Capital One $58: Q3 Results & Acquisitions Show Confidence in Growth
Capital One (NYSE:COF) recently announced better than expected third quarter results driven by lower provisions for loan losses and increased interest income, and the company is optimistic about future growth prospects in the current volatile macroeconomic environment (See Capital One Earnings Show Strength of Card Business, $58 Fair Value). CEO Richard Fairbank told analysts on a conference call that management believes the period of shrinking loans through the recession has come to an end. The company has seen its total loans grow by $987 million in the third quarter driven by growth in auto and commercial banking. [1]
We have a price estimate of $58 on Capital One’s stock, about 30% above the current market price.
See our full analysis of Capital One here
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Capital One is one of the few financial services companies in the U.S. that is looking to hire workers as others reduce their headcount to trim costs. Earlier this year, Capital One announced the acquisition of ING Direct for $9 billion and is seeking approval from the Federal Reserve. The deal would provide Capital One with more than 7 million customers and $80 billion in deposits. In addition to ING Direct, Capital One has also agreed to buy the credit card business of HSBC to strengthen its loan portfolio. Both of these deals are scheduled to be completed later this year or in the first half of 2012 though some consumer groups are asking for a review of the HSBC deal citing it as risky. [2]
In order to stay ahead of competition and entice small and medium enterprises, Capital One has launched the new “Spark business credit cards” which offer better rewards and low interest rates. [3]
Understand How a Company’s Products Impact its Stock Price at Trefis
Notes:- Capital One Financial’s CEO Discusses Q3 2011 Results – Earnings Call Transcript, SeekingAlpha [↩]
- Capital One Shares Rise as Earnings Beat Analysts’ Estimates, Business Week [↩]
- Capital One Launches New Spark Business Credit Cards, Daily Markets, Nov 9 2011 [↩]