Capital One Financial Corp.'s deal to buy ING Group NV's U.S. online banking business for $9 billion is a "game-changing" transaction that will vault the McLean, Va., company into the top tier of banks, Capital One Chief Executive Richard Fairbank said in a conference call Thursday.
Fairbank stressed that online banking is the future of the industry.
"The transaction is low-risk" because Capital One is acquiring a "fully credit-marked" balance sheet without "paying a significant premium," he said.
The ING Direct unit is fetching a core-deposit premium of 0.4%. Capital One expects to take a $1.7 billion, or 4%, mark on ING's loans presuming home prices will decline 9% from current levels.
He said it would be accretive to Capital One's tangible book value immediately, which he said was "a rarity in bank deals."
The deal — expected to close in either the fourth quarter or the first quarter of 2012 — should enable Capital One to expand profits, he said, by swapping higher-yield capital loans for ING Direct assets as they run off. There will be cost savings, and Capital One will also have an opportunity to sell more of its products to the 7 million ING customers it will acquire in the deal, officials said.
ING's $80 billion of deposits are especially low-cost and sticky, with an annual customer attrition rate of 5% in each of the last three years.
Capital One's so called "all-in" deposit costs may now fall by 10 basis points, or $200 million, in 2013 because of cost savings between the two franchises. Those savings come from lower rates as well as from the low overhead involved in ING's deposit gathering.
Capital One expects other cost savings, including: an estimated $90 million of savings in 2013 from consolidating banking and mortgage platforms, rationalizing corporate systems and reducing staff.
Capital One is also trying to buy HSBC Holdings PLC's credit card portfolio as a source of funding for ING Direct, The Wall Street Journal has reported.
Fairbank said the company does not "comment on rumored acquisitions." He added: "This deal stands on its own and does not require additional acquisitions to make it financially compelling."
The transaction also "enhances the potential economics" of other potential acquisitions, he said.
