September 10, 2009
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News: Capital One Financial Upgraded
Americans are tired of listening to market analysts and news reports on the recession. They are worn out by the beatings they've received from the credit card companies. In an effort to curb spending and credit card use, many Americans have switched from credit to debit. Realizing how the switch has negatively hurt the bottom line, banks have switched their focus from credit card fees to debit card fees. National outrage has already screamed out over the unfair practices and fees banks have been imposing on debit card customers. When will it all end? Experts are saying that we can expect to see some encouraging third quarter results which would mark the end of the recession.
According to analyst Donald Fandetti, for Citi Investment Research, Capital One Financial Corp (COF) has been upgraded from a "Buy" to a "Hold." On Wednesday, Fandetti indicated that the upgrade for one of the nation's largest credit card issuer was taken because the company expects an improvement in credit losses. Fandetti expected shares for COF to increase from $28.00 to $44.00 on Wednesday. Although COF shares did close up at $37.47, they never reached the $44.00 high. The total day's gain was $2.03. Capital One Financial's credit card delinquencies have been slowly decreasing over the past five months which an indicator of the amount of defaults the company could predict. Fandetti wrote in a release that even though COF remains cautious, the company believed the "worst is behind" them pertaining to card defaults and they will begin to lower credit loss provisions.
Credit card defaults are those loans that the company does not expect to get repaid. Historically, unemployment levels mirror loan defaults. This has not been an exception during this recession. The Department of Labor expects that the U.S. unemployment rate will peak at 9.7% before leveling off. Fandetti did not change his 2009 and 2010 forecasts for Capital One; however, did indicate that the company is in a strong position to ride out the rest of the recession.