Banking on growth

Banks are feeling the heat these days as interest rates have fallen, the direction of the economy is uncertain and unemployed people may default on loans. But at now-depressed prices, some present good investment opportunities.

Consider Capital One Financial (NYSE: COF). It was the first major bank to sign onto the cloud with Amazon Web Services, and it invested in strong infrastructure to support its customer-oriented products and services. Its credit card segment accounts for 64 percent of total revenue; Capital One also operates a consumer bank (including a large autoloan division), a smaller commercial banking division and a suite of small-business services. Most of its earnings come from the interest it charges on credit card balances and loans, and it targets average working Americans.

Capital One is in a good place because of disciplined decisions it makes during normal times. “We’ve ... been obsessed with resilience in our choices of businesses and segments and in all of our underwriting decisions in good times and bad,” CEO Richard Fairbank has explained.

Being diversified gives Capital One some cushion against any one segment pulling down the whole. Then again, if the economy tanks, banks will have trouble all around. Still, Capital One is a growth-oriented company whose youth and tech focus are a big plus. Its share price was recently down about 38 percent year to date, and it’s likely to remain volatile until the economy picks up.