- The bank posted adjusted earnings of $5.95 per share for the three months ended Sept. 30, while analysts expected it to report earnings of $4.36 per share.
- The lender’s earnings were bolstered by a $760 million loan reserve release, with consumer banking and credit card charge-offs both declining year-over-year.
- Capital One also launched a fresh buyback program of $16 billion.
Capital One Financial (COF) stock gained 3.7% in extended trading on Tuesday after the lender topped Wall Street’s estimates for third-quarter earnings.
The bank posted adjusted earnings of $5.95 per share for the three months ended Sept. 30, while analysts expected it to report earnings of $4.36 per share, according to Fiscal.ai data. Its quarterly revenue of $15.36 billion also topped estimates of $15.07 billion.
The lender’s net earnings rose to $3.19 billion, or $4.83 per share, for the third quarter, compared with $1.78 billion, or $4.41 per share, in the year-ago quarter. Its net interest income jumped 54% to $12.4 billion.
Capital One also launched a fresh buyback program of $16 billion.
How Did Capital One Get A Profit Boost?
The lender’s earnings were bolstered by a $760 million loan reserve release, with consumer banking and credit card charge-offs both declining year-over-year. “The primary drivers of this quarter’s release were continued observed credit favorability in both losses and recoveries, as well as a slight improvement in the forecasted unemployment rate,” said CFO Andrew Young.
Investors were closely watching the firm’s delinquency rates after used car seller and subprime lender Tricolor Holdings filed for bankruptcy last month, raising doubts over the financial health of U.S. consumers.
“There’s been a lot of noise in the subprime auto space pointing to rising delinquency rates. Our own performance in subprime auto has remained stable through this time,” said CEO Richard Fairbank. However, he added that the bank is seeing economic pressures for lower-income families and is keeping a close eye on the situation.
What Is Retail Thinking?
Retail sentiment on Stocktwits about Capital One was in the ‘extremely bullish’ territory, while retail chatter was ‘extremely high.’
One user praised the earnings, noting multiple probable price target hikes and fresh all-time highs.
How Is Discover Financials’ Integration Progressing?
Capital One posted a 74 basis point rise in its net interest margin, which the bank primarily attributed to gains from its $35 billion deal for Discover Financial, completed earlier this year. “The Discover integration continues to go well, and we are well-positioned to capitalize on the opportunities that lie in front of us,” Fairbank said.
Capital One stock has gained 20.6% this year, compared with the 14.7% gains of the Invesco KBW Bank ETF.
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