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Earnings Preview: Capital One Financial's 3Q

Alex Veiga, AP Business Writer

LOS ANGELES (AP) -- Capital One Financial Corp. is expected to report improved earnings for the third quarter amid an increased focus on mortgage-lending by the bank holding company. The McLean, Va., lender will report its results after the stock markets close on Thursday.

WHAT TO WATCH FOR: Details on spending trends by users of the company's namesake credit cards. Investors also will be looking for an update on the lender's slate of other financial offerings, including consumer banking and commercial lending.

During the quarter, Capital One inked a deal to acquire Beech Street Capital, a national originator and servicer of commercial real estate loans.

Beech Street is one of the largest providers of government-insured mortgage loans for apartment buildings. The company made about $4 billion in loans last year and services a loan portfolio of about $10 billion.

Wall Street will be listening for details on how quickly borrowers are paying down their balances, an indicator of potential interest and fee income for banks.

Purchase volume for Capital One's domestic card business grew about 12 percent in the second quarter versus a year earlier. Revenue for the domestic card and commercial lending also increased. In addition, the company ended the April-June period with higher loan balances at its auto lending division. But retail banking and home loans declined.

All told, Capital One's net interest income, or money earned from loans, grew about 14 percent, during the quarter, while non-interest income, which includes service charges and other customer-related fees, rose about 4 percent.

WHY IT MATTERS: Capital One is best known for its credit card business, but it has taken steps to increase its profile as a national bank in recent years. The acquisition of ING Direct made Capital One the nation's sixth-biggest bank, based on deposits. Its ING Direct division offers direct banking services.

WHAT'S EXPECTED: Analysts, on average, forecast earnings of $1.79 per share on revenue of $5.58 billion, according to FactSet.

LAST YEAR'S QUARTER: Capital One reported third-quarter 2012 net income of $1.17 billion, or $2.01 per share, on revenue of $5.78 billion. The quarter represented the first full three-month period in which the acquisition of ING Direct and HSBC's U.S. card business were both factored into Capital One's results.