Alliance Financial Corp. says a long-considered plan to buy part of HSBC Bank USA's personal trust business in upstate New York is a way for it to expand its high-net-worth business and diversify its income.
The Syracuse, N.Y., community banking company said last week that it had grasped the opportunity to expand in its upstate market, and HSBC said the deal furthered a repositioning of its personal trust business to emphasize larger accounts. Terms of the deal were not disclosed.
Jack H. Webb, Alliance's chairman, president, and chief executive officer, said in an interview Wednesday that the deal came now because the company wants to diversify its income. "With the current interest rate margins, we just want to make our way through," he said.
Mr. Webb said the opportunity presented itself to Alliance and the company had not sought it out. "This opportunity became known late last year, and it was seen as a good fit for us," he said.
"We have been stating for the last several years that we were looking for the right bank opportunity," Mr. Webb said.
The $860 million-asset company will open an office in Buffalo where HSBC's trust administration center serves the accounts to be bought. The deal is expected to be immediately accretive to earnings when it closes in December.
Mr. Webb said Alliance plans to retain the HSBC employees who administer most of the acquired accounts.
Alliance's overall strategy is to expand its Alliance Bank subsidiary fairly significantly in the next few years, Mr. Webb said, and it views a solid competency in the traditional trust business as a way of doing so. He declined to specify an ultimate size goal.
An expansion outside of upstate New York is unlikely in the near future, Mr. Webb said, but may be a possibility. "If there are other similar deals, that might be something we would look at," he said.
Gerard Joyce, a senior vice president for personal trust at HSBC, said in a press release, "Alliance's interest in expanding its trust business coincided with our desire to redefine our strategy to focus on our larger trust accounts."
Kathleen Rizzo, a spokeswoman for HSBC, declined to comment further on the deal.
Alliance's trust services include investment management, estate planning, custodial accounts, living trust, and 401(k) plan administration, among other services.
Geoff Bobroff, an asset management consultant in East Greenwich, R.I., said a personal trust business could be costly to run but makes sense for companies that want to increase revenues from high-net-worth customers.
The service component of a trust business can be "painful" to carry out, Mr. Bobroff said. "People that have wealth want to be treated differently. It goes beyond basic service," he said. The deal, however, makes a lot of sense for HSBC since it wants to turn its attention to big accounts, he said.
