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Capital One on Wednesday slashed the price they were willing to pay for Hibernia, a bank located in Louisiana. In the wake of disaster following Hurricane Katrina, Capital One executives are attempting to purchase the bank chain for a lower price than originally agreed upon because of the damages done by the storm.
Hibernia Bank has more than 22 billion dollars in assets and owns more than 350 banks across Louisiana and Texas. Capital One, who announced in March that they would take over the bank, was particularly interested in Hibernia because they have proven themselves to be a solid bank with a clean history, and their branches in Texas are in high demand in the banking world. Capital One has a large number of cardholding customers in Texas, and their automobile financing branch is located there. In addition, several other large companies, such as Wachovia, Citigroup and Bank of America, are all are vying for a bank with connections to Texas. Capital One considered Hibernia the ideal solution to their situation and the answer to their search for a retail bank to acquire.
Now, however, in the aftermath of Katrina, executives at Capital One have taken a look at Hibernia’s physical damage to its branches in Louisiana, as well as the state of the bank’s loan portfolio and its chance for future growth. Damages in all of these areas caused by the storm have caused Capital One to slash their original 22 billion dollar offer to 5 billion, as well as to postpone the closing date on the deal.
The flooding in New Orleans has led to the closure of 60 branches of Hibernia. Their market shares have dropped 4%, and some investors are questioning whether or not Capital One will continue the deal. Capital One has been on the lookout for a retail bank for some time, as more and more credit card companies are looking into diversifying their holdings and cross marketing to their customers. Bank of America, Capital One’s biggest rival, purchased MBNA two months ago at a price of 35 billion dollars.
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