The market will be closely watching Q3 earnings from this credit services giant.
I maintain a bullish rating on Capital One due to decelerating consumer loan delinquency rates and improved macroeconomic conditions. The Federal Reserve's aggressive rate cuts could create an additional tailwind. Despite a temporary spike in provisions for credit losses due to Walmart program termination, COF's loan delinquency trends show quarter-over-quarter improvement.
Capital One Financial's credit card business makes up around 48% of its loan portfolio. Net charge-offs in Capital One's credit card business have been rising for a year.
COF remains well-poised for growth, given revenue diversification efforts, high rates and decent loan demand. Yet, rising costs and weak asset quality are woes.
Here are two interesting opportunities for long-term investors.
Realty Income and Capital One are both more than 20% off their all-time highs. Both have excellent well-run businesses and could be big winners over the next few years.
A lawsuit by a former Discover executive claims the company wrongfully revoked millions in compensation. The lawsuit, filed Wednesday (Sept.
Berkshire Hathaway trimmed its position in Capital One and sold 21% of its total stake in the second quarter. Capital One has seen credit card charge-offs rise for several quarters.
Capital One Financial is a large bank. The company has a unique focus on credit cards.
Capital One plans to purchase Discover Financial, building a strong credit card portfolio and driving long-term shareholder returns. Capital One had a strong Q2 with net income of almost $600 million, maintaining a strong efficiency ratio and increasing average deposits. Despite risks such as cultural clashes in the acquisition, Capital One's strong cash flow and ability to maintain net interest ratios make it a valuable investment with future growth potential.
Capital One has seen credit card charge-offs rise for several quarters. Concerns about the consumer and their ability to repay their debt could be a near-term headwind.
Capital One is a bank, but its largest business is in credit cards. It has a sizable business lending to consumers with lower credit ratings.