🔒KeyBank’s Kelley sees BB&T-SunTrust merger triggering M&A ‘carousel’

Chip Kelley is Maine market president of KeyBank, which is based in Cleveland and in Maine has 47 branches and close to $2.5 billion in deposits. He succeeded Sterling Kozlowski, who died suddenly in June 2018.

Kelley, a Boston native who’s loved Maine since attending Colby College, joined KeyBank as a commercial banking team leader for New England in 2005. The Cape Elizabeth resident and hockey enthusiast sat down with Mainebiz in his downtown Portland office for an interview. Excerpts follow.

Mainebiz: How would you describe your management style?

Chip Kelley: Personable. I appreciate process, and understand the benefits and necessity of process, but I’m not a process person. My style is a bit of a departure from Sterling’s, who was a little more formal than I am. There’s a place for formality, there’s a place for levity, and I think we need to appreciate everything that people bring to the job — challenge them, but also reward them.

MB: How does the BB&T-SunTrust merger — the biggest in a decade — change the banking landscape? More consolidation to come?

CK: It takes two of our peers, each a bit larger than us, and scales them up significantly to become the sixth-biggest bank in the country, though still trailing by a wide margin the top four. It changes the game, and the timing relative to where we are in the market cycle is interesting. This could start the carousel.

MB: And what about in Maine?

CK: What will drive it is the operating cost coupled with technology. We still have all these small mutual banks in Maine owned by their customers. We’ve seen it starting here, and in Massachusetts and New Hampshire, where mutual banks will align under a holding company. They’ll stay independent and keep their name, but they’ll consolidate a lot of the back office operations under one roof to reduce their overhead and costs.

MB: What prompted KeyBank’s acquisition, announced in January, of Laurel Road Bank’s digital lending business?

CK: It’s one of many acquisitions we’ve made. We’ve hired some very smart younger folks who are not bankers, but fintech folks, and they’ve had great success. Their job is to primarily scour the landscape, find those emerging technologies and the companies behind them that we acquire. We make an investment that’s relatively small, then if that technology does not pan out, we move to another one.

MB: KeyBank this month is closing branches in Bethel, Guilford, Winthrop and Wilton. What’s the rationale behind the move?

CK: Economics and small, rural towns. In each instance, we have a very dedicated but small customer base, and it’s difficult for us to work in those markets. We’re a regional bank, we like to hold onto and go deep into the regions that we’re in, whether it be Watertown, N.Y., or Fort Kent, Maine. That’s the lifeblood of this bank, but we make hard decisions where it’s just not working.

MB: Is the strategy more technology, fewer branches?

CK: That’s what’s driving it. From a demographic standpoint, we’re finding that younger clients in particular want to use the app, they’re not using the physical branch at all.

MB: What’s your read on the Portland economy?

CK: This year I think we’ll be fine, but I question whether we’re at a tipping point, and where this will bring us in 2020 and 2021. We’ve had 10 years of expansion — in general, but the microcosm is here in Portland. There is a huge dichotomy in this state. The two bankers we have in Presque Isle are extremely good, both native sons. They’re each in their 50s, and I can’t see when they decide they don’t want to play anymore where we are going to find the 32-year-old replacement in Presque Isle. That’ll be harder to do. Portland has become this panacea of, “Oh, isn’t this wonderful,” Bon Appetit magazine writes an article, the New York Times writes a couple articles, and everybody then discovers Portland. It’s been here all along.