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In normal times, they have more set aside for their losses than their net charge off ratio is. About 2.

Moser: I mean that's the nature of the product that they're selling there, right. I mean, a credit card is far different than a mortgage. I mean, it seems like that that's going to be always the case even in the best of times, right? Frankel: For sure. And right now, they have 6. So, that's pretty impressive. And worth mentioning, their net charge-off ratio actually went down in the third quarter, a lot of that has to do with stimulus, kind of, holding the economy up, things like that.

And we'll see what happens now that Congress can't get its act together and agree on a stimulus bill. But so, the net charge off ratio is actually about 3.

So, if this holds out, that's going to be a big reserve release too. So, it kind of works both ways, they set aside a ton of money, but then if losses don't happen, they get to give some of that back to investors.

So, they're well-capitalized and well-prepared for losses, which is the short version of all that. Moser: Well, that's what you want to hear; I mean, that's definitely what you want to hear, particularly when you're tied to cards, as they are. Let's talk a little bit about today's big headline. We were talking before taping regarding Moderna and the headline that came out this morning. I mean, this is something, CEO, Stephane Bancel, I hope I'm pronouncing her [his] sic name correctly, she [he] sic called a game changer.

And to me, you know, we were talking about how the string of vaccine news has certainly been received very well by the real estate market. What about -- with a company like Capital One, why is the vaccine such a positive catalyst for a company like Capital One? Frankel: Well, you want unemployment to return to normal as soon as possible, especially if you're a credit card lender. High unemployment means higher than average defaults. For the second and third quarter, banks and credit card companies have been really good about letting people suspend their payments if they want to, there's been some stimulus going on, things like that.

So, we really haven't seen the effects play out yet. The ideal scenario is that the vaccine will be available, life will essentially return to normal, unemployment will normalize before we start seeing a giant wave of people running out of money to pay their bills. So, that's the big hope when you see this vaccine news. When it comes to banks and credit card heavy banks like Capital One, in general, you want the economy and life as we knew it to return, essentially, unemployment as we knew it to return, especially before people start running out of money.

Frankel: Oh, and by the way, I looked up their co-branding partners; Capital One also partners with GM , they issue their credit card; Cabela's, if you're an outdoorsy person you know who that is; and Bass Pro Shops. Moser: Bass Pro Shops. Well hey, listen, good go, brand relationships.

And frankly, I think they do a tremendous job on just brand awareness. The commercials become a little redundant, but you remember them, you know, you remember them. Frankel: They do. I mean, Walmart's a big deal, and I'd like to see them pursue a few more big deals. I mean, the ones we were just talking about, like GM, Cabela's, and Bass, that's not a Delta, that's not a Costco, that's not, you know, Amazon.

So, I'd like to see them pursue, like how Buffett likes to say, fire the elephant gun, like, pursue a big partnership and bring that into the fold. But Capital One, they put out great credit card products and I think that's a big opportunity they have going forward. I think Rich is 69 years old maybe now, so I don't know how long he plans to remain at the helm there, but you just don't really often see a bank of this size still Founder-led.

I mean, I feel like that's a reason for the success to this point. Frankel: You know, like I was saying, the credit card business is really profitable, but really hard to be good at, and he's clearly good at it.

So, that's definitely part of the investment thesis there. And as you said, he's not getting any younger, so -- and Capital One is his baby, so I mean, I can name founder-led companies where the founder is there well into their 80s, but that doesn't mean that's going to happen in this case, so that's definitely something to be aware of.

Moser: So, you know, let's bring this down to the bottom-line here. And if you look at the way the stock has performed here over the last several years, I mean, it's not lighting the world on fire, right?

I mean, the last five years have been just kind of, meh! You stretch it out over 10 years, you know, you've made money, it's nothing to write home about.

It seems to me though, that they are in a position where you could see better days ahead. I don't know, am I looking at that right way or? Frankel: Yeah, I mean, well, no bank stocks have done that great in the past couple of years as a whole. I mean, interest rates were falling even before the pandemic started, and they've been one of the worst-hit parts of the pandemic.

So, take that with a grain of salt, most bank stocks haven't done fantastic. There's money to be made, and over the long run they've done pretty well. So, that's not great, but it's not terrible considering what they've gone through in the past year-and-a-half or so with falling rates and rising defaults and the pandemic coming on. So, if you give them 10 good years, [laughs] then they're going to return a lot of money, but like I said, that's the risk of the credit card business, it's not a great business to be in during tough times, though.

They're not a great recession stock. Moser: Yeah, it feels like times [laughs] should, in theory, get better. I mean, I don't want to be, God! If it gets worse from here, then that really sucks. But I mean, also, there's the potential signing on another meaningful cobrand partnership.

You can see that that can really have a lasting impact for a business like this. And I think that as we see the finance space change so much with fintech and new offerings for younger consumers particularly, to start establishing credit, using credit and debit, it does seem like there are plenty of opportunities for a business like this.

I'll put it to you that way. There's definitely a lot of opportunities, a lot of directions they could go in. And the credit card business has been very innovative over the past, I'd say, you know, five years or so, especially that competition has never been higher, it's another big risk going forward, credit card competition keeps heating up. So, that also increases the cost and things like that, so that's something to be aware of, there's a lot of competitive pressures in the space.

You know, American Express is really doing a great job of competing for the millennial business, which is a big deal to credit card issuers, there's just a lot of competition. Discover is another one doing a great job of marketing to the younger generation.

So, it's a lot of competition there, and that's one thing to really keep in mind, even when times are good, it's a competitive business. Moser: It's a very, very good point. Well, Matt, before we wrap it up this week, as most always, we want to give our listeners a stock to keep an eye on this coming week. So, what is your one to watch this week? They're scooping up a competitor, they're broadening their reach. And I've said before, when it comes to malls, it's Simon and everyone else, and this acquisition just really adds to that statement, so I'm a big fan.

Moser: Nice, good deal. They actually have earnings coming out on Wednesday. There are a number of different angles to this company now, which I find just a fascinating business and one where they've made so many interesting moves here in the last few years.

I want to hear their perspective on the holiday season upcoming, but then there's also the Shipt angle. A little membership model there, and partnering with all sorts of different retailers out there. They recently announced this Ulta partnership, which I think is pretty fascinating. But you know, it's always interesting to see how big retailers like that pull that lever of that card. And then, certainly, Target RedCard is something that keeps some of those customers loyal, I'd say, which is just interesting.

But I mean, the business has done really well over the past several years and I'm interested to see what they have to say on Wednesday, so we'll be keeping an eye on that. But Matt, I think that is going to do it for us this week. Create a personalised content profile. Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads. Apply market research to generate audience insights. Measure content performance.

Develop and improve products. List of Partners vendors. Most of the largest banks in the United States have a long history and managed to stick around since their early days. In fact, each of the four biggest banks by market capitalization is more than a century old.

Bank of America BAC , the pup of the quartet, dates back only to Knowing all this, it raises an important question. How did Capital One COF grow enough to take its place alongside the established titans of the industry? Capital One may not be among the country's top five banks, but it is a household name. The bank relies heavily on marketing to promote its banking and credit card products, so it wouldn't be surprising if you've seen at least one of its commercials on television.

The bank was founded in in Richmond, Virginia, solely as a credit card company. Four years later, Capital One expanded to include loans and added retail banking to the mix in Over the course of its history, Capital One acquired a series of other financial companies to boost its presence and secure its place among the top 15 banks in the U.

Capital One has three reporting segments. In descending order of size, those include:. The expenses that Capital One spent to earn that interest are minimal, as well. All the promotion, advertising, and marketing that Capital One undertakes is nothing compared to how much money the company earns from those unassuming but powerful little cards.

As mentioned above, Capital One began its independent life as the credit card operator of a larger bank, just as the American penchant for instant gratification was coming into its own.

If you think people now have trouble comprehending the concepts of minimum payment and annual percentage rate APR , you should have seen the landscape back when credit cards were coming into their own. Capital One used some pretty innovative ways to grab market share.