Shares of Capital One (COF Quick QuoteCOF - Free Report) lost 2.9% in after-hour trading following the announcement of worse-than-expected fourth-quarter 2025 results. Adjusted earnings of $3.86 per share missed the Zacks Consensus Estimate of $4.12. However, the bottom line compared favorably with adjusted earnings of $3.09 in the prior-year quarter.

Results were primarily hurt by an increase in expenses and higher provisions. However, an improvement in net interest income (NII) along with higher non-interest income offered support to some extent. Also, higher loan balances were a tailwind.

Results in the reported quarter excluded non-recurring items. After considering these, net income available to common shareholders was $2.06 billion or $3.26 per share compared with $1.02 billion or $2.67 per share in the prior-year quarter.

Adjusted earnings for 2025 of $19.61 per share missed the Zacks Consensus Estimate of $19.82. The bottom line compared favorably with $13.96 in the previous year. Net income available to common shareholders (GAAP basis) was $2.18 billion or $4.03 per share compared with $4.45 billion or $11.59 per share in 2024.

Capital One’s Revenues Improve, Expenses Rise

Total quarterly net revenues were $15.58 billion, jumping 52.9% year over year. The top line beat the Zacks Consensus Estimate of $15.37 billion.

Net revenues in 2025 were $53.43 billion, up 36.6% year over year. Also, the top line beat the Zacks Consensus Estimate of $53.29 billion.

Quarterly NII surged 53.9% from the prior-year quarter to $12.5 billion. NIM expanded 123 basis points (bps) year over year to 8.26%. 

Non-interest income of $3.12 billion grew 49% year over year. The rise was driven by higher service charges and other customer-related fees, net discount and interchange fees and other income. 

Non-interest expenses were $9.34 billion, up 53.4% year over year. The rise was due to an increase in almost all cost components, with a significant rise in costs related to amortization of intangibles.

The efficiency ratio was 59.95%, up from 59.75% in the prior-year quarter. A rise in the efficiency ratio indicates a deterioration in profitability.

As of Dec. 31, 2025, loans held for investment were $453.6 billion, up 2% from the prior-quarter end. Total deposits were $475.8 billion, up 1% sequentially.

COF’s Credit Quality: A Mixed Bag

Provision for credit losses was $4.12 billion, a 56.8% rise from the prior-year quarter. Additionally, allowance, as a percentage of reported loans held for investment, was 5.16%, up 20 bps.

However, the net charge-off rate declined 14 bps year over year to 3.45%. Also, the 30-plus-day-performing delinquency rate declined 28 bps to 3.41%.

COF’s Capital Ratios Improve

As of Dec. 31, 2025, the Tier 1 risk-based capital ratio was 15.3%, up from 14.8% as of Dec 31, 2024. The common equity Tier 1 capital ratio was 14.3%, improving from 13.5%.

Capital One-Brex Acquisition Deal

Concurrent with the earnings release, Capital One announced that it has agreed to acquire Brex for $5.15 billion in a stock-cum-cash deal. The transaction is expected to be closed in the middle of 2026, subject to the satisfaction of customary closing conditions.

Richard D. Fairbank, founder, chairman, and CEO of Capital One, said, “Since our founding, we set out to build a payments company at the frontier of the technology revolution. Acquiring Brex accelerates this journey, especially in the business payments marketplace. Brex invented the integrated combination of corporate credit cards, spend management software and banking together in a single platform. They have taken the rarest of journeys for a fintech, building a vertically integrated platform from the bottom of the tech stack to the top.” 

Pedro Franceschi, the founder and CEO of Brex, stated, “We started Brex in 2017 as a category creator – bringing together financial services and software into one AI-native platform. Now we get to supercharge our next chapter in partnership with the team at Capital One. Together, we’ll maximize founder mode by combining Brex’s payments expertise and spend management software with Capital One’s massive scale, sophisticated underwriting, and compelling brand to accelerate growth and increase the speed at which we can offer better finance solutions to the millions of businesses in the U.S. mainstream economy.”

Our View on Capital One

Strategic expansion efforts, demand for consumer loans, favorable changes in interest rates and steady improvement in the card business position Capital One well for long-term growth. Moreover, the acquisition of Discover Financial has reshaped the landscape of the credit card industry, leading to the formation of a behemoth in the industry. However, elevated expenses and weak asset quality amid a tough macroeconomic backdrop are concerns.

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 COF’s Peer

Ally Financial’s (ALLY Quick QuoteALLY - Free Report) fourth-quarter 2025 adjusted earnings of $1.09 per share surpassed the Zacks Consensus Estimate of $1.01. The bottom line reflected a 39.7% jump from the year-ago quarter.

Results primarily benefited from a rise in net finance revenues and other revenues. Also, lower provisions and a decline in expenses were tailwinds for ALLY. An increase in loan balances further supported the results to some extent.

An Upcoming Peer Release

Navient (NAVI Quick QuoteNAVI - Free Report) is scheduled to announce fourth-quarter and 2025 results on Jan. 28.

Over the past seven days, the Zacks Consensus Estimate for NAVI’s quarterly earnings has remained unchanged at 31 cents. This implies a 24% rise from the prior-year quarter.