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Capital One's NCO Rates Rise: How Will This Impact its Asset Quality?
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Key Takeaways
COF's October data showed higher card NCOs at 4.77% and rising delinquencies now above pre-pandemic levels.
Growing consumer strain and an 82% jump in provisions underscore pressure on COF's credit metrics.
Loan growth and strengths in card operations and acquisitions help buffer COF against asset-quality weakness.
Capital One (COF - Free Report) is entering a more challenging credit environment as rising net charge-offs (NCOs) and delinquencies signal mounting pressure on its consumer portfolios. Per the latest SEC filing, October 2025 brought a clear uptick in asset-quality strain.
Domestic credit card NCOs climbed to 4.77%, an increase of 42 basis points (bps) from September, while delinquencies rose 10 bps to 4.99%. Both figures are above pre-pandemic norms. In February 2020, NCOs were 4.68% and delinquencies 3.88%. Auto credit trends were somewhat balanced, with NCOs rising 21 bps to 1.67% but delinquencies edging 2 bps lower to 4.97%.
Loan growth offered a slight offset, as lending activity improved modestly in October. Capital One’s loans held for investment in domestic credit cards reached $254.2 billion, while its auto book increased to $82.5 billion. Yet the firm’s increasing exposure to consumer stress is reflected in its rising provisions. For the nine months ended Sept. 30, 2025, provisions for credit losses surged 82% year over year to $16.5 billion, partly influenced by the recently closed Discover Financial acquisition.
The broader K-shaped economic recovery is amplifying this divergence in credit performance. Affluent borrowers remain resilient, but lower-income and subprime segments, where Capital One has significant exposure, are feeling greater financial strain. This is leading to higher delinquencies, elevated defaults and continued pressure on NCOs. The trends are likely to persist in the near term, given inflationary headwinds and uneven macroeconomic improvement.
Nonetheless, Capital One retains meaningful strengths, including strategic scale from its acquisitions, robust credit card operations and the tailwind of relatively high interest rates supporting revenue momentum. Its strong balance sheet and targeted growth initiatives help buffer the impact of deteriorating credit metrics.
How COF Stacks Up Against Peers in Card NCO
Capital One’s two peers – American Express (AXP - Free Report) and Synchrony Financial (SYF - Free Report) – also reported a rise in NCO rates in October.
American Express’s NCO rate for the U.S. consumer card loans rose to 2.2% in October 2025 from 1.9% in September. Further, American Express witnessed a 1.2% increase in U.S. consumer card LHI to $95.2 billion.
Similarly, Synchrony Financial recorded an adjusted NCO rate of 5.3%, up 20 bps from September. Synchrony Financial’s loan receivables at the end of October were $100.4 billion, up marginally.
Capital One’s Price Performance, Valuation and Estimates
Capital One shares have risen 12.1% this year, massively underperforming the industry’s growth of 33.6%.
Image Source: Zacks Investment Research
From a valuation standpoint, COF trades at a 12-month forward price-to-earnings (P/E) of 10.15X, above the industry average.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Capital One’s 2025 and 2026 earnings indicates growth of 38% and 2.7%, respectively, on a year-over-year basis. In the past week, earnings estimates for 2025 have been revised upward to $19.26, while for 2026, it has moved slightly down to $19.78.
Image: Bigstock
Capital One's NCO Rates Rise: How Will This Impact its Asset Quality?
Key Takeaways
Capital One (COF - Free Report) is entering a more challenging credit environment as rising net charge-offs (NCOs) and delinquencies signal mounting pressure on its consumer portfolios. Per the latest SEC filing, October 2025 brought a clear uptick in asset-quality strain.
Domestic credit card NCOs climbed to 4.77%, an increase of 42 basis points (bps) from September, while delinquencies rose 10 bps to 4.99%. Both figures are above pre-pandemic norms. In February 2020, NCOs were 4.68% and delinquencies 3.88%. Auto credit trends were somewhat balanced, with NCOs rising 21 bps to 1.67% but delinquencies edging 2 bps lower to 4.97%.
Loan growth offered a slight offset, as lending activity improved modestly in October. Capital One’s loans held for investment in domestic credit cards reached $254.2 billion, while its auto book increased to $82.5 billion. Yet the firm’s increasing exposure to consumer stress is reflected in its rising provisions. For the nine months ended Sept. 30, 2025, provisions for credit losses surged 82% year over year to $16.5 billion, partly influenced by the recently closed Discover Financial acquisition.
The broader K-shaped economic recovery is amplifying this divergence in credit performance. Affluent borrowers remain resilient, but lower-income and subprime segments, where Capital One has significant exposure, are feeling greater financial strain. This is leading to higher delinquencies, elevated defaults and continued pressure on NCOs. The trends are likely to persist in the near term, given inflationary headwinds and uneven macroeconomic improvement.
Nonetheless, Capital One retains meaningful strengths, including strategic scale from its acquisitions, robust credit card operations and the tailwind of relatively high interest rates supporting revenue momentum. Its strong balance sheet and targeted growth initiatives help buffer the impact of deteriorating credit metrics.
How COF Stacks Up Against Peers in Card NCO
Capital One’s two peers – American Express (AXP - Free Report) and Synchrony Financial (SYF - Free Report) – also reported a rise in NCO rates in October.
American Express’s NCO rate for the U.S. consumer card loans rose to 2.2% in October 2025 from 1.9% in September. Further, American Express witnessed a 1.2% increase in U.S. consumer card LHI to $95.2 billion.
Similarly, Synchrony Financial recorded an adjusted NCO rate of 5.3%, up 20 bps from September. Synchrony Financial’s loan receivables at the end of October were $100.4 billion, up marginally.
Capital One’s Price Performance, Valuation and Estimates
Capital One shares have risen 12.1% this year, massively underperforming the industry’s growth of 33.6%.
Image Source: Zacks Investment Research
From a valuation standpoint, COF trades at a 12-month forward price-to-earnings (P/E) of 10.15X, above the industry average.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Capital One’s 2025 and 2026 earnings indicates growth of 38% and 2.7%, respectively, on a year-over-year basis. In the past week, earnings estimates for 2025 have been revised upward to $19.26, while for 2026, it has moved slightly down to $19.78.
Image Source: Zacks Investment Research
COF currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.