Capital One’s $9 Billion Acquisition of ING Direct USA Wins Fed’s Approval
Capital One Financial Corp. (COF)’s planned purchase of ING Groep NV (INGA)’s U.S. online bank won approval from the Federal Reserve, clearing the way for the credit-card lender to add about $80 billion in deposits.
“The board’s action directed Capital One to take specific steps to ensure that its risk-management functions, including compliance, are commensurate with its new size and complexity,” the Fed said yesterday in a statement.
Capital One, led by Chairman and Chief Executive Officer Richard Fairbank, 61, is expanding through acquisitions. The ING transaction, announced in June, will add more than 7 million customers. Costs rose 25 percent in the fourth quarter as Capital One spent more to build out infrastructure and technology systems, the company said last month.
The bank, which derives more than half its revenue from credit cards, agreed to buy ING Direct USA for $9 billion. The deal will make McLean, Virginia-based Capital One the fifth- largest lender by U.S. deposits. The transaction will be completed within days, Tatiana Stead, a Capital One spokeswoman, said in an e-mailed statement.
“The ING deal is going to prove to be one of the strategically most transformational things that’s ever happened in this company,” Fairbank said at a Feb. 8 investor conference in Miami. “It is a very low-cost way for Capital One to become a national player in banking.”
Capital One climbed 2.3 percent to $49.06 at 6:36 p.m. yesterday in extended New York trading. The stock had fallen 2.1 percent since the ING deal was announced on June 16, trailing the 1.6 percent decline in the 81-company Standard & Poor’s 500 Financial Services Index for the period.
The deal is the first the Fed reviewed under a provision of the Dodd-Frank Act, which requires the central bank to consider whether mergers will result in “greater or more concentrated” risks to the financial system.
Regulators held three hearings to allow public input on the purchase and extended the comment period amid opposition from advocates for consumer rights and affordable housing, including the National Community Reinvestment Coalition.
‘Too Big to Fail’
The transaction will create another “too-big-to-fail” institution and should only be allowed if Capital One implements a “meaningful plan showing a true commitment to do more for the public,” John Taylor, the coalition’s CEO, said at a Sept. 20 hearing in Washington.
“We’re extremely disappointed in today’s decision,” Taylor said yesterday in an e-mailed statement. The organization is considering its options to challenge the approval, he said.
Capital One pledged to make $180 billion in new community- development loans and investments over the next decade, including $28.5 billion in home lending to borrowers characterized as low- and moderate-income. The bank also announced plans to hire thousands of workers.
ING, the biggest Dutch financial-services firm, was ordered by the European Union to sell the U.S. unit as a condition of its government bailout during the financial crisis. The agreement will give ING a seat on Capital One’s board.
ING shares rose 3 percent to 6.76 euros ($8.91) as of 10:27 a.m. in Amsterdam, extending its gain this year to 19 percent.
“This decision concludes the regulatory approval process,” Amsterdam-based ING said in a statement.
In August, Capital One agreed to purchase HSBC Holdings Plc’s U.S. credit-card portfolio. That transaction is set to be completed in the second quarter.
Morgan Stanley, Barclays Capital and Centerview Partners LLC were financial advisers to Capital One. Wachtell Lipton Rosen & Katz, Mayer Brown LLP and Loyens & Loeff provided legal advice.
ING acted as its own financial adviser, along with Deutsche Bank AG and JPMorgan Chase & Co. The Dutch lender’s legal advisers were Dechert LLP, Sullivan & Cromwell LLP and NautaDutilh.
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