Tags: Capital | growth | acquisition | COF

Capital One: Growth by Acquisition

By    |   Friday, 14 Oct 2011 03:14 PM

Capital One Financial (COF) is one of the nation’s largest banking companies in several different categories, expanding in recent years from its roots as a credit card issuer. And it’s seeking growth through the crisis via acquisition.

With $126 billion in deposits as of June 30, it ranks among the top 10 banks in the country by this measure. Capital One is also one of the top five issuers of credit cards and providers of auto insurance in the United States, according to Morningstar research.

The company is growing by buying up competitors. In June, Capital One agreed to buy ING Direct USA for $9 billion. Thanks to ING’s $80 billion in online deposits, Capital One’s assets in that area will rise by more than 200 percent. Capital One also was attracted by the fact that 69 percent of ING’s customers are 47 or younger, compared to 59 percent for Capital One.

In August, Capitol One agreed to purchase HSBC Holdings' (HBC) U.S. credit card unit for $2.6 billion. Analysts have mixed views over the purchases, questioning the profitability of Internet banking and whether Capitol One overpaid in the HSBC deal.

Capital One registered profit of $911 million in the second quarter, up a whopping 50 percent from $608 million a year earlier. Revenue dipped 2 percent to $4 billion.

Set for gains

Standard & Poor’s analyst Robert McMillan has a four-star buy rating on Capital One shares. While new credit card regulations will constrict revenue somewhat this year, Capital One will be able to make up for most of the loss in other areas, he says.

“We believe COF shares are poised to move higher, as uncertainty regarding the impact of recent credit card regulation wanes, consumers return to using their credit cards more often, and credit trends continue to improve,” McMillan writes.

“We also think COF's planned purchase of the U.S. business of ING Direct will help bolster COF's funding sources and present the company with attractive cross-selling opportunities.”

The company reports next Oct. 20.

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Capital One Financial (COF) is one of the nation s largest banking companies in several different categories, expanding in recent years from its roots as a credit card issuer. And it s seeking growth through the crisis via acquisition. With $126 billion in deposits as of...
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2011-14-14
Friday, 14 Oct 2011 03:14 PM
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