Thursday, January 20, 2011

Capital One Financial (NYSE: COF): Q4 Earnings Preview

Capital One Financial Corp. (NYSE: COF) is scheduled to release its fourth-quarter earnings after the closing bell on Thursday, January 20, 2011. Analysts, on average, expect the company to report earnings of $1.27 per share on revenue of $3.87 billion. In the year ago period, the company reported earnings of 83 cents per share on revenue of $4.37 billion.

Capital One Financial Corporation operates as the bank holding company for the Capital One Bank (USA), National Association and Capital One, National Association, which provide various financial products and services to consumers, small businesses, and commercial clients in the United States, Canada, and the United Kingdom.

In the preceding third quarter, the McLean, Virginia-based company's net income was $803 million, or $1.76 per share, compared to $394 million, or 87 cents per share, in the comparable quarter last year. Revenue increased $4.016 billion from $3.558 billion. Analysts, on average, expected the company to report earnings of $1.13 per share on revenue of $3.80 billion.

Capital One has benefited from an increase in retail spending and improved margins. Given the size of its bank, Capital One has the best funding profile of the credit card companies, which is expect to benefit margins and reduce its dependence on the capital markets. The company also reported a decline in delinquencies for the month of November and December 2010. A decline in delinquencies will have a direct impact on the provisions for losses which are expressed as a percent of total outstanding loans. 

However, recently passed regulations like the 12 cents limit per debit card transaction enforced by Federal Reserve last month could potentially limit its upside. On Thursday, analysts likely will ask for more details on the impact of financial and credit card regulation.

In terms of stock performance, COF shares have gained nearly 16 percent over the past year.

Full Disclosure: None.
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