A national philanthropy watchdog group plans to challenge claims by Capital One Financial Corp. that it will increase its philanthropy when it acquires ING's U.S. online banking business.
The National Committee for Responsive Philanthropy will testify Wednesday before the Federal Reserve Board in San Francisco that McLean, Va.-based Capital One's track record in philanthropic giving is far lower than other large banks.
In a statement, Capitol One responded that its past giving is much higher than the watchdog group suggests.
The watchdog group differed, however.
"We have reason to doubt the claims being made by Capital One regarding the public benefit of its philanthropic promises associated with this proposed acquisition," Aaron Dorfman, the group's executive director, said in written testimony prepared for the hearing. "Capital One has a track record of giving at levels far lower than its peers, and there is no mechanism in place to hold them accountable."
The group will urge federal regulators to be skeptical of Capital One's commitment to provide $450 million in charitable giving over 10 years.
Under the 2010 Dodd-Frank Wall Street Reform Act, banks must show a public benefit that outweighs adverse effects of an acquisition. Capital One made philanthropy a centerpiece of its legal argument that the acquisition of Wilmington, Del.-based ING Direct would produce significant public benefits, Dorfman said. The company outlined parts of its philanthropic pledge last month before the Federal Reserve in Chicago.
According to figures compiled by the philanthropy group, Capital One gave less than $5 million per year to charities between 2005 and 2009 while it was acquiring other banks. The group says Capital One's giving as a percentage of its revenue was only 0.024 percent, while the median annual giving for the U.S. financial sector is 0.11 percent of revenue.
In a statement, Capital One challenged the figures given out by the watchdog group.
"... In 2011 alone, our giving totals are more than 6 times greater ($30 million) than the number given by the NCRP," spokeswomanTatiana Stead wrote in a later email. She added that since 2005, Capital One has never donated less than $18 million a year.
Stead also said the group is only counting figures from the Capital One Foundation, which doesn't include all of the company's charitable giving.
"The information and the data in the NCRP's testimony are incorrect and do not come close to representing our philanthropic giving numbers — which are actually significantly higher," the company said.
The National Committee for Responsive Philanthropy has not opposed other recent bank mergers, spokeswoman Yna Moore said. The company's emphasis on philanthropy is part of its argument that the merger would produce public benefits drew the group's attention, she said.
A 2007 study by the group found that contrary to expectations in the nonprofit sector, bank mergers can dramatically increase charitable giving by financial institutions. The report examined seven large banks and their giving levels before mergers. It found total giving by those banks grew from about $100 million annually in the late 1980s to more than $400 million annually by 2001.
In June, Capital One announced it is buying ING for $9 billion in cash and stock. Under terms of the deal, Netherlands-based ING Groep would become the largest Capital One shareholder.
Capital One is known mostly for its credit card portfolio, but after several acquisitions, it has about 1,000 bank branches primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia and the District of Columbia. ING is the country's largest online bank with 7.7 million customers.
The acquisition would make Capital One the nation's fifth-largest bank based on domestic deposits after Bank of America, Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup.