Capital One (COF) shares dropped 7% after President Trump proposed capping credit card interest rates at 10% for a year. The move shook the financial sector, with bank stocks like Citigroup, J.P. Morgan Chase, and Wells Fargo falling. Capital One, heavily reliant on credit cards, felt the biggest impact.

The interest rate cap is set to start next week, potentially hurting credit card companies like Capital One, which rely on high rates for profit. The average credit card rate is around 19.7%, making a 10% ceiling a significant threat. This policy may force banks to serve subprime borrowers or reduce credit availability.

Despite the potential impact of the interest rate cap, Capital One has been performing well. Third-quarter earnings were $4.83 per share, with revenue jumping 23% post-Discover acquisition integration. Credit performance improved, with charge-off rates down to 4.63%, showing signs of stabilization post-pandemic.

Capital One closed a major Discover deal in May, enhancing its credit card business and securing a rare asset in the payments industry. Despite the uncertainty from Trump’s proposal, the company remains strong with a 14.4% equity tier one ratio and a $16 billion share buyback program. It recently raised dividends and increased repurchases.

The bank is investing in technology, AI, and premium cards to grow. Analysts expect COF stock to see earnings growth from $13.96 per share in 2024 to $29 in 2029. With positive analyst recommendations and a potential upside in stock price, Capital One remains a strong buy, despite recent challenges.

Read more at Yahoo Finance: Analysts Say Capital One Stock Is a ‘Strong Buy.’ Did Trump Just Change That?