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To: Real Man who wrote (374876)	9/23/2008 7:45:27 PM
From: Cynic 2005	Read Replies (1) \| Respond to of 436258

This guy is slick. Very slick. With Buffet buying a stake in GS, looks like my puts are screwed. NEW YORK (Dow Jones)--Capital One Financial Corp. (COF) said late Tuesday that it would raise about $750 million in capital through a secondary stock offering. Capital One's move is opportunistic as well as strategic. The company is taking advantage of the strong performance of its stock in recent months to further insulate its balance sheet from worsening consumer credit. The company has long said its credit quality will deteriorate, and noise from legislators to include a rollback of the recent consumer bankruptcy reform in the government's bailout for mortgage lenders could hurt Capital One. But Gary L. Perlin, Capital One's chief financial officer, said the company also is seeing opportunities to invest the fresh capital until it needs it to cover loan losses. Capital One, which has $151 billion of assets, said in a separate announcement that it will increase its loan loss reserve by $200 million in the third quarter, which would allow the company to absorb $7.2 billion in loan losses over the next 12 months. Perlin said the reserve increase was not what prompted the capital raise - in fact, he said he had no reason at this point to believe that credit will become worse than the guidance he gave investors recently. However, he also said that the uncertainty has increased in recent weeks. "One simply has to believe that the range of potential outcomes has widened dramatically," he said. "And when there are greater degrees of uncertainty, the market has told us in no-uncertain terms that having strong liquidity is crucial, and secondly that having capital is a positive thing." "But, of course, we are not going to be sitting on it. It has to earn a return for our shareholders," Perlin said. "Hopefully, it won't be needed for some of the negative scenarios one might contemplate." Unlike many banks, Capital One had not tapped the equity market this year, and conditions to do so have improved since news spread that the government plans to buy illiquid mortgage assets from banks. Bank stocks rallied Thursday and Friday. But Capital One's shares have been doing well for some time, rising 13.7% this year, which makes it one of the best-performing large-cap financial stocks. On Tuesday, it fell 1.3% in a fickle market, to $53.72. The shares have risen $7.38, or 16%, since bank stocks started a frantic rally on Thursday. Still, the debt market remains expensive for banks, observers said. And Capital One wanted to give large shareholders an opportunity to participate in the offering, and therefore chose to issue 14 million of common stock. "Attractive market conditions were necessary, but not sufficient" for Capital One to tap the market, Perlin said. "We are not playing the market here." But he said Capital One also "has an expectation that we have good uses" for the money raised - well beyond building the loan loss provision. Perlin said Capital One might look for acquisitions, but is unlikely to do a deal in the current environment. More likely are the purchase of loans or distressed assets, he said. Asked for specifics, the CFO said: "The kinds of things that people have been sending our way for prospective indication of interest would likely be business with which we are already very familiar." "We got $30 billion-plus in liquidity, and we'll keep it that way. But by definition, the best opportunities may be in the area where people are having trouble liquifying assets." Capital One has sidestepped this year's mortgage market mess by sticking to its traditional credit-card and auto-lending business as well as the banking operations it expended into several years ago. It wound down the mortgage operations it got with the acquisition of North Fork Bancorp Inc. ahead of the worst part of the crisis. On June 30, Capital One's capital ratios were comfortably ahead of the requirements regulators set to consider a bank "well-capitalized." But credit quality was mixed. Credit-card charge-offs fell for two consecutive months since the company's second-quarter results, but delinquencies overall continued to rise - and auto loan losses and delinquencies also continue to rise.