Capital One Financial Corporation
I have chosen as my organization Capital One Financial Corporation which is a bank holding company with the following affiliated entities: Capital One Bank (USA), National Association (COBNA) and Capital One, National Association (CONA) that operate separately. It also has overseas operations particularly in the United Kingdom and Canada. According to its website, Capital One is a Fortune 500 company and its deposit base makes it one of the top 10 largest banks in America (Capital One, 2016). The company has three major sectors: credit card, commercial and consumer banking.
The banking and financial intermediaries literally prop up the economy as they are responsible in the steady flow of money to spur growth and development in both the public and private sector. As a financial institution, I would think that the macroeconomic indicators that would be most significant in the planning and decision-making process of Capital One would include the following: Gross Domestic Product (GDP), Housing Starts and Consumer Confidence Index (CCI). Like other banking institutions, Capital One takes money from its clients that are put into various interest bearing and non-interest bearing savings and deposit products and other investments schemes. Other financial products and services include credit card loans and installment loans; auto, home, and retail banking loans; and commercial and multifamily real estate, commercial and industrial, and small-ticket commercial real estate loans (Yahoo Finance, 2016).
As a general economic indicator, the GDP is a good reference for the bank’s analysts in analyzing the current economic health and make use of reasonable assumptions and future estimates that would aid in crafting strategic directions and corporate decisions.
Capital One as an institution providing home loans, can make use of the data and information provided in the Housing Starts to project the size of the probable market for housing and real estate loans and reasonably estimate the funds that it can allot or reserve for this sector. A consistently growing percentage in the Housing Starts can also give the Capital One analysts opportunity to estimate the portion of the consumer population that would most likely buy or purchase home furnishings through credit and debit cards and when would they do it.
Moreover, Capital One is heavily engaged in credit card loans hence, the analysts may also consider the Consumer Confidence Index or CCI. CCI is a unique indicator, formed from survey results of more than 5,000 households and designed to gauge the relative financial health, spending power and confidence of the average consumer (Investopedia, 2016). Through the CCI, analysts could determine how consumers would likely behave in the near future such that consumers’ positive outlook to acquire big ticket items can be useful to the bank as it can aggressively pursue marketing strategies to promote credit and debit card usage as consumers are confident that they will have access to disposable money to pay for credit transactions.
The analysts by correctly using the data in the given economic indicators can help the company’s management and other stakeholders make crucial fiscal decisions. This would include predicting future gains and profit, managing risks and strengthening the company’s financial position. These can also help in concretizing corporate plans for either expansion or downsizing depending on the story behind the figures and numbers in the economic indicators.
References
Capital One.(2016).About Capital One. Retrieved from https://www.capitalone.com/about/
Yahoo Finance: Institutional Shareholder Services (ISS): COF Capital One Financial Corporation NYSE. Retrieved from https://beta.finance.yahoo.com/quote/COF/profile?ltr=1
Investopedia.(2016). Economic Indicators: Consumer Confidence Index (CCI) . Retrieved from http://www.investopedia.com/university/releases/consumerconfidence.asp
