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10 Big Bank Stocks Gearing Up for Third-Quarter Earnings (Update 3)

1. Capital One
Shares of Capital One Financial (COF) of McLean, Va., closed at $56.96, returning 35% year-to-date, following a flat return during 2011.

The shares trade for 1.6 times tangible book value, and for 8.2 times the consensus 2013 EPS estimate of $6.94. The consensus 2012 EPS estimate is $6.16.

For the 12-month-period ended June 30, Capital One's ROA was 1.00%, while the company's ROE was 7.70%.

The consensus among analysts is for Capital One to report a third-quarter profit of $1.65, increasing from 16 cents during the second quarter, when the company set aside reserves for the $27 billion U.S. credit card portfolio it acquired from HSBC (HBC), and also agreed to pay $210 million in refunds and fines, after entering into a settlement with regulators over the marketing of credit protection products. During the third quarter of 2011, the company earned $1.77 a share.

While Capital One's acquisitions over the years have pushed the company in different directions, the company's shoring up of its liquidity with the purchase of ING Direct early this year, followed by the HSBC card purchases, pushes the company further back toward its core competency.

Guggenheim analyst David Darst rates the company a "Buy," with a $67 price target, and said last month that "COF is in a prime competitive position to benefit from a consumer shift to direct banking, given its product set, early adopter customer base, and national brand," and that his "$7.00 earnings estimate for 2013 assumes COF generates a 15% [return on tangible equity] with a 6.71% [net interest margin].

"Given an opportunity to remix the balance sheet and a limited asset growth outlook, we believe COF should have increasing opportunities to return capital to shareholders," he said.

Oppenheimer Securities analyst Chris Kotowski rates Capital One "Outperform," with a 12-18 month price target of $16, and said on Friday that "we made no changes to our COF model this quarter; the last two reported quarters have had lots of moving pieces with both the ING and HSBC card portfolio acquisitions closing," and that "we expect this quarter to give us a much clearer insight into the new COF since this is the first clean quarter we'll have."

COF Chart COF data by YCharts

Interested in more on Capital One? See TheStreet Ratings' report card for this stock.


-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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