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NII, Fee Income to Support Capital One's (COF) Q3 Earnings
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Capital One (COF - Free Report) is scheduled to report third-quarter 2022 results on Oct 27, after market close. While quarterly earnings are expected to have witnessed a fall on a year-over-year basis, revenues are likely to have risen.
In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate. Results were affected by higher provisions for credit losses and an increase in operating expenses. Yet, a robust improvement in loan balances and higher interest rates aided net interest income (NII). Further decent consumer sentiments supported the credit card business and non-interest income.
Capital One has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 9.41%.
Capital One Financial Corporation Price and EPS Surprise
Net interest income (NII): In the third quarter, the demand for consumer loans was robust, which drove the loan balances. The Zacks Consensus Estimate for total average earning assets of $406.6 billion indicates a 4.9% rise from the prior-year quarter’s reported figure. We project this metric to be $398.6 billion, implying 2.8% growth.
Capital One’s efforts to strengthen its card operations are expected to have provided further support to loan growth. Along with the increase in loan balances, higher interest rates are expected to have positively impacted the company’s NII. The consensus estimate for NII of $6.77 billion indicates a 10% year-over-year improvement. Our estimate for NII stands at $6.67 billion, reflecting an increase of 8.3%.
Fee income: Supported by the rise in card usage, Capital One’s interchange fee (constituting more than 60% of fee income) is likely to have been positively impacted. The Zacks Consensus Estimate for the same is $1.14 billion, indicating an 11.6% growth on a year-over-year basis. We anticipate interchange fee to be $1.11 billion, suggesting an 8.8% improvement.
The consensus estimate for service charges and other customer-related fees (constituting almost 20% of fee income) of $420 million suggests a 3.2% increase. The Zacks Consensus Estimate for other non-interest income is pegged at $213 million, indicating a year-over-year fall of 12.3%. Our estimates for service charges and other customer-related fees, and other non-interest income are $430.7 million and 307.9 million, respectively.
The consensus estimate for total non-interest income of $1.76 billion suggests a rise of 5.3% from the prior-year quarter’s reported figure. We expect the metric to grow 10.5% to $1.85 billion.
Expenses: Capital One has been witnessing a persistent rise in expenses over the past several years because of higher marketing costs. The company’s investment in technology upgrades leads to higher costs. These, along with rising inflation, are expected to have resulted in an increase in operating expenses in the third quarter.
Our estimate for total non-interest expenses stands at $4.94 billion, reflecting an increase of 18% year over year.
Asset Quality: With the rise in loan balance and expectations of economic slowdown due to geopolitical and inflation concerns, Capital One is likely to have built reserves in the third quarter.
Our estimate for provision for credit losses is pegged at $1.07 billion against a provision benefit of $342 million a year ago.
Earnings Whispers
According to our quantitative model, the chances of Capital One beating the Zacks Consensus Estimate this time are low. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Capital One is -1.76%.
Zacks Rank: The company currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for Capital One’s third-quarter earnings of $5.03 has been revised marginally lower over the past seven days. The figure indicates a plunge of 26.7% from the prior-year quarter’s reported number. Our estimate for earnings per share of $5.12 suggests a 25.4% decline.
The consensus estimate for sales is pegged at $8.60 billion, suggesting a year-over-year increase of 9.9%. We project this metric to be 8.52 billion, reflecting an 8.8% growth.
Stocks That Warrant a Look
A couple of other finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Earnings ESP for First Citizens BancShares, Inc. (FCNCA - Free Report) is +1.84% and it sports a Zacks Rank #1 (Strong Buy) at present. The company is slated to report third-quarter 2022 results on Oct 27.
Over the past 30 days, the Zacks Consensus Estimate for FCNCA’s quarterly earnings has been revised almost 1% north.
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NII, Fee Income to Support Capital One's (COF) Q3 Earnings
Capital One (COF - Free Report) is scheduled to report third-quarter 2022 results on Oct 27, after market close. While quarterly earnings are expected to have witnessed a fall on a year-over-year basis, revenues are likely to have risen.
In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate. Results were affected by higher provisions for credit losses and an increase in operating expenses. Yet, a robust improvement in loan balances and higher interest rates aided net interest income (NII). Further decent consumer sentiments supported the credit card business and non-interest income.
Capital One has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 9.41%.
Capital One Financial Corporation Price and EPS Surprise
Capital One Financial Corporation price-eps-surprise | Capital One Financial Corporation Quote
Key Factors & Estimates for Q3
Net interest income (NII): In the third quarter, the demand for consumer loans was robust, which drove the loan balances. The Zacks Consensus Estimate for total average earning assets of $406.6 billion indicates a 4.9% rise from the prior-year quarter’s reported figure. We project this metric to be $398.6 billion, implying 2.8% growth.
Capital One’s efforts to strengthen its card operations are expected to have provided further support to loan growth. Along with the increase in loan balances, higher interest rates are expected to have positively impacted the company’s NII. The consensus estimate for NII of $6.77 billion indicates a 10% year-over-year improvement. Our estimate for NII stands at $6.67 billion, reflecting an increase of 8.3%.
Fee income: Supported by the rise in card usage, Capital One’s interchange fee (constituting more than 60% of fee income) is likely to have been positively impacted. The Zacks Consensus Estimate for the same is $1.14 billion, indicating an 11.6% growth on a year-over-year basis. We anticipate interchange fee to be $1.11 billion, suggesting an 8.8% improvement.
The consensus estimate for service charges and other customer-related fees (constituting almost 20% of fee income) of $420 million suggests a 3.2% increase. The Zacks Consensus Estimate for other non-interest income is pegged at $213 million, indicating a year-over-year fall of 12.3%. Our estimates for service charges and other customer-related fees, and other non-interest income are $430.7 million and 307.9 million, respectively.
The consensus estimate for total non-interest income of $1.76 billion suggests a rise of 5.3% from the prior-year quarter’s reported figure. We expect the metric to grow 10.5% to $1.85 billion.
Expenses: Capital One has been witnessing a persistent rise in expenses over the past several years because of higher marketing costs. The company’s investment in technology upgrades leads to higher costs. These, along with rising inflation, are expected to have resulted in an increase in operating expenses in the third quarter.
Our estimate for total non-interest expenses stands at $4.94 billion, reflecting an increase of 18% year over year.
Asset Quality: With the rise in loan balance and expectations of economic slowdown due to geopolitical and inflation concerns, Capital One is likely to have built reserves in the third quarter.
Our estimate for provision for credit losses is pegged at $1.07 billion against a provision benefit of $342 million a year ago.
Earnings Whispers
According to our quantitative model, the chances of Capital One beating the Zacks Consensus Estimate this time are low. This is because it doesn’t have the right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or higher.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: The Earnings ESP for Capital One is -1.76%.
Zacks Rank: The company currently carries a Zacks Rank #3.
The Zacks Consensus Estimate for Capital One’s third-quarter earnings of $5.03 has been revised marginally lower over the past seven days. The figure indicates a plunge of 26.7% from the prior-year quarter’s reported number. Our estimate for earnings per share of $5.12 suggests a 25.4% decline.
The consensus estimate for sales is pegged at $8.60 billion, suggesting a year-over-year increase of 9.9%. We project this metric to be 8.52 billion, reflecting an 8.8% growth.
Stocks That Warrant a Look
A couple of other finance stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Earnings ESP for First Citizens BancShares, Inc. (FCNCA - Free Report) is +1.84% and it sports a Zacks Rank #1 (Strong Buy) at present. The company is slated to report third-quarter 2022 results on Oct 27.
Over the past 30 days, the Zacks Consensus Estimate for FCNCA’s quarterly earnings has been revised almost 1% north.
Cullen/Frost Bankers, Inc. (CFR - Free Report) is also scheduled to release third-quarter 2022 earnings on Oct 27. CFR, which carries a Zacks Rank #3 at present, has an Earnings ESP of +0.73%. You can see the complete list of today’s Zacks #1 Rank stocks here.
CFR’s quarterly earnings estimates have moved 3.1% lower over the past month.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.