Several analysts have recently updated their ratings and price targets for Capital One Financial Corp.
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Capital One Chief Executive Officer Richard Fairbank has expanded the credit-card consulting firm he founded more than two decades ago into a diversified lender that ranks as the seventh-largest commercial bank in the U.S. The transformation has been fueled by a spree of acquisitions that have included smaller businesses, such as energy investment banking and health-care lending.
Investors had long pushed for the Fairfield, Connecticut, company to get rid of its finance unit, even though it has been profitable, because it is hard for investors to understand and it carries risk. “This addition will catapult us to a leading market position in providing financial services to the healthcare sector”, Michael Slocum, President of Capital One’s Commercial Bank.
Capital One stock is up 0.69% to $81.43 in after-hours trading this afternoon. The business had revenue of $5.70 billion for the quarter, compared to the consensus estimate of $5.74 billion. Capital One also acquired the online banking business of ING Groep NV for about $9 billion in 2011.
In June, GE struck a deal to sell another lending business for more than the value of the loans it holds.
Credit Suisse Group AG and Wells Fargo & Co. were financial advisers to Capital One, and Wachtell Lipton Rosen & Katz provided legal advice. About the sale to Capital One, GE Capital GE Capital CEO said, “this transaction is another example of the value generated by GE Capital’s strong businesses and exceptional teams as we continue to demonstrate speed and execute on our strategy to sell most of the assets of GE Capital”.
The banking operations imperiled the parent company during the 2008 financial crisis. It spun off its consumer credit card business, Synchrony Financial, into a separate publicly traded company last year, and completed the sale of NBC Universal to Comcast in 2013.
The sale comes as GE is streamlining its operations and exiting financial service businesses that don’t tie back to its core industrial, power generation, aviation and oil and gas expertise.
The unit contains about $US8.5 billion worth of assets.
Separately, GE said it is selling $600 million of the unit’s real estate equity investments to another buyer. Capital One also will retain the HFS management team and employees. The deal, which isn’t expected to impact Capital One’s previously stated share buyback or dividend plans, is expected to close by the end of 2015.
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Ryan Dezember contributed to this article.
