Capital One's Crossover

Credit Card Firm's Next Challenge: Branding Itself at the Bank Counter

NEW YORK The Capital One bank branch in trendy Tribeca is in an old art gallery with exposed brick and wrought iron. The branch in Union Square features pictures from the nearby farmer's market. The one by Chinatown has floor-to-ceiling bamboo, and the one in Chelsea has zebra-patterned chairs.

The design touches are one way McLean-based credit card giant Capital One has tried to nurture the local look and feel of the bank branches the company bought as part of a strategy to transform itself into what longtime chief executive Richard Fairbank called "one of the nation's great banks."

Capital One embarked on this journey a few years ago, and Fairbank and others say the strategy has helped buffer the company from some of the harshest effects of the meltdown in the credit markets.

But the journey has hardly been problem-free. There's been a natural disaster to contend with, as well as a punishing downturn in the mortgage business that sent Capital One's stock down 50 percent. Capital One is still struggling to mesh its culture with that of the banks it bought -- Hibernia National Bank, based in Louisiana, and North Fork, based in New York.

Capital One made its name with a national credit card business, run by computer whizzes who built sophisticated programs for making decisions about who got cards. Hibernia and North Fork, by contrast, are anchored deep in their geography and in the personal relationships forged between bankers and customers.

Longtime North Fork executive Carolyn Drexel said her bank is used to "dealing with customers face-to-face."

"With legacy Capital One," she said, customers are "either on the phone or an account number on a piece of paper."

The difference in cultures has produced some tensions. Dozens of North Fork bankers have quit to go to more entrepreneurial firms such as Signature Bank. The head of North Fork, John Kanas, resigned as head of Capital One's banking division last summer -- ahead of schedule.

"I was disappointed," said James F. Reeve, a Long Island businessman who served on North Fork's board for nearly two decades, including when the purchase was announced. "I felt that the ongoing success probably in the banking portion would have been enhanced if the North Fork management had stayed in place a little longer. They understood the banking business 100 percent, and they understood the area in which the bank operated."

Culture Clash

Fairbank said he hired a team with deep experience in local banking and said he intends to preserve the "explicitly different cultures" between the banking and credit card businesses.

For example, Capital One contemplated giving the "senior vice presidents" at the bank branches -- managers who work directly with customers -- lesser titles that conform with the company's overall system for titles and salaries. But that would have hurt feelings, so the company opted for one set of titles that bank employees could use with the public and another set for internal use.

Whatever the differences, Fairbank said the banks and the credit card company offer lines such as credit cards, mortgages and auto loans. Now, "Our customers can have access to a full suite of products" through their local bank, Fairbank said.