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.

US Economics Updating Our Themes: Fed Exit and Sustainable Growth

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Fed will exit in 2010 – What’s New: Fed Chairman Ben Bernanke’s congressional testimony reinforced the notion that progress towards an eventual Fed exit is underway. We continue to believe that the exit process will unfold fairly quickly during 2H10, spurred by market-based indications of rising inflation expectations as the economic recovery takes hold. The Fed is getting closer to hiking the discount rate as part of ending its liquidity facilities. The stance of policy might be best communicated using the IOR (interest on reserves) rate rather than the fed funds target – at least during the initial stage of the exit process.

Sustainable Growth through 2011 – What's new: The jobless claims report released on Thursday, February 11, showed that filings plunged 43,000 in the latest week to 440,000, the lowest reading since the week ended January 2. The latest claims data, layoff survey info, rising temporary help jobs, and consumer sentiment gauges are all supportive of gradual progress toward recovery in the labor market.
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