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COF Shares Slide on Q1 Earnings Miss as Provisions & Expenses Jump Y/Y
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Key Takeaways
COF slid 3.2% after Q1 adjusted earnings of $4.42 missed estimates despite higher revenues.
COF provisions for credit losses jumped 72% Y/Y, and net charge-offs rose 41%, signaling weaker credit.
COF non-interest expense rose 43% Y/Y, and NIM widened to 7.87%; deposits grew 3% sequentially.
Shares of Capital One Financial’s (COF - Free Report) lost 3.2% during after-hours trading on lower-than-expected first-quarter 2026 performance. Adjusted earnings of $4.42 per share lagged the Zacks Consensus Estimate of $4.61. However, the bottom line was up from $4.06 in the prior-year quarter.
Results were hurt by a jump in provisions, higher expenses and a lower loan balance. However, a rise in net interest income (NII) and higher non-interest income offered support. Improvement in net interest margin (NIM) and sequential deposit growth were other positives.
Results excluded Discover Financial-related amortization and integration expenses. Including these, net income available to common stockholders (GAAP basis) was $2.08 billion, or $3.34 per share, up from $1.33 billion, or $3.45 per share, in the prior-year quarter.
Capital One’s Revenues Increase, Expenses Rise
Total net revenues were $15.23 billion, rising 52% year over year. However, the top line missed the Zacks Consensus Estimate of $15.37 billion.
NII was $12.15 billion, up 52% from the prior-year quarter. Net interest margin (NIM) expanded 94 basis points (bps) year over year to 7.87%.
Non-interest income was $3.09 billion, up 55% year over year. The increase was driven by a rise in net discount and interchange fees, service charges and other customer-related fees and other income.
Non-interest expense was $8.46 billion, up 43% year over year. The increase reflected a rise in all cost components.
The efficiency ratio was 55.57%, improving from 59.02% in the prior-year quarter. An improvement in the efficiency ratio indicates better profitability.
As of March 31, 2026, loans held for investment were $447.75 billion, down 1% from the prior quarter. Total deposits were $489.05 billion, up 3% sequentially.
COF’s Credit Quality Weakens
Provision for credit losses was $4.07 billion, up 72% year over year. The allowance for credit losses, as a percentage of loans held for investment, was 5.28%, up 37 bps.
Net charge-offs (NCOs) were $3.85 billion, jumping 41% year over year. The NCO rate rose 5 bps.
On the other hand, the 30-plus-day performing delinquency rate was 3.04%, down 25 bps year over year. The 30-plus-day delinquency rate was 3.24%, down 27 bps.
COF’s Capital Ratios Improve
As of March 31, 2026, the common equity Tier 1 capital ratio was 14.4%, up from 13.6% in the prior-year quarter. The Tier 1 capital ratio was 15.4%, up from 14.9% a year ago.
Capital One’s Share Repurchase Update
During the reported quarter, Capital One repurchased 12.1 million shares for $2.5 billion.
Our Viewpoint on Capital One
Strategic expansion efforts, demand for consumer loans, favorable changes in interest rates and steady improvement in the card business are expected to support Capital One well for long-term growth. The acquisition of Discover Financial has reshaped the landscape of the credit card industry, leading to the formation of a behemoth. However, elevated expenses and weak asset quality against a tough macroeconomic backdrop are major near-term concerns.
Capital One Financial Corporation Price, Consensus and EPS Surprise
Performance and Earnings Expectations of COF’s Peers
Ally Financial’s (ALLY - Free Report) first-quarter 2026 adjusted earnings of $1.11 per share surpassed the Zacks Consensus Estimate of 93 cents. The bottom line reflected a 90% jump from the year-ago quarter.
Results primarily benefited from a rise in net financing revenues and a sharp increase in other revenues. Lower expenses and an increase in loan and deposit balances were tailwinds for ALLY. However, a rise in provisions was an undermining factor.
Navient (NAVI - Free Report) is scheduled to announce first-quarter 2026 results on April 29.
Over the past seven days, the Zacks Consensus Estimate for NAVI’s quarterly earnings has remained unchanged at 17 cents. This implies a 39.3% decline from the prior-year quarter.
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COF Shares Slide on Q1 Earnings Miss as Provisions & Expenses Jump Y/Y
Key Takeaways
Shares of Capital One Financial’s (COF - Free Report) lost 3.2% during after-hours trading on lower-than-expected first-quarter 2026 performance. Adjusted earnings of $4.42 per share lagged the Zacks Consensus Estimate of $4.61. However, the bottom line was up from $4.06 in the prior-year quarter.
Results were hurt by a jump in provisions, higher expenses and a lower loan balance. However, a rise in net interest income (NII) and higher non-interest income offered support. Improvement in net interest margin (NIM) and sequential deposit growth were other positives.
Results excluded Discover Financial-related amortization and integration expenses. Including these, net income available to common stockholders (GAAP basis) was $2.08 billion, or $3.34 per share, up from $1.33 billion, or $3.45 per share, in the prior-year quarter.
Capital One’s Revenues Increase, Expenses Rise
Total net revenues were $15.23 billion, rising 52% year over year. However, the top line missed the Zacks Consensus Estimate of $15.37 billion.
NII was $12.15 billion, up 52% from the prior-year quarter. Net interest margin (NIM) expanded 94 basis points (bps) year over year to 7.87%.
Non-interest income was $3.09 billion, up 55% year over year. The increase was driven by a rise in net discount and interchange fees, service charges and other customer-related fees and other income.
Non-interest expense was $8.46 billion, up 43% year over year. The increase reflected a rise in all cost components.
The efficiency ratio was 55.57%, improving from 59.02% in the prior-year quarter. An improvement in the efficiency ratio indicates better profitability.
As of March 31, 2026, loans held for investment were $447.75 billion, down 1% from the prior quarter. Total deposits were $489.05 billion, up 3% sequentially.
COF’s Credit Quality Weakens
Provision for credit losses was $4.07 billion, up 72% year over year. The allowance for credit losses, as a percentage of loans held for investment, was 5.28%, up 37 bps.
Net charge-offs (NCOs) were $3.85 billion, jumping 41% year over year. The NCO rate rose 5 bps.
On the other hand, the 30-plus-day performing delinquency rate was 3.04%, down 25 bps year over year. The 30-plus-day delinquency rate was 3.24%, down 27 bps.
COF’s Capital Ratios Improve
As of March 31, 2026, the common equity Tier 1 capital ratio was 14.4%, up from 13.6% in the prior-year quarter. The Tier 1 capital ratio was 15.4%, up from 14.9% a year ago.
Capital One’s Share Repurchase Update
During the reported quarter, Capital One repurchased 12.1 million shares for $2.5 billion.
Our Viewpoint on Capital One
Strategic expansion efforts, demand for consumer loans, favorable changes in interest rates and steady improvement in the card business are expected to support Capital One well for long-term growth. The acquisition of Discover Financial has reshaped the landscape of the credit card industry, leading to the formation of a behemoth. However, elevated expenses and weak asset quality against a tough 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 and Earnings Expectations of COF’s Peers
Ally Financial’s (ALLY - Free Report) first-quarter 2026 adjusted earnings of $1.11 per share surpassed the Zacks Consensus Estimate of 93 cents. The bottom line reflected a 90% jump from the year-ago quarter.
Results primarily benefited from a rise in net financing revenues and a sharp increase in other revenues. Lower expenses and an increase in loan and deposit balances were tailwinds for ALLY. However, a rise in provisions was an undermining factor.
Navient (NAVI - Free Report) is scheduled to announce first-quarter 2026 results on April 29.
Over the past seven days, the Zacks Consensus Estimate for NAVI’s quarterly earnings has remained unchanged at 17 cents. This implies a 39.3% decline from the prior-year quarter.