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Capital One: Earnings Season Winner

NEW YORK ( TheStreet) -- Capital One Financial (COF - Get Report) was the winner among large-cap U.S. bank stocks on Friday, with shares rising 1.6% to close at $71.92.

Capital One is set to announce its third-quarter results on Oct. 17, with analysts polled by Thomson Reuters on average estimating the card lender will report net income of $978 million, or $1.75 a share, compared to EPS of $1.74 a share the previous quarter and $2.01 a year earlier.

The company's shares trade for 10.5 times the consensus 2014 EPS estimate of $6.85. For more on Capital One, please see TheStreet's recent coverage of Bargain Credit Card Stocks.

The broad indices all showed solid gains on Friday, as investors continued to wait for agreements in Washington to raise the federal debt limit and to allow the government to restore full services.

The KBW Bank Index (I:BKX) rose 0.4% to close at 63.58 as investors digested a very complicated start to third-quarter earnings season.

Third-Quarter Earnings Kick-Off

JPMorgan Chase (JPM) and Wells Fargo (WFC - Get Report) traditionally begin earnings season for large-cap banks and did so on Friday. But before the party started, SunTrust (STI - Get Report) late on Thursday announced a serious of negative mortgage items expected to wipe out roughly half of its third-quarter net income.

SunTrust of Atlanta announced over $1 billion in extraordinary third-quarter mortgage related items, a settlement of claims by the Federal Housing Administration, with the bank agreeing to pay $500 million in "consumer relief" and make a $468 million cash payment.

SunTrust also announced loan repurchase claim settlements with Fannie Mae (FNMA) and Freddie Mac (FNMA), which resulted in cash payments of roughly $268 million after credits for previously repurchased loans were deducted. The bank also was required to pay a $160 million fine to the Federal Reserve under the national mortgage settlement.

The bank said it would also take a $96 million charge related to the sale of mortgage servicing rights.

The above items were partially offset by a tax benefit of $113 million, following a "taxable reorganization of certain subsidiaries during the third quarter."

SunTrust said the multiple items would lower its third-quarter earnings after taxes by $179 million, or 33 cents a share. Prior to the announcement, the consensus among analysts polled by Thomson Reuters was for the bank's third-quarter earnings to come in at $372 million, or 68 cents a share.
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