Is ING a Safe Bank in 2012?

NEW YORK ( TheStreet) -- Questions surrounding the safety and soundness of ING Bank, FSB will reach a crescendo at the end of the year.

In the wake of the Federal Reserve's public hearings on Capital One's ( COF) pending acquisition of ING Direct (USA) from ING Groep ( ING), many consumers are wondering if ING Bank, FSB -- which represents nearly all of ING's U.S. banking business -- is a safe place to put their money.

Yes it is. And Capital One is also a safe place for deposits, and a good bet for investors, for that matter.

A quick look at ING Bank, FSB's third-quarter numbers shows an institution that is in decent shape. The thrift -- which gathers deposits and originates mortgage loans online through the ING Direct website -- had $91.7 billion in total assets as of Sept. 30, and was strongly capitalized, with a Tier 1 leverage ratio of 9.68% and a total risk-based capital ratio of 29.09%, according to regulatory data provided by SNL Financial. These ratios far exceed the respective 5% and 10% required for most institutions to be considered well-capitalized under regulatory guidelines.

One reason that Capital One covets the thrift is that it is quite liquid. ING Bank, FSB's ratio of loans to deposits was just 50% as of Sept. 30.

Capital One expects to receive Federal Reserve approval of the ING Direct (USA) acquisition soon, completing the deal this month or early in 2012. The liquidity cushion form the acquisition is very important to Capital One heading into the company's purchase of HSBC's $30 billion U.S. credit card portfolio, which is expected to close during the second quarter of 2012.

So what about Capital One? An important way to keep depositors safe and make money for investors is to turn a solid profit, and Capital One has been quite profitable over the past year.

Capital One's third-quarter return on average assets (ROA) was 1.72%, and its ROA has ranged from 1.42% to 2.08% over the past five quarters. The company's focus on credit card lending, representing about 42% of its total loans as of Sept. 30, has enabled it to consistently beat its larger competition:
  • For Bank of America (BAC), the third-quarter ROA was 1.08% according to SNL, and the company has posted negative operating returns on average assets in three of the past five quarters.
  • Over the past five quarters, JPMorgan's (JPM) ROA has ranged from 0.76% (in the third quarter) to 1.06%.
  • For Citigroup (C), the has ranged over the past five quarters from 0.28% to a high of 0.76% in the third quarter.
  • For Wells Fargo (WFC), the third-quarter ROA was 1.29%, and the ROA has ranged between 1.12% and 1.30% over the past five quarters.

Capital One has already priced a $2 billion common stock offering to partially finance the ING acquisition, and plans to raise an additional $1.25 billion in common equity to partially finance the HSBC car deal.

The company had a strong Tier 1 common equity ratio of 10.00%, as of Sept. 30.

Most analysts have positive sentiments for Capital One, with 15 out of 20 rating the shares a buy, while four have neutral ratings and one analyst recommends selling the shares.

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-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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