If you were told a year ago that America's banks were headed for big trouble and that the government would end up giving them a report card for soundness, would you have guessed that Capital One Financial Corp. (NYSE:COF) would end up at the head of the class?
Think about it. This is a huge credit card lender (and we're worried about credit card receivables, aren't we?) that acquired its way into banking only in recent years -- when the market was booming -- as it sought to build a deposit base and lessen its reliance on securitization for funding.
In 2006 we ran an
interview with Capital One co-founder and CEO Richard Fairbank, a few months after he paid $14.6 billion for New York's North Fork Bancorp Inc. and, shortly before that, bought Hibernia Corp., Louisiana's biggest bank (and a player in Texas) for $5.3 billion. The headline -- a quote from Fairbank himself -- was, "Bigger, bolder, sooner."
But the stress test results are in, and here's Capital One on the front page of The Wall Street Journal with a tier one common capital ratio of 9.1%, well ahead of, say, J.P. Morgan Chase & Co. (NYSE:JPM), which is at 6.5%.
No doubt this is unsurprising to those who really follow banks. Capital One did make an acquisition in February, buying Maryland's Chevy Chase bank. It
also posted a loss of $112 million in the first quarter, with a worse-than-projected loss rate on its credit card portfolio of 8.4% and a warning that it will exceed 10%, The Washington Post reported.
According to the Feds, though, the bank can take it. The idea of lashing all those computers and credit models to a retail deposit base is looking pretty good so far. -
Kenneth Klee
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