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What Happens If Ally Bank Buys ING Direct?

Last week, there was news about Ally Bank in talks to buy ING Direct [3]. It would be a marriage of my two favorite online banks*.

The biggest question I had, as a customer of both, is what should I expect after an acquisition. I know it’s still early but I’m curious to know, so I called Greg McBride [4] of Bankrate, one of the most knowledgeable people I know, and he gave me a good idea of what to expect (if anything, many times these “talks” become nothing).

* I feel like I have to qualify why I like the two banks. ING Direct rocks because their website is dead simple to use, chock full of features, and because they’re basically the grandfather and archtype for online savings accounts. Ally Bank is the young gun and much newer, but you really can’t beat a 60 day early termination penalty on their certificates of deposit. The website is good, not nearly as great as ING Direct, and both their rates are about average now.

He basically told me that when it comes to traditional mergers, there are two varieties. The first is when a bank buys another bank in an area they already do business – this is so the acquiring bank increases their market share. The second is when a bank expands into a new area through acquisition, like a West Coast bank buying an East Coast bank. What’s unique about this situation is that this is a merger of online banks, so in a sense it’s a variety of the first type.

In this case, since it’s an amicable acquisition (instead of an FDIC sponsored “let’s save this sinking ship” bank failure), you should look at it like any other regular acquisition. It’s more like Southwest buying Airtran [5] than JP Morgan buying Washington Mutual [6]. They’ll announce the sale, it’ll take months to process, and pretty much nothing will change quickly. Greg made the excellent point that since Ally will probably pay a premium (as opposed to a discount, which is often the case in bank failures) so they’ll try their hardest to keep all those depositors. You won’t see rates changing because of the acquisition, though they’ll invariably change because of the economic environment, and chances are it’ll be a slow migration. As anyone with a Bank of America account knows, mergers take a long time… (BoA has at least a dozen ABA routing numbers)

After these last few years of banks acquisitions fueled by bank failures, it’s a little refreshing to hear about a potential sale of two strong banks.

I wrote this post entirely so I could reuse my Allying Direct logo.