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Capital One Acquires ING Direct En Route to Becoming 5th Largest U.S. Bank

Deal highlights synergy between Capital One's branch footprint and ING Direct's online banking, and could reenergize Capital One's credit card business.

Capital One is poised to become the fifth largest U.S. bank following a June 16 announcement that it will acquire ING Direct USA for $9 billion from Netherlands-based ING Groep.

Founded in 2000, Wilmington, Del.based ING Direct USA ($92.2 billion in assets) has grown over the last decade to become the nation's largest direct bank, primarily serving its 7.7 million customers online, over telephone or through mobile. McLean, Va.-based Capital One Financial Corp. ($199.3 billion in total assets) has about 1,000 branch locations and is a large credit card provider. Capital One chairman and CEO Richard Fairbank said the two banks' specific strengths are complementary.

"The acquisition of ING Direct is a game-changing transaction that delivers attractive deal economics immediately and compelling long-term strategic value," Fairbank said in a release. "The combination of Capital One and ING Direct creates a unique and valuable banking franchise that includes advantaged access to assets, great local scale branch banking in attractive markets, and with ING Direct, the leading direct bank customer franchise with national reach. Adding ING Direct enhances and sustains key sources of shareholder value over the long-term, including growth, returns and capital generation."

While Capital One is playing up the apparent synergies between the two banks, Ron Shevlin, senior analyst at Boston-based financial research and consulting firm Aite Group says the deal could inject new life into Capital One's credit card business. ING Direct's large customer base with a demographic that skews toward high income members of Gen X and Gen Y is an asset.

"When they look at that demographic they probably see a good potential cross sell on the credit card side," Shevlin adds.

Another area in which the banks could align well is in the ability to attract customers.

"The core competency (at ING Direct USA) is all about marketing and technology, and to bring marketing and technology about to make the bank work like a retailer," ING Direct USA chairman, president and CEO Arkadi Kuhlmann told Bank Systems & Technology in a recent interview.

ING Groep announced it was selling ING Direct USA in March, not as a concession that the model didn't work, but out of obligation to repay the Dutch government for aid received during the financial crisis.

Capital One expects some $90 million in savings through the consolidation of systems, platforms and corporate functions, and says leadership of both banks will work together to ensure the highest quality integration and leadership going forward. Capital One spokeswoman Tatiana Stead says it's too early to comment on additional specifics.

"Bottom line: We envision business as usual," she says.

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