Was This Fool Wrong About Capital One's ING Direct Buy?

I was planning on giving Capital One (NYSE: COF  ) the benefit of the doubt. In fact, I was even saying that the acquisition of ING's (NYSE: ING  ) ING Direct unit could work out quite well for Capital One if it was able to use ING Direct's solid deposit base to fund higher-interest loans.

On Monday, I concluded, "Overall, I'd have to give this acquisition a thumbs-up from the perspective of Capital One shareholders."

However, after being pointed to the ING Direct Facebook page, I'm wondering whether I stuck my thumb up prematurely. Based on the comments on the Facebook page, many ING Direct accountholders are not happy about this deal, to put it mildly. Here are just a few of the hundreds of critical comments that show up not only on the announcement of the deal, but also on every subsequent post on the page.

  • "This is no way to treat loyal customers, ING. This stinks!"
  • "Very sad news. Feels like losing a longtime friend."
  • "This change is not good. The only company on this planet worse than Capital One is [Comcast (Nasdaq: CMCSA  ) ]."
  • "I came in this evening guess what's in my mailbox? A mail from Ally Bank guess they knew I would be needing them."
  • "We hate Capital One!!!"
  • "ING is dead to me ..."
  • [In response to a post about the first day of summer and sunscreen:] "You shouldn't be worried about sun screen but not losing customer when ING becomes Capitol One ... I know im leaving!!!"

Please don't hate us!
It gets better. Yesterday, the folks running ING Direct's Facebook page were apparently trying to save face and wrote: "We hear you, Savers. The plan is ING DIRECT + the best of Capital One = more ways to help you save." That was basically the equivalent of knocking the hornets' nest off the tree and kicking it repeatedly until every last hornet was sufficiently enraged.

The responses?

  • "Goodbye, ING Direct. Can't in good conscience do business with Capital One."
  • "There's no way I'm letting Cap One have a dime of my money!"
  • "Peace out Crap One!"
  • "I will join my local credit union ASAP"
  • "The best of Capital One? That's like saying the best parts of colon cancer."

My bad?
In Capital One's slide deck for the deal, its bullet points pitching the deal's "compelling strategic value" include:

  • "7 million young, high-income, loyal customers"
  • "$80 billion of low cost, stable deposits"

Emphasis mine in both cases.

Granted, hundreds of angry comments on Facebook don't absolutely prove that ING Direct's entire customer base is going to jump ship, but it definitely calls into question whether those loyal customers will stay anywhere near as loyal or those stable deposits remain anywhere near as stable under Capital One.

And if they don't? Well, Capital One may be looking for a towel to wipe the egg off of its face.

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Fool contributor Matt Koppenheffer has no financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


Read/Post Comments (8) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 23, 2011, at 7:25 PM, StableMinded wrote:

    The unfortunate thing is that ING Direct actually had absolutely no control in this deal. ING Group was forced to sell ING Direct USA and ING Group accepted the bid from Capital One. I'm sure the employees at ING Direct are as distraught as many of the customers. From all of the interactions I have had with ING Direct as a customer, they really do care about offering simple & great banking products that do not screw the consumer. Hopefully, the people at ING Direct can find a way to convince Capital One management to continue to let them operate with their very respectable core business values. I am willing to give them a chance.

  • Report this Comment On June 24, 2011, at 12:15 PM, scottgeiger wrote:

    It has been noted that M&A failures are often the result of a clash in corporate cultures. ING Direct and COF have radically different cultures (IMO). Not withstanding the exodus of many ING Direct customers, I wonder how the integration of the two cultures can succeed? Short term COF can expect to lose a number of customers from ING Direct, and I suspect employees as well due to the culture clash. Will this ultimately end in failure? Only time will tell. The one thing for certain is that the ING Direct of tomorrow will be radically different from the one of last week; regardless of any marketing to the contrary.

  • Report this Comment On June 24, 2011, at 3:13 PM, TheMotleyTimbear wrote:

    If Arkadi Kuhlmann retains control of the Direct Bank, all will be well. He is the biggest champion for simple, straight-forward banking products I've ever seen.

  • Report this Comment On June 27, 2011, at 2:16 PM, MSaver2012 wrote:

    Capital One is a publicly held company that seeks to deliver the highest shareholder return. INGDirect philosophically opposes credit cards, and instead makes its money on prime mortgages priced from 2.99% - 4.25%.They can still earn a profit based on their low cost, customer friendly business model.

    Capital One is more likely to use the deposits to buy other credit card companies, or "lend" it via credit cards at 12 - 28%,with fees. Their business model is all about unsecured debt, late fees, annual maintenance fees,etc. They might try to make customers "loyal" and deposits "sticky" by slightly increasing their rates on deposit accounts. But they will effectively kill INGDirect's business model and its mission.

    Most analysts do not understand why INGDirect customers are so passionate and loyal or why employees at INGDirect feel passionate about their mission to "lead Americans back to saving."

    Important to note: Capital One must pay a $270 million cancellation fee if the deal doesn't go to closing. If enough customers and deposits leave before regulators approce, Capital One can withdraw their offer andING Group would have about 2 more years to sell again.

  • Report this Comment On July 14, 2011, at 1:29 PM, umh wrote:

    I've never heard anything good about being a Capital One customer and see no reason to wait for them to give me a reason to leave in a hurry. I'm researching where to move my accounts to now so that I can make a rational decision.

  • Report this Comment On August 01, 2011, at 9:56 PM, AmericanPeon wrote:

    I just moved my Orange Savings, My IRA to a local credit union. I closed my Sharebuilders account.

    I was sad to leave the peace-loving flower picking INGDIRECT but Satan has taken over.

    Cap 1 is one of the most evil-cheating scum bag banks to exist. (yes,personal experience)

    Those who think ING can remain in a bubble have obviously never worked for a satanic company. Cap 1 will turn the hairy eyeball on them and destroy them cut by cut by cut. The happy employees? Gone.

    It's all about gold golf tees/big checks for the execs and screw the customers.

  • Report this Comment On August 04, 2011, at 3:07 AM, Rickajho wrote:

    When you merge two companies whose business/customer services models and strategies are so diametrically opposed I can't see the good in this.

    Existing Ing customers are not fools. Most of them are savvy enough, at least, to know the difference between the Ing experience and the Capital One experience. Been there, done that. If I wanted a Capital One account I wouldn't have my assets parked at Ing Direct. That's why the initial reaction from existing Ing customers has been so strong. Personally, I'll sit tight for the time being. The transition will take time, but I'm not expecting a great experience for COF and will pull my assets at the first sign of a drop in interest rates, or fees being tacked on.

    This does make me wonder, by the time the deal is said and done, what COF will be getting for their 9 billion dollars? How much of that "stable" account base will actually be left? And since COF isn't historically interested in mortgage lending, if/when COF sells off the existing Ing mortgage portfolio what's left about this deal to "brag" about.

    I see writing on the wall... SELL COF!!! Oh, assuming the negative Ing customer reaction hasn't already soured the deal enough to kill it. ("Soured" = closing accounts, drawing down deposits.)

    If it *had* to be a cc company it seems like AMEX would have been a far better marriage. Too bad they weren't interested.

  • Report this Comment On May 02, 2013, at 10:50 AM, mygems1 wrote:

    I just want to say that ING is not a great company. This company is being run by kids who give you really bad customer service and I mean it when I say they are kids who are in control of your money and just treat you really bad. The management is just horrible. I wouldn't invest one dime with Sharebuilder or ING Direct the bank. I speak of experience. Do not go with this company, if you do, just simply watch how your money disappears. I also wonder about their security for your funds cause it's not secure just with the code you have to put in and their website it says alot about their bank and their brokerage firm. Gee what a surprise their system goes down every sunday like clock work.

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