Capital One (NYSE:COF) recently completed the acquisition of ING Direct USA from the ING Groep. The $9 billion deal, which includes $6.3 billion in cash and 54 million shares, will provide Capital One access to ING Direct’s $80 billion worth deposits and a chance to become a leader in online direct banking.  But the real challenge for Capital One lies in retaining ING Direct’s customers and offering them the same level of service. With the acquisition of ING Direct, Capital One has become the fifth largest consumer bank by deposit behind Bank of America (NYSE:BAC), JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC).
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The Federal Reserve delayed its decision twice before approving the acquisition as some consumer groups argued that the deal would result in another too big to fail bank and would pose a risk to the U.S. financial system. After the news of Capital One’s plans to buy ING Direct broke out last summer, some of ING Direct’s customers voiced their concerns on social networking sites about the inevitable erosion of the bank’s simple, customer-first philosophy. 
Challenging Times Ahead for Capital One
ING Direct and Capital One are two radically different banks in the eyes of customers. While customers love ING Direct for its simplicity, great customer service and no-fee checking account, they view Capital One as a bank that charges high fees and has annoying commercials.  It will be a tough job for Capital One to retain and grow ING Direct’s customer base as some customers are already looking at alternatives.
On the other hand, if Capital One does bridge the gap between ING’s approach and its own approach toward customer service, it will not only make ING’s customers happy but will also delight its own customers. And these efforts should help Capital One become the leader in online direct banking.
Our price estimate for Capital One stands at $46.16, implying close to 5% discount to the market price.Notes:
- Capital One Wraps Up ING Direct Deal, Feb 17, 2012, WSJ [↩]
- ING and Capital One: Is a Culture Clash Inevitable?, Feb 20, 2012, TIME [↩]
- Capital One’s Next Challenge: Persuade ING Direct Customers to Stay, Feb 24, 2012, Advertising Age [↩]