Philip van Doorn
5 min read
In This Article:
Capital One Financial Corp. announced Sunday it had completed its acquisition of Discover Financial Services, ending a long regulatory approval process after announcing the merger agreement in February 2024.
Through Friday, Capital One’s COF stock had returned 10.9% for 2025, while Discover shares had returned 16% as investors became more confident the deal would be completed. The KBW Bank Index had returned 2.8% so far this year. Those figures include reinvested dividends.
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Investors might be wondering whether or not the postmerger Capital One is now fully valued. In a note to clients on Sunday, Keefe, Bruyette & Woods analyst Sanjay Sakhrani rolled out his firm’s 2027 earnings-per-share estimate of $22.42 for the postmerger Capital One.
Capital One’s stock closed at $197.22 on Friday. So if we use KBW’s 2027 EPS estimate, Capital One would be trading at a price-to-earnings ratio of 8.8 — a low valuation, as you can see from the table below.
Forward price-to-earnings ratios are typically based on consensus earnings estimates for the following 12 months among analysts working for brokerage or research firms. But Capital One will go through a transition as it integrates Discover. This will shift Capital One more toward credit-card lending. Card loans made up 49% of the bank’s average loans held for investment during the first quarter. And along with Discover’s card loan portfolio, Capital One now owns Discover’s payment-processing network, which handles Discover-branded card transactions. American Express Co. AXP also has its own processing system.
Based on their March 31 financial reports, the combined Capital One and Discover had $638 billion in total assets, ranking eighth among the largest U.S. bank holding companies. So here are the largest 20 U.S. banks, with two P/E ratios — the customary forward P/E using the consensus estimates among analysts polled by FactSet for the next 12 months, which is marked “NTM,” and one based on consensus 2027 EPS estimates.
|
Largest 20 U.S. banks |
Ticker |
City |
Forward P/E – NTM |
Price/ consensus 2027 EPS estimate |
Total assets ($bil) |
|
JPMorgan Chase & Co. |
JPM |
New York |
14.7 |
12.6 |
$4,358 |
|
Bank of America Corp. |
BAC |
Charlotte, N.C. |
12.0 |
9.3 |
$3,349 |
|
Citigroup Inc. |
C |
New York |
9.9 |
6.6 |
$2,572 |
|
Wells Fargo & Co. |
WFC |
San Francisco |
13.0 |
9.9 |
$1,950 |
|
Goldman Sachs Group Inc. |
GS |
New York |
13.9 |
11.2 |
$1,766 |
|
Morgan Stanley |
MS |
New York |
15.5 |
13.1 |
$1,300 |
|
U.S. Bancorp |
USB |
Minneapolis |
10.2 |
8.5 |
$676 |
|
Capital One Financial Corp. |
COF |
McLean, Va. |
11.7 |
9.1 |
$638 |
|
PNC Financial Services Group Inc. |
PNC |
Pittsburgh |
11.5 |
9.3 |
$555 |
|
Truist Financial Corp. |
TFC |
Charlotte, N.C. |
10.2 |
8.4 |
$536 |
|
Charles Schwab Corp. |
SCHW |
Westlake, Texas |
20.0 |
14.9 |
$463 |
|
Bank of New York Mellon Corp. |
BK |
New York |
13.2 |
10.8 |
$441 |
|
State Street Corp. |
STT |
Boston |
10.3 |
8.4 |
$373 |
|
American Express Co. |
AXP |
New York |
19.2 |
15.0 |
$282 |
|
Citizens Financial Group Inc. |
CFG |
Providence, R.I. |
10.5 |
6.8 |
$220 |
|
Fifth Third Bancorp |
FITB |
Cincinnati |
10.8 |
8.9 |
$213 |
|
M&T Bank Corp. |
MTB |
Buffalo, N.Y. |
11.3 |
9.1 |
$210 |
|
Huntington Bancshares Inc. |
HBAN |
Columbus, Ohio |
11.1 |
9.2 |
$210 |
|
Ally Financial Inc. |
ALLY |
Detroit |
9.0 |
6.0 |
$193 |
|
KeyCorp |
KEY |
Cleveland |
11.2 |
8.7 |
$189 |
|
Source: FactSet |
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The average forward P/E ratio for these 20 banks is 12.5, while the average P/E based on Friday’s closing prices and consensus 2027 EPS estimates is 9.8. Capital One trades at a forward P/E of 11.7 and at 9.1 times the consensus 2027 EPS estimates, which is slightly above the 8.8 valuation based on KBW’s 2027 EPS estimate.
