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COF's Q3 Earnings Top on Discover Deal, New Buyback Plan Boosts Stock
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Key Takeaways
Capital One's Q3 adjusted EPS rose to $5.95, beating estimates and up 9% sequentially.
The Discover deal and resilient card spending fueled a 23% rise in total net revenues.
A new $16B share repurchase plan and a planned 33.3% dividend hike boosted COF shares.
Capital One (COF - Free Report) reported better-than-expected third-quarter 2025 results, with the acquisition of Discover Financial Services in May acting as a major catalyst.
Adjusted earnings of $5.95 per share outpaced the Zacks Consensus Estimate of $4.20 and grew 9% sequentially. Moreover, COF’s total net revenues surged 23% to $15.36 billion and surpassed the consensus estimate of $14.9 billion.
Relatively higher interest rates for most of the reported quarter and resilient consumer card spending amid trade policy and economic uncertainties supported the company’s quarterly performance. CEO Richard Fairbank acknowledged Discover Financial’s contribution to revenue growth and earnings recovery.
Capital One Financial Corporation Price and EPS Surprise
Further, COF’s board of directors authorized the repurchase of up to $16 billion of shares. This replaced the company’s previous buyback authorization announced in April 2022. The company also intends to increase its quarterly dividend by 33.3% to 80 cents per share, subject to approval by its board of directors.
Growing investor confidence in the Discover buyout and Capital One’s new capital distribution plan seems to have resulted in its shares gaining 4.6% in after-hours trading yesterday.
Resilient Card Spending, Discover Deal Aid COF’s Revenues
Following the Discover buyout, COF is now the biggest U.S. credit card issuer by balances. On a sequential basis, the company’s credit card loan portfolio rose marginally to $272 billion, driven by persistent demand for credit card loans.
Interest on credit card loans is significantly higher than that on mortgages and other types of loans. So, this, along with lower rates paid on deposits and the Discover deal, drove Capital One’s net interest income (NII) and margins. As such, quarterly NII improved 24% from the prior quarter to $12.4 billion and net interest income (NIM) expanded 74 basis points (bps) to 8.36%.
Consumer spending in the United States, which drives the bulk of Capital One’s credit card loan portfolio, was resilient in the third quarter. While inflationary pressures amid ambiguity over tariff policies and softening labor market dampened discretionary purchases to some extent, spending on essential goods and services held firm. Hence, purchase volume on Capital One credit cards jumped 14% sequentially to $230.4 billion.
Driven by increased card spend during the quarter, Capital One's non-interest income, which primarily consists of net interchange income and service charges and other customer-related fees, grew 18% to $2.96 billion.
Other Factors That Impacted Capital One’s Q3 Earnings
In the third quarter, Capital One’s provision for credit losses was $2.71 billion, down 76% from the prior quarter. In the second quarter, the company had built an initial allowance of $8.8 billion for the Discover deal, leading to a massive surge in provision for credit losses.
Further, COF’s non-interest expenses increased 18% to $8.26 billion. This included Discover acquisition-related charges. Excluding these, this Zacks Rank #2 (Buy) company reported adjusted expenses of $7.24 billion, up 16%. You can see third-quarter 2025 results.
Driven by robust top-line growth and the Discover buyout, Capital One’s bottom line improved during the third quarter in the absence of several one-time charges. The company’s net income available to common shareholders was $3.09 billion against a net loss of $4.34 billion in the last quarter.
Performance & Earnings Date of COF’s Peers
Ally Financial’s (ALLY - Free Report) third-quarter 2025 adjusted earnings of $1.15 per share surpassed the Zacks Consensus Estimate of 99 cents. Further, the bottom line reflected a significant jump from the year-ago quarter.
Results primarily benefited from a rise in net finance revenues and lower provisions. Also, a marginal rally in loan balances supported ALLY’s results to some extent. However, a decline in other revenues and higher non-interest expenses were the undermining factors.
Navient (NAVI - Free Report) is scheduled to announce third-quarter 2025 results on Oct. 29.
Over the past seven days, the Zacks Consensus Estimate for NAVI’s quarterly earnings has remained unchanged at 18 cents. This implies a 35.7% decrease from the prior-year quarter.
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COF's Q3 Earnings Top on Discover Deal, New Buyback Plan Boosts Stock
Key Takeaways
Capital One (COF - Free Report) reported better-than-expected third-quarter 2025 results, with the acquisition of Discover Financial Services in May acting as a major catalyst.
Adjusted earnings of $5.95 per share outpaced the Zacks Consensus Estimate of $4.20 and grew 9% sequentially. Moreover, COF’s total net revenues surged 23% to $15.36 billion and surpassed the consensus estimate of $14.9 billion.
Relatively higher interest rates for most of the reported quarter and resilient consumer card spending amid trade policy and economic uncertainties supported the company’s quarterly performance. CEO Richard Fairbank acknowledged Discover Financial’s contribution to revenue growth and earnings recovery.
Capital One Financial Corporation Price and EPS Surprise
Capital One Financial Corporation price-eps-surprise | Capital One Financial Corporation Quote
Further, COF’s board of directors authorized the repurchase of up to $16 billion of shares. This replaced the company’s previous buyback authorization announced in April 2022. The company also intends to increase its quarterly dividend by 33.3% to 80 cents per share, subject to approval by its board of directors.
Growing investor confidence in the Discover buyout and Capital One’s new capital distribution plan seems to have resulted in its shares gaining 4.6% in after-hours trading yesterday.
Resilient Card Spending, Discover Deal Aid COF’s Revenues
Following the Discover buyout, COF is now the biggest U.S. credit card issuer by balances. On a sequential basis, the company’s credit card loan portfolio rose marginally to $272 billion, driven by persistent demand for credit card loans.
Interest on credit card loans is significantly higher than that on mortgages and other types of loans. So, this, along with lower rates paid on deposits and the Discover deal, drove Capital One’s net interest income (NII) and margins. As such, quarterly NII improved 24% from the prior quarter to $12.4 billion and net interest income (NIM) expanded 74 basis points (bps) to 8.36%.
Consumer spending in the United States, which drives the bulk of Capital One’s credit card loan portfolio, was resilient in the third quarter. While inflationary pressures amid ambiguity over tariff policies and softening labor market dampened discretionary purchases to some extent, spending on essential goods and services held firm. Hence, purchase volume on Capital One credit cards jumped 14% sequentially to $230.4 billion.
Driven by increased card spend during the quarter, Capital One's non-interest income, which primarily consists of net interchange income and service charges and other customer-related fees, grew 18% to $2.96 billion.
Other Factors That Impacted Capital One’s Q3 Earnings
In the third quarter, Capital One’s provision for credit losses was $2.71 billion, down 76% from the prior quarter. In the second quarter, the company had built an initial allowance of $8.8 billion for the Discover deal, leading to a massive surge in provision for credit losses.
Further, COF’s non-interest expenses increased 18% to $8.26 billion. This included Discover acquisition-related charges. Excluding these, this Zacks Rank #2 (Buy) company reported adjusted expenses of $7.24 billion, up 16%. You can see third-quarter 2025 results.
Driven by robust top-line growth and the Discover buyout, Capital One’s bottom line improved during the third quarter in the absence of several one-time charges. The company’s net income available to common shareholders was $3.09 billion against a net loss of $4.34 billion in the last quarter.
Performance & Earnings Date of COF’s Peers
Ally Financial’s (ALLY - Free Report) third-quarter 2025 adjusted earnings of $1.15 per share surpassed the Zacks Consensus Estimate of 99 cents. Further, the bottom line reflected a significant jump from the year-ago quarter.
Results primarily benefited from a rise in net finance revenues and lower provisions. Also, a marginal rally in loan balances supported ALLY’s results to some extent. However, a decline in other revenues and higher non-interest expenses were the undermining factors.
Navient (NAVI - Free Report) is scheduled to announce third-quarter 2025 results on Oct. 29.
Over the past seven days, the Zacks Consensus Estimate for NAVI’s quarterly earnings has remained unchanged at 18 cents. This implies a 35.7% decrease from the prior-year quarter.