Capital One (
) is one of the largest financial institutions in the United
States, with banking and non-banking subsidiaries that market a
variety of financial products and services. The company specializes
in credit cards, home loans, auto loans, banking and saving
products. Its main competitors are JP Morgan (
), Bank of America (
), Citigroup (
We have a price estimate of
for Capital One, well above market price.
See our full analysis and $61.26 price estimate
for Capital One
Rising Consumer Credit Outstanding
The Federal Reserve recently reported a $6.1 billion increase in
total credit outstanding for December 2010, which follows a $2
billion increase in credit outstanding in the previous month.
Consumer credit is essentially the amount of credit used by
consumers to purchase non-investment goods or services. The surge
in U.S. consumer credit supports the view that economic activity is
gathering momentum in the country.
December 2010 was the third consecutive month in which
consumer credit grew; however, prior to these three increases,
consumer credit had contracted for 20 straight months. The growth
in consumer spending by 4.4% in the fourth quarter of 2010 sparked
a rise in consumer credit towards the end of last year.
Consumer credit is closely linked to credit card debt. As
unemployment is still high in the U.S., the primary method of
financing new consumption is through credit cards. Thus, a rise in
consumer credit leads to a corresponding rise in credit card debt.
In December last year, credit card debt climbed by $3.5 billion,
following declines since August 2008. This increase in consumer
spending in December can also be attributed to the holiday shopping
season from Thanksgiving through Christmas when consumers are more
likely to turn to their credit cards for purchases.
Capital One Credit Card Balance Outstanding
Capital One's total credit card balance outstanding increased
from $18.4 billion in 2007 to $19.6 billion in 2008 at an annual
growth rate of 6.5%. The acquisition of Chevy Chase Bank in
2009 further boosted Capital One's outstanding loans balance by
6.2% to $20.8 billion.
We estimate that a rise in consumer spending promoted by a
growing economy will increase Capital One's credit card balance
outstanding to about $28 billion by the end of our forecast