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Capital One to Acquire HFS Group; A Leading Home Equity Loan Broker in the United Kingdom

November 3, 2004 at 8:31 AM EST

MCLEAN, Va.--(BUSINESS WIRE)--Nov. 3, 2004--Capital One Financial Corporation (NYSE:COF) today announced a definitive agreement under which Capital One will acquire HFS Group, one of the United Kingdom's leading home equity loan brokers for $117 million (GBP 65 million) in an all-cash transaction. This consideration includes repayment of $47 million (GBP 26 million) of HFS Group's debt.

HFS Group, a privately held company, primarily originates home equity loans for individuals utilizing its relationships with a network of lenders. In the year ending March 31, 2004, HFS originated a volume of approximately 15,000 loans, with a value of approximately $630 million (GBP 350 million).

The transaction will broaden Capital One's presence in the U.K., where it has almost four million customers and is one of the country's largest providers of credit cards. HFS is one of the U.K.'s leading independent brokers of home equity and other secured loans.

"This transaction aligns with Capital One's strategy of diversifying through carefully targeted acquisitions that provide new product lines, build on our successful consumer-lending platforms, and create value for our shareholders," said Richard D. Fairbank, Chairman and Chief Executive Officer of Capital One.

HFS will continue to operate as a distinct business with its current senior management team. Paul Naden, Managing Director of HFS's senior management team, will report to Fergus Brownlee, Executive Vice President, Capital One Europe.

Naden said, "This is the right step for everyone with a stake in HFS Group. We are all looking forward to taking our business to the next level of success as an important part of Capital One's growing U.K. business. This transaction allows us to realize a myriad of benefits, such as Capital One's direct marketing expertise."

"We expect to generate significant top-line synergies by taking advantage of HFS Group's rapidly growing position in the home equity loan market, highly-skilled management, and solid record of success," said Larry Klane, Capital One's Executive Vice President, Global Financial Services.

Under the terms of the agreement, HFS Group's owners and loan note holders will receive $117 million (GBP 65 million) in cash. HFS will become a subsidiary of Capital One Bank Europe, plc (COBEP). The transaction, which has been approved by the boards of directors of both companies, is subject to approval by the U.K. Financial Services Authority and is expected to close early in the first quarter of 2005. The transaction, including the associated integration costs, is not expected to have a material effect on Capital One's earnings.

The company cautions that current expectations in this release for earnings, synergies and strategy are forward-looking statements and actual results could differ materially from current expectations due to a number of factors, including competition in the home equity loan business, the company's ability to integrate operational and strategic platforms, and general economic conditions affecting consumer income and spending, which may affect consumer bankruptcies, defaults, and charge-offs. A discussion of these and other factors can be found in Capital One's annual reports and other reports filed with the Securities and Exchange Commission, including, but not limited to, Capital One's report on Form 10-K for the fiscal year ended December 31, 2003.

About Capital One

Headquartered in McLean, Virginia, Capital One Financial Corporation (www.capitalone.com) is a holding company whose principal subsidiaries, Capital One Bank and Capital One, F.S.B., offer consumer lending products and Capital One Auto Finance, Inc., offers automobile and other motor vehicle financing products. Capital One's subsidiaries collectively had 47.2 million accounts and $75.5 billion in managed loans outstanding as of September 30, 2004. Capital One, a Fortune 500 company, is one of the largest providers of MasterCard and Visa credit cards in the world. Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 500 index.

About HFS Group

Founded in 1969 HFS has grown from a small company employing 24 staff, to a group with over 480 staff. In the year ending March 31, 2004, HFS originated a volume of approximately 15,000 loans, with a value of approximately $630 million (GBP 350 million). UK based HFS (Macclesfield, Cheshire) is one of the country's leading independent brokers, providing services for secured and unsecured lending, mortgages, insurance and investment products. It works with a network of major lenders and insurance providers to offer the best possible financial deals for its customers. (www.hfsgroup.co.uk)

CONTACT: Capital One Financial Corporation, McLean
Investor Relations:
Paul Paquin, (703) 720-2456
or
Media:
Tatiana Stead, (703) 720-2352
or
HFS Group
Media:
Lisa Baythorpe, (011 44) 1625 507 978

SOURCE: Capital One Financial Corporation