Journal, reported on Thursday that KeyCorp is in advanced talks to acquire First Niagara Financial Group. Christopher M. Gorman, President of Key Corporate Bank, will lead the merger integration team which will be comprised of both KeyCorp and First Niagara team members.

The deal could value Buffalo, N.Y.-based First Niagara at a modest premium to its market capitalization of just under $4 billion, the people said. KeyCorp’s net interest margin, an important gauge that measures how much a bank earns from the difference between what it pays on deposits and what it takes in on loans and investments, declined slightly in the third quarter. This equates to the consensus earnings growth estimate for the last 12 months, and should not be mistaken for a long term growth estimate.