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Earnings Preview: Capital One Financial's 4Q

By ALEX VEIGA

LOS ANGELES (AP) â¿¿ Capital One Financial Corp. is expected to report improved earnings and revenue for the last quarter of 2012, when consumers traditionally boost spending and rack up more debt as they hit stores for the holiday season.

The McLean, Va., bank holding company will report its results after the stock markets close on Thursday.

WHAT TO WATCH FOR: Insights on how use of Capital One credit cards fared during the October-December period, and in the first weeks of 2013. Investors also will want to hear an update on the lender's outlook for consumer demand and appetite for credit.

In the third quarter, management anticipated weak consumer demand for the foreseeable future and noted that competition had intensified in auto, commercial and industrial lending.

Wall Street also will be listening for details on how quickly borrowers are paying down their balances, an indicator of potential interest and fee income for banks.

The economy has shown signs that consumers' appetite for spending has held firm, despite high unemployment and low wage growth.

U.S. imports of consumer goods grew to a monthly record in November, driven by demand for cellphones and other household electronics products.

Recent retail sales data suggest holiday season retail spending was respectable but not robust.

Data from Chicago-based ShopperTrak show that U.S. retail sales climbed 2.5 percent for the November and December period, boosted by a last-minute shopping surge.

Still, consumers may be reluctant to boost spending or take on more debt this year.

New Year's Day legislation increased income taxes on the country's top earners and boosted payroll taxes for most working Americans.

A decline in retail spending typically translates into lower credit card use, which hurts card issuers like Capital One.

WHY IT MATTERS: Capital One, based in McLean, Va., is best known for its credit card business, but it has taken steps to increase its profile as a national bank in recent years. The acquisition of ING Direct made Capital One the nation's sixth-biggest bank, based on deposits. Its ING Direct division offers direct banking services.

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