Capital One: Financial Loser
By Philip van Doorn - 08/10/12 - 4:15 PM EDT
NEW YORK (TheStreet
) -- Capital One
was the loser among the largest U.S. financial names on Friday, with shares pulling back 1% to close at $56.10.
The broad indexes mixed, as evidence for a global slowdown increased, after China's General Administration of Customs reported that the country's exports during July grew 1% from a year earlier, falling significantly short of forecasts for an 8.6% increase, among economists polled by Thomson Reuters. Chinese import increased 4.7%, far below expectations of a 7.2% rise.
Back home, economists are expecting a revised GDP growth number for the second quarter. UBS economist Maury Harris said early on Friday that "based on Thursday's data as well as earlier construction data, Q2 GDP is on track to be revised up by 0.2 pt to a 1.7% annual rate."
"The international trade report alone implied an upward revision of 0.5pct pt, most of that imports (0.4pt), but weaker wholesale inventories offset that gain," Harris said, adding that "earlier construction data had implied +0.2 pct pt. Although the upward revision that we now expect is only small, it will include a slightly stronger composition of growth--faster final sales, slightly faster domestic final sales, and an offset from inventory contraction."
The KBW Bank Index
recovered during the last minutes of trading to show a slight increase for the session, at 46.61, with the 24 index components roughly split between winners and losers.
Capital One's shares have now returned 33% year-to-date, following a flat return during 2011.
The shares for 1.4 times tangible book value, according to Thomson Reuters Bank Insight, and for eight times the consensus 2013 earnings estimate of $6.93, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $6.21.
Capital One on July 18 reported second-quarter earnings
of $92 million, or 16 cents a share, declining from $1.4 billion, or $2.72 a share, in the first quarter, and $911 million, or $1.97 a share, during the second quarter of 2011.
The second-quarter results were hit by $210 million in customer refunds and fines related to credit card settlements
with the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency, which were also announced on July 18. Capital One was force to pay the refunds and fines because of inadequate monitoring of third-party contractors' sales efforts for credit protection and credit monitoring products, to credit card customers.
Second-quarter results also included expenses of $174 million to establish reserves and loan premium amortization charges of $63 million related to the company's second-quarter purchase of HSBC's
$27.6 million credit card portfolio.
The first-quarter results included a bargain purchase gain of $594 million on the purchase of ING Direct (USA) from ING Groep
Guggenheim analyst Marty Mosby rates Capital One a "Buy," with a $67 price target, estimating the company will earn $6.10 a share for all of 2012, followed by EPS of $7.25 in 2013.
The analyst said on Friday that his price target "is based on our detailed analysis that ties returns on tangible common equity to a relative premium to tangible book value and growth in tangible book value." The $67 price target "would be 52% above our estimate of COF's 2013 year-end tangible book value per share."
Interested in more on Capital One Financial? See TheStreet Ratings' report card for this stock.
-- Written by Philip van Doorn in Jupiter, Fla.
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