Capital One Financial Corp.’s top banking executive said she plans to make balance-sheet growth a bigger priority following the McLean, Va., company’s integration of North Fork Bancorp of Melville, N.Y.
The conversion this month paved the way for a “more aggressive” effort to offer credit cards to North Fork’s commercial clients, the executive, Lynn Pike, said in an interview last week.
However, Ms. Pike, who became the president of Capital One’s banking operations in August, said her $151 billion-asset company will take a slow and steady approach this year to expanding the balance sheet, because of broad concerns about credit quality.
“Market conditions will be a dictator for that,” she said. “We want to grow the balance sheet carefully.”
And Ms. Pike was quick to note that credit quality in Capital One Bank’s $44 billion loan book is “holding up great,” because of a history of conservative underwriting at both Hibernia Corp. of New Orleans, which Capital One bought in 2005, and North Fork, which was bought about a year later.
Ms. Pike said she would prefer to bridge the gap between the Gulf Coast and Northeast markets of Hibernia and North Fork, either through organic growth or acquisitions. “Honestly, I would say that the footprint seems weird, and it is hard from a leadership perspective, because of the white space.”
However, she also said there is no urgent to expand geographically.
“We have so much opportunity in our existing markets and customer base,” Ms. Pike said. “We have a functionalized bank, … so we can get things done that demonstrate growth.”
Richard A. Fairbank, Capital One’s chairman, president, and chief executive officer, has also said that further bank acquisitions are not a priority.
“There is no need to be truly national in branch banking,” he said in a September interview. “We certainly don’t feel a need to connect the North and the South.”
The North Fork conversion was completed the weekend of March 8, roughly two years after Capital One unveiled its $13.2 billion deal for the company and 15 months after the deal closed. Capital One said a lengthy integration was necessary, because of the size and complexity of the task of combining North Fork’s computer systems and 383 branches with those of Hibernia and Capital One Bank. As a result of the integration, Capital One now has 742 bank branches, according to yearend numbers.
Ms. Pike said she was “really pleased” with the conversion, though she would not provide any details until the integration team holds its final debriefing next month.
Having everything on the same platform will let Capital One increase business in a number of ways, including broadening the consumer offerings at the branches inherited from North Fork, Ms. Pike said. Customers at those branches now can sign up for mobile banking and enhanced online banking and bill payment.
“There’s pent-up demand, … and we haven’t launched any advertising,” she said. Capital One will start marketing the new products in New York and New Jersey next month. “We wanted our associates to get more comfortable” before making a more aggressive pitch, she said.
Also, Capital One has created a VIP program to help market credit cards to the customers inherited from North Fork. The program refers business owners to a team within the card division. “To us, it is all about relationships,” she said.
In its annual filing with regulators, the company said it expects Capital One Bank’s loan and deposit growth to be “in the low single digits” this year. At yearend the unit had $44 billion of loans and $73.3 billion of deposits.
Another impediment is the expected runoff of $1.6 billion of mortgages and home equity loans originated by GreenPoint Mortgage Funding Inc. Capital One moved the loans on to its banking unit’s balance sheet from held-for-sale status after closing the alternative-A mortgage originator late last year.
Though the loans helped raise Capital One Bank’s fourth-quarter nonperforming assets by 58% from a quarter earlier, to $178.4 million, Ms. Pike said she is content with how credit quality has held up elsewhere in the unit’s loan book. Though North Fork had considerable exposure to commercial real estate, that book consists largely of a “pristine portfolio” of multifamily loans.
Scott Valentin, an analyst at Friedman, Billings, Ramsey Group Inc., said in an interview Monday that the North Fork conversion could be a turning point for Capital One’s bank strategy, and that certain operations such as deposit gathering “were purposefully held back” until all branches were put on the same platform.
“Now they are in a ‘Show me’ phase where they need to show that the acquisitions made sense,” Mr. Valentin said.
Capital One also used the conversion to unveil a red, white, and blue logo with a boomerang-shaped icon for its banking unit. The logo is already on branches in the Northeast, and the company plans to introduce it at Texas and Louisiana branches starting next month.
Ms. Pike said Capital One scrapped Hibernia’s traditional green and white logo, partly because the word “bank” does not appear on the signs of those branches. “It’s an important step, … because we want people to feel that we’re one bank. People will eventually think of the card company and the bank as being part of the same company, but we’re at the beginning of that journey.”
James Ashworth, a marketing consultant in Winston-Salem, N.C., said Capital One chose a popular color pattern, noting that Citigroup Inc. and Bank of America Corp. also use it.
The color pattern also closely resembles that of Commerce Bancorp Inc. of Cherry Hill, N.J., which Toronto-Dominion Bank recently acquired. Toronto-Dominion has renamed TD Banknorth Inc., its U.S. banking unit, as TD Commerce and given it a green logo, though many of the Commerce branches will use their old color pattern for now.
A Capital One spokeswoman said it designed its new logo to reflect “a progressive and dynamic” company.
