Capital One Financial Corp. seized quickly on the recent surge and relative stability in financial stocks to raise capital with a plan to sell 14 million common shares.

Analysts are urging others to do likewise, capitalizing on the sector's price gains in response to the government's efforts and proposals last week to curb the financial crisis. The KBW Bank Index has gained 8.3% since Sept. 15, when Lehman Brothers filed for bankruptcy protection.

Capital One's stock has gained 17.4% since then and 55.5% since hitting its 52-week low on July 15. At Tuesday's closing price of $53.72, the proposed stock sale could bring in $765 million of capital, and an overallotment option could push the proceeds to $869 million.

Craig Maurer, an analyst at Credit Agricole Group's Calyon Securities, said in an interview that Capital One could have sold more stock, "but I imagine they felt the issuance would be a good balance between raising capital and avoiding a certain level of dilution."

In addition, "considering the less-than-attractive global environment, building as much capital as possible can only make investors feel that much more comfortable," he said.

Other financial services companies are raising capital this week. Goldman Sachs Group Inc. raised $10 billion, half of it from an investment by Berkshire Hathaway Inc. And First Niagara Financial Group Inc. in Lockport, N.Y., said it plans to raise $100 million. (See stories: Goldman Sachs, First Niagara.)

In a research note issued Monday, the bank research team at Friedman, Billings, Ramsey Group Inc. urged bankers to sell common stock, saying it would bolster tangible common equity. Doing so "is paramount to investors" and "dictates tangible book value, the degree of leverage to common shareholders, and, ultimately, stock price."

Capital One took the added step of reaffirming its full-year revenue guidance, including expectations of low- or mid-single-digit growth. The company also said that it would build its allowance for loan losses by $200 million this quarter.

A spokeswoman for the $151 billion-asset McLean, Va., company said she could not comment further.

Mr. Maurer said the guidance did not stray from previous forecasts and was likely intended to show that the capital issuance was not directly tied to any newly discovered credit problems.

Capital One said the proceeds from the stock sale would be used for "general corporate purposes," but several analysts said they believe it could use the funds to expand its bank platform.

"Specifically, we expect Capital One to target attractively priced depository institutions or branch networks to grow the company's deposit base," Richard Shane, an analyst at Jefferies & Co., wrote in a note to clients. "As one of the best-capitalized banks and largely free from complex mortgage-related assets, we believe Capital One will be in a favorable position."

Capital One gained a sizeable deposit base through its 2005 purchase of Hibernia Corp. in New Orleans and its 2006 acquisition of North Fork Bancorp in Melville, N.Y. In doing so, the company also altered its approach to returning capital, raising its dividend in January by 34.8 cents, to 37.5 cents a share. On Wednesday, the company's shares fell 2.29%.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.