Net income: $1.8 billion, or $4.41 per diluted common share.
Adjusted earnings per share: $4.51 after adjusting for items.
Earnings before provisions: +3% to $4.7 billion.
Revenue Growth: Increased 5% due to higher net interest income.
Non-interest expense: increased 7% due to higher operating and marketing expenses.
Allowance for credit losses: $2.5 billion, down $1.4 billion from the prior quarter.
Allowance Release: $134 million was released, leaving an allowance balance of $16.5 billion.
Total liquidity reserves: increased to approximately $132 billion.
Net interest margin: 7.11%, up 41 basis points from last quarter.
Common Equity Tier 1 Capital Ratio: 13.6%, up 40 basis points from last quarter.
Domestic card revenue growth rate: 10% YoY.
Domestic cards return: 18.7%, up 43 basis points year over year.
Amortization rate: 5.61%, increased by 38 basis points due to termination of Walmart contract.
Delinquency rate for people 30 and older: 4.53%, an increase of 22 basis points from the previous year.
Marketing expenses: $1.1 billion, up 15% year over year.
Automatic origination: 23% increase year over year.
Consumer Banking Revenue: down 3% year over year.
Consumer banking non-interest expenses: 5% increase year over year.
Automatic charge-off rate: 2.05%, up 28 basis points from the same period last year.
Commercial Bank Net Charge-off Rate: 0.2%, up 7 basis points sequentially.
Release date: October 24, 2024
For a complete record of financial statements, see Complete Record of Financial Statements.
Capital One Financial Corp (NYSE:COF) reported a strong third quarter with earnings of $1.8 billion and $4.41 per diluted common share.
Pre-provision earnings increased 3% from the second quarter to $4.7 billion due to higher net interest income.
The company saw revenue increase 5% sequentially due to higher net interest income.
Capital One Financial Corp (NYSE:COF) saw a 23% year-over-year increase in auto originations, indicating strong growth in the sector.
The company’s liquidity reserves increased by approximately $9 billion to approximately $132 billion, reflecting strong deposit growth.
Non-interest expenses increased 7% due to higher operating and marketing expenses.
Reserve for credit losses was $2.5 billion, down from last quarter but still a significant expense.
The charge-off rate in the credit card division rose to 5.61%, due to the termination of Walmart’s loss-bearing contract.
Consumer Banking segment revenue decreased approximately 3% compared to the prior year period, primarily due to higher deposit costs.
In the Commercial Banking segment, ending loan balances decreased by approximately 2% compared to the related quarter.
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Q: Can you talk about the current state of consumer credit across different segments and what that means for potential losses in major asset classes? A: Richard Fairbank CEO: U.S. consumers , continues to do relatively well due to a strong labor market and rising incomes. But some of the pressure is due to inflation and rising interest rates. We are seeing a lag in amortization from the pandemic period. For Capital One, although credit has stabilized above pre-pandemic levels due to lower recovery rates and affordability pressures, we remain confident in our credit performance and are effectively managing risk. We are making strategic adjustments to manage it.
Q: Given recent trends and Fed actions, what do you expect net interest margin (NIM) to be? A: Andrew Young CFO: In the near term, we expect some pressure on NIM due to asset sensitivity, but card growth could provide a tailwind. Over the long term, factors such as cash levels, yield curve steepening, and credit channels will impact NIM. Despite some headwinds, recent stability and third-quarter growth suggest a positive outlook.
Q: How is Capital One’s automotive business performing? What is the outlook for growth? A: Richard Fairbank CEO: Automotive new entries have increased for three consecutive quarters. Due to anticipated risks, we exited in 2022, but our credit history remains strong. With interest rates and vehicle values easing, we believe there is an opportunity for disciplined growth supported by our underwriting and dealer relationships.
Q: How will the Discover acquisition impact your company’s regulatory approval process and competitive position? A: Richard Fairbank CEO: The Discover acquisition is unique in that it involves the acquisition of a network. , and we believe this will enhance competition in a concentrated industry. We believe this acquisition will be competitive and create significant value for our merchants and customers.
Q: What is your approach to managing capital and share repurchases given the Discover acquisition and regulatory uncertainty? A: Andrew Young CFO: Given the regulatory changes and uncertainty surrounding the Discover acquisition, what is your approach to managing capital and share repurchases? Therefore, we maintain a cautious approach. Although we are repurchasing our own shares at a moderate pace, we are prepared to promptly return excess capital as soon as our post-acquisition capital needs become clear.
For a complete record of financial statements, see Complete Record of Financial Statements.
This article first appeared on GuruFocus.
