BetterTrades looks at Capital One purchase of Chevy Chase Bank - December 4, 2008

What’s in your wallet? If you were a patron to Chevy Chase banks, then you will now be a part of the Capital One Financial Corp. (COF) family. In a statement released earlier today, Capital One announced the purchase of Chevy Chase Bank for $520M in cash.

Under the agreement, COF will use $445M of its own funds to finance the deal, and an additional 2.65M shares of COF for the remainder. The use of shares amounts to $75M, or about $29.30 per share.

Chevy Chase, with branches surrounding the D.C. area and into Maryland, currently has over $15.5B in total assets and runs nearly 240 branches in the Mid-Atlantic region. The bank also possesses some $11B in bank deposits, which COF will have full access to and will increase COF’s net deposits by nearly 10%.

In a time when it has become increasingly difficult to raise capital, COF embarked on this journey to help transform the image of the financial institution into one more of a consumer-based bank. Read more about Capital One purchase of Chevy Chase at Bloomberg.

With a long-standing reputation as being known as a credit card company, Capital One took steps to enter into consumer banking sector three years ago when they made two crucial purchases, the Louisiana-based Hibernia Corp. and the New York-based North Fork Bancorp.

With the purchase, Capital One may now become eligible for a bigger chunk of the $350M bailout fund that the Treasury Department has set aside for financial institutions. Just over a month ago, COF received $3.55B in funds from the government and now, with the purchase of Chevy Chase, may take part in the $450M allotment that may have been allocated to the bank before Capital One’s purchase.

Chevy Chase customers will have access to the full range of products and services that Capital One offers. Customers can now take advantage of a full-line of credit card offers along with additional financial products currently available. To date, COF has more than 50 million credit card holders.

Despite the recent demise of the economy and the financial environment, Capital One has been one of the few institutions to remain profitable during these turbulent times. The company currently has nearly $99B in deposits in which they can use to help offset the $7.2B in bad loans.

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