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PostPosted: Tue Aug 15, 2006 12:49 am 
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Bank Director Magazine - 2nd Quarter 2006
Capital One Charts a New Course
Jack Milligan

Capital One is a direct marketing company that used its industry-leading analytical skills to become a dominant player in the U.S. credit card market. So why does CEO Rich Fairbank want to get into branch banking?



In 1994, Signet Banking Corp.—a Richmond, Virginia-based regional bank—took the unusual step off spinning of its credit card division through an initial public offering. With just one product and no retail deposit base to fund its loans, the decision might have seemed foolhardy—or at best, quixotic. How could a tiny start-up hope to survive against the giant money-center banks that dominated the credit card business? Surely it would be stomped on.

In one of the great corporate success stories of the 1990s, that little company—Capital One Financial Corp.—grew up to be one of the card industry’s largest and most dominant players. The timing of Capital One’s spin off was darn near perfect. The credit card industry was starting to boom and the company, which had established its headquarters in the Washington, D.C. suburb of Falls Church, Virginia, boomed along with it. Wall Street was happy to fund Capital One’s operations by turning its credit card loans into securities, and from 1996–2004 its annual return on equity never slipped below 21%, or its earnings-per-share growth below 20%. The company’s national advertising campaign features a merry band of Vikings who ask, “What’s in your wallet?â€

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