Capital One

Shares of Capital One are down 3.2% this year, following a 34% return during 2013.  The shares trade for 1.7 times the reported Dec. 31 tangible book value of $42.47, and for 10.1 times the consensus 2015 earnings estimate of $7.28, among analysts polled by Thomson Reuters.  The consensus 2014 EPS estimate is $6.81.

The company had a decent 2013, with a return on tangible common equity of 16.05 and a return on average assets of 1.40%, according to Thomson Reuters Bank Insight

What has held the stock back this year appears to be investors' disappointment with the company's declining credit card loan balances.  Average domestic card loans held for investment were $69.739 billion in February, down 2.9% from January.  Card lenders typically see seasonal pressure on loan balances at this time of the year, but Capital One's average domestic card loans held for investment were down 3.5% from a year earlier, in part because of the company's decision to sell its portfolio of over 46 billion in Best Buy credit card loans to Citigroup (C), in transaction completed in September.

The Federal Reserve on Thursday will announce the results of its annual stress tests on 30 major bank holding companies, but the more important date for investors is March 26, when the regulator will announce the results of its second set of stress tests, incorporating banks' plans to deploy excess capital through dividend increases, share buybacks and/or acquisitions.  KBW analyst Sanjay Sakhrani estimates Capital One will receive regulatory approval to raise its quarterly dividend by a nickel to 35 cents a share, and also be approved to repurchase up to $1.837 billion in common shares from the second quarter of 2014 through the first quarter of 2015.

Please see the following for more on what to expect from the stress tests and capital plan reviews:

Discover, Fifth Third Are Well-Positioned for Higher Payouts After Stress Tests

Banks' Excess Capital Is 'Absolutely a Reality'

A 'Compelling' Case for JPMorgan's Stock

Citigroup, Stress Tests and Shareholder Gravy

Why You Should Celebrate Bank Stress Tests

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 TheStreet.com 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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