Capital One's Shares Are Still Cheap

Capital One's average domestic credit card loans held for investment totaled $80.6 billion, increasing from $53.3 billion the previous month, because of the HSBC portfolio purchase. Net charge-offs -- loan losses less recoveries -- in the domestic card portfolio during July were $175 million, increasing from $151 million in June, but declining from $198 million a year earlier, when average domestic card loans totaled $53.8 billion.

Capital One also reported improved credit quality in its $8.8 billion international credit card portfolio, with a net charge-off rate of 4.97% during July, improving from 5.16% in June, and 6.59% in July of last year. The 30+ days delinquency rate in the international credit card portfolio improved to 4.78% in July, from 4.84% the previous month, and 5.34% a year earlier.

Capital One's shares have moved ahead nicely so far during a transformational 2012, following the drag in the second half of last year, as the regulatory approval process for the ING Direct and HSBC card portfolio acquisitions dragged on and on. The shares remain cheaply priced to forward earnings estimates, and with a strong capital base and hopefully a smooth second half to show the benefits from the two acquisitions, investors can look forward to a capital return through an increased dividend and/or share buybacks during 2013.

Interested in more on Capital One? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.

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