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5 Banks Stocks Showing 'Real' Earnings Growth

Stocks in this article: BAC C JPM WFC COF MTB CYN BRKL WTFC

3. Capital One
Shares of Capital One Financial (COF) of McLean, Va., closed at $60.00 Friday, returning 42% year-to-date, following a flat return during 2011.

The shares trade for 1.5 times their reported Sept. 30 tangible book value of $40.17, and for 8.5 times the consensus 2013 EPS estimate of $7.05.

Following "messy" first and second quarters, from one-time items related to the acquisitions of ING Direct (USA) in the first quarter and HSBC's U.S. credit card portfolio in the second quarter, Capital One reported third-quarter earnings available to common shareholders of $1.2 billion, or $2.01 a share (excluding income from discontinued operations), increasing from $813 million, or $1.77 a share, during the third quarter of 2011.

The company's third-quarter ROA was 1.60% and its return on average equity was 12.33%. The return on average tangible equity was 21.48%.

Capital One's second-quarter pre-provision net revenue grew 45% year-over-year, to $2.8 billion. Net interest income was up 42% to $4.6 billion, while the net interest margin narrowed to 6.97% from 7.39%.

Noninterest income increased 30% year-over-year, to $1.1 billion, while noninterest expense grew 33% to $3.0 billion.

Oppenheimer analyst Chris Kotowski on Oct. 19 said that Capital One "crushed it," beating his third-quarter EPS estimate of $1.63, although there were "complicated purchase accounting impacts and moving parts that keep us from simply multiplying the $2.01 by four to estimate 2013."

Kotowski rates Capital One a "Buy," and said that "investors are yearning for two comparable quarters from COF, and this wasn't it. However, while we are once again left with an unease about all the moving parts, a $7+ number in 2013 seems very reasonable to us, and our target for the stock is now $71."

Kotowski's price target for Capital One is $68.00, and he estimates that Capital One will earn $7.02 a share in 2013.

COF Chart COF data by YCharts

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

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