Capital One: Hat Trick of Bad Decisions

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Richard Fairbanks, the CEO, chairman, co-founder, and starting center of Capital One likens his business to a hockey game, because bad baseball metaphors are played out in his opinion. Fairbanks lives and breathes hockey. He co-owns the Washington Capitals, is a member of a full-contact rec team, coaches youth teams and drives a Zamboni to work. He lives by what he calls the Gretzky Concept, which is “go where the puck is going instead of where it is.” Unfortunately, Gretzky’s head is bleeding profusely, through a culmination of industry factors and a hat trick of bad decisions made by Fairbanks.
Fairbanks’ first goal in this hat trick was grabbing Southern consumer bank Hibernia for $4.9bn right before Katrina. The second was acquiring Northeastern commercial bank North Fork for $14.6bn right before the subprime fallout. What really got the hats on the ice was Fairbanks’ belief that he could integrate two major regional bank acquisitions in such a short period of time and face-off against established retail banking giants while battling a flat yield curve. Most North Fork branches have not been rebranded and still are not in Capital One’s central computer system. Apparently Fairbanks reads from the same bad expansion/integration playbook as retail banking giant JPMorgan, and makes equally awkward two line passes.
Last month, Fairbanks tried to mix up his lines, announcing Capital One’s first major cost cutting effort after two and half years of the company’s stock price being stuck in the neutral zone trap. The trap held.
Now, Capital One is trying to find its mojo by playing the management shuffle game, taking execs from Wachovia and Bank of America to replace the head of North Fork and commercial banking. Fairbanks commented, “We really are in the early third period of a three period game when it comes to completing my banking master plan…ok, fine, the seventh inning. We’re in the freaking seventh inning.”
Chief of Capital One Applies Hockey Strategies to Banking [New York Times]

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