We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Capital One (COF) Stock Up 5.3% on Q3 Earnings & Revenue Beat
Read MoreHide Full Article
Shares of Capital One (COF - Free Report) gained 5.3% in after-hours trading following the release of better-than-expected third-quarter 2023 results. Earnings of $4.45 per share surpassed the Zacks Consensus Estimate of $3.27 by a considerable margin. Also, the bottom line grew 6% from the year-ago quarter.
Results benefited from an increase in net interest income (NII), higher loan balance and lower expenses. Further, higher fee income on the back of robust credit card performance offered support. However, net interest margin (NIM) declined year over year due to the rise in deposit costs. Also, higher provisions were the undermining factor.
Net income available to common shareholders was $1.71 billion, increasing 6% from the prior-year quarter. Our estimate for the metric was $1.23 billion.
Revenues Improve, Expenses Down
Total net revenues were $9.37 billion, up 6% from the prior-year quarter. The top line beat the Zacks Consensus Estimate of $9.16 billion.
NII improved 6% to $7.42 billion. NIM declined 11 basis points (bps) to 6.69% as higher rates paid on interest-bearing deposits were more than offset by higher asset yields and growth in the Credit Card loan portfolio. Our estimates for NII and NIM were $7.25 billion and 6.42%, respectively.
Non-interest income of $1.94 billion increased 8%. The rise was driven by an increase in net interchange fees, service charges and other customer-related fees and other income. Our estimate for non-interest income was $1.85 billion.
Non-interest expenses were $4.86 billion, down 2%. The decrease was attributable to lower marketing costs, professional services, communications and data processing-related costs and other expenses. We expected the metric to be $5.03 billion.
The efficiency ratio was 51.89%, down from 56.21% in the year-ago quarter. A fall in the efficiency ratio indicates an improvement in profitability.
As of Sep 30, 2023, loans held for investment were $314.78 billion, up 1% from the prior-quarter end. Total deposits were $346.01 billion, which rose 1%.
Credit Quality Worsens
Provision for credit losses was $2.28 billion in the reported quarter, rising 37% from the prior-year quarter. We had anticipated provisions of $2.50 billion.
The 30-plus-day-performing delinquency rate rose 84 bps year over year to 3.42%. Also, the net charge-off rate jumped 132 bps to 2.56%. Allowance, as a percentage of reported loans held for investment, was 4.75%, up 73 bps year over year.
Capital & Profitability Ratios Improve
As of Sep 30, 2023, the Tier 1 risk-based capital ratio was 14.3%, up from 13.6% a year ago. The common equity Tier 1 capital ratio was 13%, improving from 12.2%.
At the end of the third quarter, the return on average assets was 1.52%, on par with the year-ago period. Return on average common equity was 13.59%, rising from 13.01%.
Share Repurchase
During the reported quarter, Capital One repurchased 1.4 million shares for $150 million.
Our View
Capital One’s strategic acquisitions, rise in demand for consumer loans, higher rates and steady improvement in the card business position it well for long-term growth. However, elevated expenses and a deteriorating macroeconomic backdrop are major near-term concerns.
Capital One Financial Corporation Price, Consensus and EPS Surprise
Ally Financial’s (ALLY - Free Report) third-quarter 2023 adjusted earnings of 83 cents per share surpassed the Zacks Consensus Estimate of 80 cents. The bottom line reflects a decline of 25.9% from the year-ago quarter.
Results were primarily aided by an improvement in other revenues. A decent increase in loans was another tailwind. However, a decline in net financing revenues, along with higher expenses and provisions, were the undermining factors for ALLY.
Navient Corporation (NAVI - Free Report) reported third-quarter 2023 adjusted earnings per share of 47 cents, missing the Zacks Consensus Estimate of 81 cents. Also, the bottom line was lower than the prior-year quarter’s 62 cents.
Results were adversely impacted by a fall in total other income and elevated expenses. However, a rise in core NII acted as a tailwind for NAVI.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Capital One (COF) Stock Up 5.3% on Q3 Earnings & Revenue Beat
Shares of Capital One (COF - Free Report) gained 5.3% in after-hours trading following the release of better-than-expected third-quarter 2023 results. Earnings of $4.45 per share surpassed the Zacks Consensus Estimate of $3.27 by a considerable margin. Also, the bottom line grew 6% from the year-ago quarter.
Results benefited from an increase in net interest income (NII), higher loan balance and lower expenses. Further, higher fee income on the back of robust credit card performance offered support. However, net interest margin (NIM) declined year over year due to the rise in deposit costs. Also, higher provisions were the undermining factor.
Net income available to common shareholders was $1.71 billion, increasing 6% from the prior-year quarter. Our estimate for the metric was $1.23 billion.
Revenues Improve, Expenses Down
Total net revenues were $9.37 billion, up 6% from the prior-year quarter. The top line beat the Zacks Consensus Estimate of $9.16 billion.
NII improved 6% to $7.42 billion. NIM declined 11 basis points (bps) to 6.69% as higher rates paid on interest-bearing deposits were more than offset by higher asset yields and growth in the Credit Card loan portfolio. Our estimates for NII and NIM were $7.25 billion and 6.42%, respectively.
Non-interest income of $1.94 billion increased 8%. The rise was driven by an increase in net interchange fees, service charges and other customer-related fees and other income. Our estimate for non-interest income was $1.85 billion.
Non-interest expenses were $4.86 billion, down 2%. The decrease was attributable to lower marketing costs, professional services, communications and data processing-related costs and other expenses. We expected the metric to be $5.03 billion.
The efficiency ratio was 51.89%, down from 56.21% in the year-ago quarter. A fall in the efficiency ratio indicates an improvement in profitability.
As of Sep 30, 2023, loans held for investment were $314.78 billion, up 1% from the prior-quarter end. Total deposits were $346.01 billion, which rose 1%.
Credit Quality Worsens
Provision for credit losses was $2.28 billion in the reported quarter, rising 37% from the prior-year quarter. We had anticipated provisions of $2.50 billion.
The 30-plus-day-performing delinquency rate rose 84 bps year over year to 3.42%. Also, the net charge-off rate jumped 132 bps to 2.56%. Allowance, as a percentage of reported loans held for investment, was 4.75%, up 73 bps year over year.
Capital & Profitability Ratios Improve
As of Sep 30, 2023, the Tier 1 risk-based capital ratio was 14.3%, up from 13.6% a year ago. The common equity Tier 1 capital ratio was 13%, improving from 12.2%.
At the end of the third quarter, the return on average assets was 1.52%, on par with the year-ago period. Return on average common equity was 13.59%, rising from 13.01%.
Share Repurchase
During the reported quarter, Capital One repurchased 1.4 million shares for $150 million.
Our View
Capital One’s strategic acquisitions, rise in demand for consumer loans, higher rates and steady improvement in the card business position it well for long-term growth. However, elevated expenses and a deteriorating macroeconomic backdrop are major near-term concerns.
Capital One Financial Corporation Price, Consensus and EPS Surprise
Capital One Financial Corporation price-consensus-eps-surprise-chart | Capital One Financial Corporation Quote
Currently, Capital One carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Consumer Loan Stocks
Ally Financial’s (ALLY - Free Report) third-quarter 2023 adjusted earnings of 83 cents per share surpassed the Zacks Consensus Estimate of 80 cents. The bottom line reflects a decline of 25.9% from the year-ago quarter.
Results were primarily aided by an improvement in other revenues. A decent increase in loans was another tailwind. However, a decline in net financing revenues, along with higher expenses and provisions, were the undermining factors for ALLY.
Navient Corporation (NAVI - Free Report) reported third-quarter 2023 adjusted earnings per share of 47 cents, missing the Zacks Consensus Estimate of 81 cents. Also, the bottom line was lower than the prior-year quarter’s 62 cents.
Results were adversely impacted by a fall in total other income and elevated expenses. However, a rise in core NII acted as a tailwind for NAVI.