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1 Bank That’s More Than Just What’s in Your Wallet

Patrick Morris
August 14, 2013

While the average consumer may think of Capital One (NYSE: COF) as only a credit card issuer, a string of recent acquisitions means that the 12th biggest bank holding company in the United States does much more than peddle plastic.

In 2012, Capital One spent $1.3 billion on advertising , as Jimmy Fallon, Alec Balwdin, Charles Barkley, and a whole host of Vikings asked, "What's in your wallet?" That amount trailed other well-known companies American Express and Bank of America in the financial services industry and placed it 26th in the U.S. Capital One even eclipsed the combined spending of Wells Fargo at $580 million and Visa's $480 million.

Source: Capital One annual report.

Through this expansive advertising to the public, Capital One may be thought of and portrayed as exclusively as a credit card issuer, but investors need to know it attributed roughly 47% of its net income in the most recent quarter to its traditional consumer and commercial banking operations vs. just 45% at better-known "bank" US Bancorp (NYSE: USB). The company provides and offers to investors much more than simply the plastic you would find in your wallet.

In 2011, Capital One acquired online bank ING Direct and the U.S. credit card portfolio of HSBC. This marked the beginning of its concerted effort to transform into an all-encompassing bank, allowing it to deliver on the full-service banking model that many consumers are accustomed to. In the most recent annual report, Capital One CEO Richard Fairbank highlighted:

The acquisitions we completed in 2012 were important to this transformation, giving us the core deposits, national banking reach, access to assets, and enhanced digital and customer capabilities that will help us compete successfully for years to come.

Instead of offering only credit cards, Capital One can now provide checking and savings accounts, auto loans, and mortgages to consumers while also offering commercial loans to companies. Understanding the success and progress of this transformation of its business will be vital before determining an investment decision.

With the acquisitions completed in the first and second quarter of 2012, it will be helpful to look at the previous four quarters compared to the years prior to the acquisition to see how the bank has changed the composition of its income:

Capital One (COF) Pre-Tax Income


2013 Q2

2013 Q1

2012 Q4

2012 Q3

FY 2011

FY 2010

Commercial Bank







Consumer Bank







Credit Card







Source: Capital One 10-Qs.

The portion of Capital One's income attributable to the consumer bank has grown 17.5% over the previous four quarters, and the composition of its income from the credit card business has fallen more than 20% over that same time period. 

While Capital One is often considered to be less of a bank than its peers PNC and US Bancorp, con