Banks
Capital One beats profit forecasts as its margin widens and credit costs ease, lifting shares after hours
Adjusted EPS of $6.69 cleared the $5.50 consensus as net interest margin rose 40 basis points to 8.41%, though card delinquencies ticked higher.
HedgeWeekly News Desk ·
Capital One Financial earned $3.5 billion in the third quarter, or $5.61 a diluted share, the card lender said after Tuesday's close. That compares with $3.0 billion in the second quarter and $3.2 billion a year earlier. Stripping out $868 million of pre-tax acquisition amortization and Discover and Brex integration costs, adjusted EPS was $6.69, against a consensus near $5.50 cited by Benzinga Pro.
Total net revenue rose 3% from the prior quarter to $16.3 billion, roughly in line with forecasts, while non-interest expense fell 2% to $8.9 billion. Pre-provision earnings climbed 10% to $7.5 billion, and the net interest margin widened 40 basis points to 8.41%. Shares rose about 5% to around $211 in after-hours trading.
Credit costs eased. The provision for credit losses fell $73 million to $2.9 billion, including $3.1 billion of net charge-offs and a $225 million reserve release. The company-wide net charge-off rate dropped to 2.73% from 3.23%, and the domestic card charge-off rate fell to 3.98% from 4.71%. The common equity tier 1 ratio stood at a preliminary 13.8% at September 30.
Why it matters: the beat came mostly from margin and cost control, not loan growth, as card balances and purchase volume were flat on the quarter. The forward credit signals were mixed. Domestic card 30-plus day delinquencies rose 35 basis points to 3.74% and the auto charge-off rate edged up to 1.59%, a trend worth watching with 10-year Treasury yields above 5%. The share count also fell to 601.5 million from 613.5 million over the quarter. Even after the after-hours move, the stock remains well below its 52-week high of $259.64.