Credit cards and banks
The newest trend in US financial involves a bank buying a credit card company and a credit card company buying a bank. A short lull in major US banking acquisitions was broken by the recent announcement that the nation’s largest savings and loan company, Washington Mutual, has agreed to buy Providian Financial Corporation. The deal will cost around $6.5 billion.
Providian, headquartered in San Francisco, is the #9issuer of credit cards, with over 10 million accounts. The company also owns a savings bank. Seattle-based Washington Mutual has over 2,000 bank branches and is expanding aggressively cross-country. It also is involved in mortgages (through its Long Beach Mortgage division), in property and life insurance, and in mutual funds. The combined company will have gross income of over $18 billion.
Meanwhile, the converse pattern is happening in the announced $5 billion acquisition of Hibernia National Bank by credit card issuer Capital One. Hibernia is Louisiana’s largest bank, going back to 1870, and has a full; range of standard banking services in that state and Texas. Virginia-based Capital One is one of the largest credit card issuers in the US, with an aggressive advertising campaign. It was looking for a conventional bank to consolidate its financial services. The new company will have an income of around $12 billion.
Interestingly, Capital One started in the 1990s as a division of bank, Signet Bank in Virginia. It was spun off in 1995. In 1997, First Union (now Wachovia) acquired Signet Bank.
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