Fitch Ups Capital One's Debt Rating
Fitch Ratings has upgraded the long-term issuer default rating of Capital One Financial Corp., which over the last two years has acquired two big mortgage lenders, to a rating of "A-" from a previous rating of "BBB+." Fitch also raised the company's senior debt and subordinated debt ratings.
In addition, Fitch said the rating outlook is positive. Approximately $119.7 billion of debt is affected by the action.
Fitch said the upgrade reflects the "risk-reduction associated with the company's product and funding diversification" following Capital One's acquisitions of Hibernia Corp. and North Fork Bancorporation in 2005 and 2006, respectively. Fitch said Capital One has a "solid track record" when it comes to integrating acquisitions. Fitch noted that North Fork is a major alt-A lender.
Fitch said the positive outlook reflects the continued benefits Capital One should achieve from the integration of North Fork and its residential mortgage banking platform. Fitch said the additional deposits and secured loan products Capital One gets from that deal should help the company lower its funding costs and credit losses over the long term. As a result, the rating agency expects Capital One to more closely resemble the performance metrics of a commercial bank going forward.
Fitch maintained its short-term issuer rating of "F2," noting that the company's leverage is now higher than historical levels.
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