Capital One Financial (COF)

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Latest Earnings

In Q1 2020, Capital One’s reported revenues of $7.2 billion, which was 2% less than the previous year. This could be attributed to a 10% y-o-y drop in Non-Interest Revenues, followed by a 1% decrease in Net Interest Income. Further, provision for credit losses doubled to $5.4 billion due to expected losses on outstanding loans.

Impact of coronavirus outbreak

Capital One’s stock has suffered as states and countries are on lockdown, which would negatively impact consumer demand. People aren’t meeting friends and colleagues for drinks, lunch, or dinner; they are not going to movies, amusement parks, vacation trips, and are refraining from any non-essential expenditure. As the credit card giant derives most of its revenues from card business, it could suffer losses due to lower consumer demand and an expected spike in loan default rates. While the results for Q1 2020 were on the similar lines, we believe the company’s results for Q2 will further confirm this reality with a drop in revenues across all the segments.


Below are key drivers of Capital One’s value that present opportunities for upside or downside to the current Trefis price estimate for the bank:

Credit Cards

  • Provisions % of Outstanding Credit Card Loans: Capital One’s credit card provisions increased from 4.7% of the outstanding loan portfolio in 2007 to 8.3% in 2009 before declining to 3% by 2011. Major acquisitions pushed this figure to 5.1% for 2012 before Capital One’s decision to run-off/sell some of the loan portfolios helped provisions to fall to below 3.5% in 2014 before jumping to 5.9% by 2017. In FY 2018, it reported provisions of 4.5% which we estimate to normalize at around 5% over our forecast period, should the division perform worse than expected in coming years, the provisions could increase to 6%. If that were to occur, there would be a downside of 16% to the Trefis price estimate. On the other hand, if the bank focuses on improving the credit quality of its loan portfolio, and the provisions reduce to 4% of the loans over the same period, then this would represent a 16% upside to the Trefis price estimate.
  • Net Interest Yield on Credit Card Balances: Capital One’s net interest yield on its credit card portfolio has remained around 13% over recent years, and we forecast it to stay at that level over the rest of the forecast period. However, if the yield figure falls to 12% for this period, then there would be a downside of about 8% to the current price estimate.


Capital One is one of the largest banks in the United States, whose banking and non-banking subsidiaries market a variety of financial products and services. The corporation’s principal subsidiaries include Capital One Bank (USA) and National Association (COBNA) which currently offer credit and debit card products, other lending products, and deposit products; and Capital One, National Association (CONA) which offer a broad spectrum of banking products and financial services to consumers, small businesses and commercial clients.

Big-Ticket Acquisitions

In June 2011, Capital One bought the American banking operations of ING Direct for $9 billion, which significantly boosted Capital One’s consumer and commercial loan portfolio.

Capital One also agreed to buy the United States credit card business of HSBC Holdings for $2.6 billion, which boosted Capital One’s credit card loans by more than $30 billion. The company is also expected to realize cost saving of about $350 million from the business combination.

In late 2015, Capital One acquired GE’s healthcare financing unit - adding $8.5 billion in healthcare loans to its total portfolio.


The Credit Cards division is the primary source of value for Capital One for the following reasons.

Largest revenue contributor

Capital One’s Credit Card division accounted for 64% of the firm’s total revenues in 2018 compared to 26% from the Consumer Loans division and 10% from the Commercial Loans division.


Rise in Prime Loan Interest Rates Will Benefit Capital One

As a result of the economic downturn, the U.S. government decreased the prime loan interest rate (the interest rate that commercial banks charge their most credit-worthy customers) from levels of around 8.25% in late 2007 to 3.25% in 2008. The prime rate remained at this level for more than seven years, before a series of rate hikes by the Fed brought this figure to its current level of 5.50%. As economic conditions improve, interest rates will eventually return to historical levels, at which point Capital One’s revenues will be positively impacted.

Fast Growth in Electronic, Cashless Payment Solutions

Capital One also operates in the cashless payment solution market. This includes payments using credit cards. The market for such transactions is growing at a rapid pace. Consumers are moving toward cashless transactions in large numbers, particularly in international markets where credit and debit cards are becoming more prevalent. We expect significant growth in this segment in the near future as more customers and merchants embrace credit/debit card payment solutions.

Recent Trefis Articles

Is Capital One Oversold At $62?

Having gained nearly 40% since hitting a low of $43 on March 23, Capital One’s stock (NYSE: COF) may yet increase quite a bit more over the coming months. ...More

Coronavirus Recovery Watch: Discover Financial Had A Strong Run Last Week With Potentially More To Come

Our Consumer Finance portfolio of 5 stocks shows an average return of 24% in the last five trading days compared with a 12.8% return in the Dow during the same period. This portfolio reflects one set of possible stocks expected to outperform if there’s a reasonably quick Coronavirus-recovery. ...More

Is A 40% Jump In Capital One’s Stock Possible Post Coronavirus Crisis?

Capital One (NYSE: COF) stock declined by about 38% between 8th March 2020 and 24th March 2020 (vs. an 18% decline in the S&P 500), and the stock is down almost 49% since 31st January after the WHO declared a global health emergency in light of the coronavirus spread (vs. about 27% decline in the S&P 500 since then). ...More

Capital One Earnings Preview: Will Capital One Miss FY 2019 Revenues Expectations?

Capital One (NYSE: COF) will release its Q4 and full-year 2019 results on Tuesday, January 21. Trefis details expectations from the credit card giant in an interactive dashboard, parts of which we highlight below. We believe that Capital One will likely report an earnings beat for FY19, although its revenues would miss consensus. ...More

Is Citigroup’s Card Business In Better Shape Than Capital One’s?

Citigroup (NYSE: C) and Capital One (NYSE: COF) are among the five largest credit card issuers in the U.S. Since the recession, Citigroup has transformed itself from a financial institution with a significantly diversified business model to one that focuses considerably on core-banking services. ...More

Are Credit Cards 60%, 75%, or 90% of Capital One’s Stock?

Capital One (NYSE: COF) is one of the largest issuer of credit cards in the U.S. with more than $110 billion in outstanding credit card loans at the end of 2018. While the bank is best known for its card offerings, it has also grown its consumer banking and commercial banking operations considerably over recent years. ...More

Why Is Capital One’s Net Interest Margin Decreasing And What Does It Mean For The Bank?

Capital One (NYSE:COF) is a financial institution which provides credit & debit cards, commercial lending and consumer lending services to its clients, and drives more than 80% of its revenues from net interest income. ...More

Is Capital One Undervalued?

Capital One (NYSE:COF) is one of the largest credit-card issuers in the U.S, whose banking and non-banking subsidiaries offer credit & debit cards, commercial lending and consumer lending services to retail consumers, small businesses and corporate clients. ...More

How Could The Recent Data Breach Affect Capital One’s Stock?

Capital One (NYSE: COF) is one of the largest banks in the United States, whose banking and non-banking subsidiaries offer credit & debit cards, commercial lending and consumer lending products & services to retail consumers, small businesses and commercial clients. ...More

Industry Headwinds, Fallout Of Recent Data Breach To Weigh On Capital One’s Stock

Capital One (NYSE:COF) is one of the largest issuer of credit cards in the U.S. with more than $110 billion in outstanding credit card loans at the end of 2018. It provides consumer banking, commercial banking and credit card services to retail consumers, small business & corporates. ...More

Increased Card Lending, Lower Charge-Off Rates Should Have Boosted Capital One’s Q2 Results

Capital One (NYSE: COF) will report its Q2 2019 earnings on Wednesday, July 18. Consensus figures points to a 3% decline in revenues year-on-year to $7 billion, and a 23% drop in EPS figure to $2.86. Per Trefis, Capital One's stock has a fair value of $100, which is roughly 10% higher than the current market price. ...More

Capital One’s Conservative 2019 Capital Plan Hints At More Acquisitions To Come In The Near Future

Capital One (NYSE:COF) announced its decision to return $2.9 billion to its shareholders over the next twelve months as part of its latest capital return plan recently. While share repurchases are set to jump 83% compared to the previous year, quarterly dividends would remain at the same level of 40 cents per share. ...More

What Does The Decline In Net Interest Margin Over Q1 Mean For Capital One’s Fair Value?

Capital One (NYSE: COF) declared its Q1 2019 earnings late last week and the card-focused bank posted an EPS of $2.87 (outperforming the market EPS estimate of $2.30). ...More

How Have Capital One’s Revenues Trended, And What Can We Expect For Full-Year 2019?

Capital One (NYSE:COF) is expected to publish its Q1 2019 results on April 25, after the market closes. This note details Trefis’ forecasts for Capital One, as well as some of the key trends we will be watching when the company reports earnings. ...More

Capital One’s Q4 Results Saw Headwinds, But Its Shares Still Look Underpriced

Capital One (NYSE:COF) reported a worse-than-expected EPS figure for the fourth quarter despite meeting revenue expectations, as unusually high marketing expenses for the period hurt the bottom line. ...More

How Have Credit Card Balances For The 10 Largest U.S. Card Lenders Changed Over The Last Twelve Months?

After having crossed the $1 trillion mark a year ago, the U.S. card industry has grown steadily over recent quarters after nudging lower over the seasonally weak first quarter to reach $1.04-trillion in size by the end of Q3 2018. ...More

Discover Makes The Most Of Upbeat Market Conditions To Report Strong Growth In Q3 Card Purchase Volume

The six largest U.S. card issuers reported total Q3 purchase volumes of $569 billion for their retail credit cards - representing just under 61% of the total credit card purchase volume of $934 billion for the U.S. in the quarter. ...More

Should Investors Be Worried About Capital One’s Aggressive Auto Lending Push?

The strong outlook for the U.S. economy, and the ongoing trend of customers choosing SUVs, larger cars and higher-priced models to traditional smaller cars, has had a positive impact on the country's auto industry for several quarters now. However, this helped auto lending volumes, with the U.S. ...More

Is Discover’s Below-Average Growth In U.S. Card Purchase Volumes A Cause For Concern?

The six largest U.S. card issuers reported total Q2 purchase volumes of $566 billion for retail cards issued by them - representing more than 61% of the total credit card purchase volume of $927 billion for the U.S. in the quarter. ...More

Capital One’s Strong Q2, Improved Outlook Justify A $117 Price Estimate

Late last week Capital One (NYSE:COF) reported a better-than-expected EPS figure for the second quarter of the year, with the card-focused banking giant making the most of upbeat economic conditions to report a jump in revenues even as its loan losses fell sharply. ...More

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