Capital One Financial (COF) March Credit Quality $COF Credit Suisse

Raising estimates. Credit Suisse raised there 2010 and 2011 EPS estimates to $2.00 and $3.75 (old: $1.75 and $3.25), respectively to reflect a lower run rate of charge offs and incremental reserve release. Our 1Q aggregate loss rate forecast is 6.36%, nearly flat with 4Q. We expect reserve levels to decline $270mn ($0.40 per share) in 1Q given the runoff in the portfolio and improvement in delinquencies. Reserve release is the largest variable in our model.

International Interest Rate Strategist Fiscal Pressures and Swap Spreads

• Concrete financial support is yet to materialize for Greece. We expect the
market’s focus to shift to issuance and implementation risks.
• Our analysis of swap spreads suggests scope for 10yr Bunds to trade flat and 10yr gilts to trade north of 30bp over swaps.
• The upcoming supply profile clearly supports 30yr Bunds over 30yr gilts.
• The 30yr TIPS auction on 22 February is likely to be a success. We see scope for the 10s20s TIPS real yield curve to flatten. Euro BEs wideners look
interesting.
• We include our end-February index projections for the EGBI, the UK, US,
Canada, Australia and Japan.
• The week beginning 22 February sees $126bn of UST issuance in the 2-, 5-
and 7-year sectors (equivalent to 815k DV01 10-year futures). The net cash
requirement in Euro continues to remain non-supportive until the week
commencing 1 March.

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