Capital One Financial Corp. (COF), PNC Financial Services (PNC), U.S. Bancorp (USB): The Reason Behind 1 Bank’s Massive Margins

A fairer comparison would be to view the yield associated with each business, since all of the banks are composed differently:

Yield of Earning Assets by Business (FY 2012)

Source: Company 10-Ks. PNC Financial Services (NYSE:PNC) does not disclose credit card portfolio yield.

Even here, Capital One Financial Corp. (NYSE:COF) has the highest yield in both its credit card and consumer banking business. Yet the disparity between its credit card margins and those of its peers is not two times as great, as we would have been led to previously believe. Vetting these large differences is crucial because “understanding what makes up a bank’s asset-base is one of the most important things a bank investor can do,” says David Hanson, banking analyst and author of the Fool’s new report on finding great banks stocks.

When you’re making an investment decision about a company, remember that not all metrics are created equal, and that you shouldn’t view them in isolation. Instead of relying solely on the data a company gives you, consider the entire story behind the underlying metric itself. While Capital One has great meat loaf, it can’t all be attributed to the cook. The mix of its ingredients sure helped, too.

The article The Reason Behind 1 Bank’s Massive Margins originally appeared on Fool.com and is written by Patrick Morris.

Patrick Morris owns shares of US Bancorp. The Motley Fool recommends Wells Fargo and (NYSE:WFC) owns shares of PNC Financial Services (NYSE:PNC) and Wells Fargo.

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