Capital One to take over North Fork

In a major banking deal, credit-card issuer Capital One Financial Corp. is buying North Fork Bancorp. Inc. in a transaction of nearly US$ 15 billion.

The banks combined will have deposits of more than US$ 84 billion, putting it among the nation's top 10 banks by deposits.

John A. Kanas, North Fork's chairman, president and chief executive, will remain with the merged company as president of Capital One's banking business and will join Capital One's board, the announcement said.

Capital One, based in McLean, Va., is one of the America's largest credit card issuers and one of the few remaining stand-alone card companies.

The combined institutions would have a managed loan portfolio of more than 3 billion, more than 50 million customer accounts and some 655 retail branches.

Last year, they paid about $ 5 billion for Hibernia Corp., which operates some 300 branches under the name Hibernia National Bank in Louisiana and Texas. Capital One had reduced its offering price for Hibernia and delayed the sale's closing to mid-November because of the miscalculation of the Hibernia's portfolio, which has millions of dollars in outstanding loans to individuals and businesses hurt by Katrina.

"It's positive to have more scale, more diversity in funding and business lines," analyst Kathleen Shanley of Gimme Credit said of Capital One's purchase. "But with any acquisition there are challenges of integration, and with Katrina there are special challenges that are ongoing."

A number of independent card issuers have been acquired by major banks in the past. Capital One has retained its independence instead.

A nonprofit consumer advocacy group Inner City Press-Fair Finance Watch said it would urge state and federal regulators to reject the deal on grounds that Capital One charges a disproportionately large number of its black and Hispanic customers higher rates on mortgage loans.

The deal, which has been approved by both companies' boards, still must be ratified by shareholders and pass regulatory muster.

North Fork shareholders will receive cash or stock equal to .25 plus the value at closing of 0.2216 Capital One shares.

The transaction is expected to close in the fourth quarter of 2006. Capital One expects the deal to achieve pretax cost savings of 5 million and boost its earnings beginning in 2008.