Frequently bullish on Capital One Corp., Bankstocks Director Thomas Brown noted Capital One's 67% increase in stock value so far this year in a report released earlier today.

This enthusiasm mirrors two recent positive equity outlooks, one by Mike Hughs at Merrill Lynch. According to Brown, Cap One has shown 20% growth in earnings per share for the past nine years, and he expects this to continue through 2004.

Cap One lost a bit of market confidence following a Memorandum of Understanding with the federal bank regulators last year. As reported in ASR (7/22/02), Cap One's ABS spreads widened significantly for the issuer following the disclosure of the MOU, especially in light of several first-time credit card blowups that spread skepticism throughout the sector.

Cap One continued taking a beating from the stock market throughout the year. The issuer's first credit card deal this year, which came in April, was somewhat of a pay-to-play transaction, with the three-year triple-A floaters pricing at 39 basis points over one-month Libor, only to tighten several basis points after its glowing first quarter earnings report came out. This compares to Cap One's two most recent deals (7/29 and 8/6): the June two-year triple-As priced at 11 over 1ML, while the August five-year triple-As priced at 25 over the same benchmark.


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