Capital One Financial Corp. the credit card company spun off by Signet Banking Corp. last November, is about to reward investors with some pleasant surprises, says new advocate Thomas Facciola.

The Salomon Brothers Inc. analyst on Wednesday initiated coverage of the Richmond, Va., company with a "buy" rating, saying receivables could grow by more than 25% annually through 1996.

What's more, Mr. Facciola said Capital One stands to reap huge rewards from the repricing of some $4.4 billion of credit card receivables during that time, as introductory rates on its mainstay card product expire.

"Assuming that 60% of the receivables reprice upwards of 800 basis points, nearly $2 per share of earnings power is created by yearend 1996," Mr. Facciola wrote in announcing the new coverage.

Salomon's move brings to 12 the number of firms that are covering Capital One, according to First Call Corp.

Mr. Facciola predicted Capital One would earn $2.60 in 1996. That compares with a consensus forecast of $2.30 per share, according to First Call.

The analyst set a 1995 yearend target price of $29, which would represent an appreciation of about 30% from current trading values.

On Wednesday, Capital One shares rose 12.5 cents to $21.625.

Ground-floor investors in Capital One already have done well. As of Wednesday, shares were up 32% from their initial price of $16.375 on Nov. 18. In the same period, the S&P 500 index rose 13%.

In its formative years as a division of Signet, Capital One achieved unprecedented growth rates using information-based technology to facilitate rapid formulation and introduction of new products.

Most notably, the company wrested business from competitors by dangling low-rate introductory offers to those who transferred balances.

Though the jury is still out on whether technology-driven solicitation enabled the company to target customers who won't default when the economy weakens, analysts credit Capital One for staying a step ahead of problems so far.

Capital One's share price has been held back somewhat by investor concerns about overspecialization. Lacking other businesses to fall back on, Capital One may be more exposed to deterioration in the credit card business than some of its peers, said Moshe Orenbuch, an analyst at Sanford C. Bernstein & Co. But Mr. Orenbuch reiterated his "outperform" rating on Monday, saying that Capital One's first-quarter results showed that its main line of business is vibrant.

The company's net interest margin rose 105 basis points in the first quarter, and its credit card spread rose 90 basis points, Mr. Orenbuch pointed out. He credited the company's aggressive stance on late fees and the effects of account repricing.

Far from keeping its head in the sand, Capital One has been "most outspoken" about the issue of saturation in the credit card market and is moving aggressively to diversify its product mix, added Samuel G. Liss, a CS First Boston analyst who follows credit card companies.

Mr. Facciola pointed out that Capital One is spending $65 million on new products - the same amount it plans to spend on its traditional balance- transfer product.

He said Capital One is the only major issuer allocating a sustained level of resources to a secured card product, which enables a borrower to qualify for a credit card by opening a deposit account with the issuer.

Mr. Facciola also said Capital One's spending, which is higher than normal as it invests in processing systems, should come down in 1996.

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