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.

Financials Update $BAC $MS $GS $STT $XLF

· Financials Update for the week – there was some expectation that the financials, esp. the banks, would cool their rapid advance as Q1 came to an end; however, this hasn’t happened and the group has continued its very strong march higher. The banks are up ~5% on the week and are up ~29% YTD. After posting the best performance of any major group in Q1, buyers continued to allocate to the group ahead of the kick-off to earnings season. There weren’t many specific catalysts for the rally, but rather a confluence of events. There is a bit of performance anxiety in the group, as the space remains relatively underowned and gains have been so strong. The desk noted that some larger MFs are starting to increase their allocations. There were a couple of bullish articles written this week on the state of commercial real estate (focusing on multi-family and office; retail still seems to be struggling), which has helped provide a bid to the smaller regional banks (keep in mind that a lot of the CRE exposure is concentrated in the regional banks). There has been a dramatic rally in the MI/financial guarantor space, reflecting the recent mortgage mod announcements (BoA, Treasury) and general optimism around resi real estate. ABK posted earnings Thurs night and the stock saw a dramatic short squeeze on Fri (recall the co delayed its earnings a few weeks back and warned of a potential bankruptcy filing). On the regulatory front, the smaller/mid-cap regional banks are viewed as having less exposure to any new rules that may come out of Washington (the most intense focus has been on activity in investment banks).