The acquisition of North Fork Bancorp by giant credit card company Capital One Corp. is a way to prepare for "the end game" for the nation's consolidating financial services industry, Richard D. Fairbank, chief executive of Capital One Corp., said yesterday.
Fairbank foresees a situation in which "a tidal wave of changes" results in a "new equilibrium" dominated by a number of large, nationally known lenders. Buying North Fork is a key part of his strategy to be one of those survivors.
"This isn't about finding a new boss for [North Fork chief executive] John Kanas," he said. "This is about me getting a business partner."
In a joint interview, Fairbank and Kanas said their plan involves combining the name recognition of Capital One - known for its television commercials featuring hordes of Visigoths flummoxed by the sight of a Capital One card, or comedian David Spade playing a call center representative for a rival company - with a bank that has a lot of branches to help sell its products and a lot of deposits, a source of relatively low-cost funds.
The Capital One-North Fork deal, valued at $14.6 billion, is expected to close in the fourth quarter. Kanas will head the banking operations of the combined company, which bought Hibernia Corp., a bank with branches in Louisiana and Texas, for about $5 billion last year. He will continue to work out of North Fork's headquarters in Melville, N.Y.
McLean, Va.-based Capital One will pay $31.18 for each North Fork share in cash or stock. North Fork shares closed at $29.23 yesterday, up 15 percent from Friday's close of $25.40. Capital One stock fell 7.6 percent to $83.10.
All 355 North Fork branch banks in New York, New Jersey and Connecticut will be renamed Capital One. Kanas said a merger of the companies' back offices will result in an undetermined number of layoffs but that jobs will probably be added in the long term.
Fairbank said that in addition to deposits, which are a cheaper source of funds than going to the capital market for money to lend out, buying North Fork was attractive because its small-business, mortgage and commercial lending operations will help diversify Capitol One's revenue stream.
Asked why he decided to sell now, Kanas repeated what he has said before, that rising short-term interest rates and relatively flat long-term rates have created a profit squeeze for his bank and others.
Susan Harrigan writes for Newsday.