Capital One Financial Corp.'s credit card business is "showing the greatest profitability because of lower provisioning," Chief Financial Officer Gary Perlin said during a webcast Tuesday of the Morgan Stanley financial services conference.

The banking company recently reported strong quarterly results, and said the bulk of its earnings growth stemmed from its cards business, allowing Capital One to release funds from its loss reserve.

The use of these freed-up funds will include investments to restart marketing efforts, Perlin said.

Also on Tuesday, Bank of America Merrill Lynch analysts upgraded the stock of Capital One, American Express Co. and Discover Financial Services to "buy" from "neutral."

The stocks' recent pullback is an opportunity to benefit from a recovery, stronger earnings and improving sentiment toward credit cards, the analysts said in a report, predicting 15% to 25% upside for each stock.

Capital One shares were at $37.65 Tuesday afternoon, up 2.37% from Monday. American Express stock was at $38.95, up 1.94%, while Discover shares were at $13.71, up 2.93%.

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