Capital One Sees Credit Improve After The Holiday Season

Citigroup has published a research report on Capital One Financial Corporation COF as the company sees credit improvement following the holiday season. In the report, Citigroup writes "COF Jan monthly managed credit data showed a -23 bps decrease in the Nat'l Lending net charge-off (NCO) rate to 5.74% while delinquencies were down 9 bps at 5.07% (see Figure 1). US & International Cards drove the improvement in NCOs (likely aided by the Hudson's Bay Canadian portfolio acq in Jan). US card balances fell -2.1% m/m following the seasonal boost in Q4. On a m/m basis, US Cards loan balance decreased by $1.1 B or 2.1% to $52.7B. The m/m decline in Jan was expected as cardmembers paid off holiday balances. COF management expects balances to bottom in Q2, aided by the Kohl's portfolio acquisition. Auto balances were up $70 mm (+0.4%). International Cards balances were up $1.3 B (+17.9%), benefiting from the $1.3 B Hudson's Bay Company portfolio acquisition from GE. Stripping out the acquisition, International Cards balances would have been flat and national lending balances would have been down $1 B, or -1.3% m/m." Citigroup maintains its Buy rating and $55 price target. Capital One Financial Corporation closed yesterday at $51.92.