Trump's 10% Credit Card APR Cap Looms Over Capital One Ahead Of Q4: Analysts Warn Bank Is 'Most Vulnerable'

Financial services company Capital One Financial Corp. (NYSE:COF) is set to report its fourth quarter results on Thursday, amid the looming threat of President Donald Trump’s proposed 10% cap on credit card interest rates, which analysts said leaves the bank more exposed relative to its peers.

Capital One Is ‘Most Vulnerable’ To Credit Card Rate Caps

According to analysts at CFRA Research, Capital One is among the “most vulnerable” to this policy proposal, given its heavy reliance on revolving credit card balances and net interest income.

During its third-quarter results, Capital One reported $271 billion in credit card loans, up 70% year-over-year, following its acquisition of Discover Financial Services, which closed early last year.

The credit card segment represents the largest share of Capital One's loan portfolio, which totaled $443 billion towards the end of the third-quarter, and remains a key driver of revenue. Net interest margin reached 8.36% during the quarter, supported largely by higher yields across the company's credit card portfolio.

Alexander Yokum, an equity research analyst at CFRA Research, said that banks such as Capital One, with large credit portfolios, can see at least 10% earnings pressure if Trump’s proposal goes through.

Analysts Remain Bullish

Despite these concerns, analysts remain bullish on Capital One ahead of its fourth-quarter results, with JPMorgan Chase reiterating its “Overweight” rating on the stock, while increasing its Price Target to $300 from $280, representing a 30.62% upside from current levels.

Analyst Jim Cramer, the host of CNBC’s “Mad Money,” said recently that all banks are cheap, while singling out Capital One as the “cheapest of all,” and having the “most upside,” compared to its peers in the industry.

Capital One Financial currently trades at just 10.56 times forward earnings, compared to the SPDR S&P 500 ETF Trust (NYSE:SPY), which tracks the S&P 500, with a price-to-earnings ratio of 27.43.

Shares of Capital One were down 4.36% on Tuesday, closing at $228.72, and are up 0.56% overnight. The stock scores high on Momentum and Quality in Benzinga’s Edge Stock Rankings, with a favorable price trend in the Medium and Long terms.

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