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Capital One has plans to expand in Bay State

Permission sought to open several branches

By Todd Wallack
Globe Staff / July 6, 2011

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Capital One Financial Corp., one of the country’s largest banks and credit card issuers, is expanding into the state with plans to establish its first Massachusetts branches in Boston and Brookline.

The financial giant, known for aggressively marketing its online bank with ads featuring comedian Jerry Stiller, last week filed applications with federal regulators to open offices in Brookline at Coolidge Corner; in Brighton, near St. Elizabeth’s Medical Center; and on Tremont Street, near the Park Street MBTA station.

Currently, Capital One has branches in Delaware, Louisiana, New York, Connecticut, New Jersey, Texas, Maryland, Virginia, and Washington, D.C.

The expansion, first reported by the trade journal Banker & Tradesman, comes when many banks have shuttered branches across the country as customers increasingly rely on automatic teller machines and Internet banking. For example, Bank of America, the nation’s largest bank, plans to eliminate nearly 600 branches by the end of 2014, including some in Massachusetts.

But Capital One’s move is a reminder that banks continue to open new branches as a way to push into new markets and grab market share from competitors. While a growing number of customers do most of their everyday banking electronically, customers still generally prefer to open new accounts and take out loans in person, industry executives say. And consumers still pick banks partly based on which ones have branches near where they live or work.

Citibank, for example, says it plans to build 200 more branches in key markets, including Boston. TD Bank, already the fourth-largest bank in Massachusetts, plans to add as many as 15 branches in the Boston area by the end of next year.

Connecticut-based People’s United Bank recently bought three banks with branches in Eastern Massachusetts (Butler Bank, Danversbank, and River Bank).

Capital One declined to discuss its expansion plans, but a job posting for a Boston area manager suggests the district could encompass more than 10 branches with some $600 million in total deposits. In addition to the three locations in the regulatory filings, Banker & Tradesman reported that Capital One plans to open a large branch at the corner of Boylston and Fairfield streets in the Back Bay, forcing the current tenant, women’s clothing retailer Anthropologie, to move to Newbury Street.

Anthropologie’s local manager referred questions to the corporate headquarters, which did not respond to requests for comment.

At first glance, Milton banking consultant Suzanne Moot said, Capital One’s move is puzzling because it involves so few branches and the bank has focused on expanding its online banking business. Last month, Capital One struck a $9 billion deal to buy ING’s online bank, which has 7 million customers.

Capital One also has heavily promoted its own online bank through ads in print, radio, subways, and other venues, including a temporary display in Faneuil Hall last year featuring then-New England Patriots receiver Randy Moss.

Moot said Capital One may already have a large base of Internet banking customers in the Boston area whom it might be able to serve effectively through a limited number of branches. “It’s an interesting development, and I think will be one that will be fun to watch,’’ Moot said.

The planned branch openings also appear to be part of a strategy to develop a new model for delivering banking services, which today entails the Internet and mobile devices as well as local offices. In the job posting, Capital One said it wants to “fundamentally redefine what the future of banking looks like across all aspects of banking.’’

Capital One also has a credit card business and makes commercial real estate loans in many markets, including Massachusetts.

The state’s three biggest retail banks are Bank of America, Citizens Bank, and Sovereign Bank. The state is also served by community banks and credit unions.

Todd Wallack can be reached at twallack@globe.com.