KeyCorp has put up for sale its 28 retail bank branches on Long Island, according to people familiar with the situation.
The branches, which are in Nassau and Suffolk counties, represent about $1.1 billion of deposits, these people say. They are expected to fetch about $90 million to $135 million, representing 8% to 12% of deposits.
The bank has hired Credit Suisse First Boston to shop around the branches, sources said.
Spokesmen for KeyCorp and Credit Suisse First Boston declined to comment. But observers said the move makes sense as Cleveland-based KeyCorp tries to cluster its retail network around major metropolitan areas.
KeyCorp's Long Island presence is the legacy of the old Key Bank, which was based in Albany and merged with Society Corp. of Cleveland in 1994.
"It's certainly not part of their service territory," said Stephen Biggar, an analyst at S&P Equity Group.
"It would be difficult for economic reasons to maintain a meaningful branch presence" in Long Island, he said. "They can't leverage their marketing dollars."
KeyCorp has 241 branches in New York, more than in any other state. But the bulk of them are upstate, far from Long Island, said Kevin T. Timmons, an analyst at First Albany Corp.
The $1.1 billion of deposits represents only a 2% market share on Long Island, Mr. Timmons noted, whereas in Albany, KeyCorp has roughly the same dollar amount of deposits but a 13% market share.
Two years ago, KeyCorp announced a plan to reorganize its 12 banks into a single nationwide bank, divided into 28 sales districts centered on sizable metropolitan areas.
The company has indicated that it plans to close 30 to 50 of its 968 branches this year and to continue at that pace for the next few years. It has closed or sold 315 in the last four years.
The reported branch sale comes as Long Island emerges as a prime banking battleground.
The thrifts Dime Bancorp, GreenPoint Financial Corp., Roslyn Bancorp, Astoria Financial Corp., and the bank holding company North Fork Bancorp are all vying for local market share through acquisitions.
"There is likely to be a healthy bidding war" for KeyCorp's branches, said James Ackor, an analyst at Tucker Anthony. "I bet all five names will be involved if invited in," as well as a few others.
"It's not a secret that there are people that want to establish or enhance an existing presence" on Long Island, Mr. Ackor added, "and this would help someone in that quest."
Dan Healy, chief financial officer of North Fork, Melville, N.Y., disagreed. Though Long Island thrifts are consolidating, they would not all bid aggressively for a package of commercial bank branches, he said.
Customers who are used to receiving services offered by a commercial bank such as KeyCorp may not stay with an acquiring thrift that could not offer those same services, he said.
Mr. Healy added that North Fork "may potentially be interested" in the KeyCorp branches.