Capital One shares rise on strong 3Q results

NEW YORK -- Shares of Capital One Financial Corp. rose to a nearly five-year high Friday, as recent big acquisitions helped the bank grow net income 47 percent in the third quarter.

THE SPARK: Capital One on Thursday said that it earned $1.17 billion, or $2.01 per share for the three months ended Sept. 30. Revenue climbed 39 percent to $5.78 billion.

Analysts polled by FactSet were expecting earnings of $1.68 per share on revenue of $5.55 billion.

THE BIG PICTURE: The third quarter marked the first full three-month period in which both ING Direct and HSBC's U.S. card business were factored into the McLean, Va., company's results.

That helped drive up loans held for investment at the end of the quarter to $203 billion from $130 billion a year ago.

CEO Richard Fairbank cautioned that he still expects weak demand from consumers, and that competition is increasing from other banks, particularly in auto, commercial and industrial lending. The company expects average loans to decline modestly for the year.

THE ANALYSIS: It's good that the bank is taking note of increasing competition, said Jefferies analyst Daniel Furtado.

"While these aren't necessarily new revelations, we take comfort in the fact that Capital One will pull back in certain areas when things feel overheated," Furtado wrote in a note to investors. He has a "Buy" rating on the shares.

THE SHARES: Up $3.25, or 5.7 percent, to $60.55 in afternoon trading, after peaking at $60.80 earlier in the day. The jump marked the company's highest stock price since November 2007, a month before the recession began.

Since the beginning of this year, Capital One shares have gained about 35 percent.