This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

2 Big Winners Out of 3 Credit Card Stocks From Goldman Sachs

NEW YORK ( TheStreet) -- Capital One (COF - Get Report) is ready to move beyond its year of acquisitions, cut expenses and reward investors, according to Goldman Sachs analyst Ryan Nash.

Credit card stocks are in a sweet spot, according to Nash, who said in a report on Sunday that "valuations remain very attractive," and that he expected the group to "see further outperformance in 2013," because "credit losses remain below normalized levels" and "superior capital generation drives higher capital returns for the group, with payouts surpassing 100% for some."

With the nation's largest banks now submitting their 2013 capital plans to the Federal Reserve as part of the regulator's annual stress tests, Nash said that card lenders "are in the best positions for returning capital," as the group has "a higher starting point, with an average Tier 1 common ratio of 12.4% (banks are at about 10.0%) and this matters greatly for these stocks as the cards generate capital much more quickly than the banks (260 bps vs. 75-90bp at banks on an annual basis)."

Nash also sees further upside for the credit card lenders as the group continues to take market share from money center banks, including Bank of America (BAC - Get Report), Citigroup , and JPMorgan Chase (JPM). For the 12-month period ended Sept. 30, Goldman Sachs said that Bank of America's credit card loan balances declined by 9%, while its total loans declined by 4%. For Citigroup, card balances were down 4%, although total loans grew by 3%. JPMorgan Chase saw its credit card loans decline by 2% while total loans grew by 4%.

Meanwhile, according to Goldman, American Express (AXP - Get Report) grew its card loans (and total loans) by 6%, while Discover Financial Services (DFS - Get Report) saw its credit card loan balances climb by 4%, while total loans grew by 10%. Capital One's credit card balances were down 1%, although total loans grew by 5%. Nash said that "COF should continue to show strong core underlying growth, but this would likely be masked by strategic run-off in mortgage and card."

Capital One Upgraded


Nash upgraded Capital One to a "Buy," rating from a "Neutral" rating, while increasing his price target for the shares to $75 from $65 and leaving his 2013 earnings estimate unchanged at $6.90. Nash raised his 2014 EPS estimate by 20 cents to $7.50.

1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AXP $81.17 0.67%
BAC $16.18 2.10%
C $53.16 -0.95%
COF $78.91 0.33%
DFS $59.09 -0.37%

Markets

DOW 18,135.72 +38.82 0.21%
S&P 500 2,101.04 +2.51 0.12%
NASDAQ 4,982.8090 +15.6680 0.32%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs