Capital One (COF) Q1 Earnings Miss, Provisions Decline Y/Y

Capital One’s COF first-quarter 2024 adjusted earnings of $3.21 per share lagged the Zacks Consensus Estimate of $3.25. In the prior-year quarter, earnings per share was $2.31. The reported quarter’s results exclude an FDIC special assessment charge of $42 million.

Results were adversely impacted by higher expenses. Also, loan balances witnessed a sequential decline in the quarter. Nevertheless, an increase in net interest income (NII), along with higher non-interest income, supported the results to some extent. Also, a decline in provisions was a tailwind.

After considering the non-recurring item, net income available to common shareholders was $1.2 billion, up 35% from the prior-year quarter. Our estimate for the metric was $1.1 billion.

Revenues Improve, Expenses Rise

Total net revenues were $9.40 billion, up 6% from the prior-year quarter. The top line marginally beat the Zacks Consensus Estimate of $9.35 billion.

NII increased 4% year over year to $7.49 billion. The NIM expanded 9 basis points (bps) to 6.69%. Our estimates for NII and NIM were $7.56 billion and 6.71%, respectively.

Non-interest income of $1.91 billion increased 11% from the prior-year quarter. 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 $1.74 billion.

Non-interest expenses were $5.14 billion, up 4% year over year. The rise was due to an increase in almost all cost components, except for professional services costs. We expected the metric to be $5.11 billion.

The efficiency ratio was 54.64%, down from 55.54% in the year-ago quarter. A fall in the efficiency ratio indicates an improvement in profitability.

As of Mar 31, 2024, loans held for investment were $315.2 billion, down 2% from the prior-quarter end. Total deposits were $351 billion, which rose 1% sequentially.

Credit Quality: Mixed Bag

Provision for credit losses was $2.68 billion in the reported quarter, declining 4% from the prior-year quarter. We anticipated provisions of $2.64 billion.

The 30-plus-day-performing delinquency rate rose 52 bps year over year to 3.40%. Also, the net charge-off rate jumped 112 bps to 3.33%. Allowance, as a percentage of reported loans held for investment, was 4.88%, up 24 bps year over year.

Capital & Profitability Ratios Improve

As of Mar 31, 2024, the Tier 1 risk-based capital ratio was 14.4%, up from 13.9% a year ago. The common equity Tier 1 capital ratio was 13.1%, improving from 12.5%.

At the end of the first quarter, the return on average assets was 1.08%, up from 0.83% in the year-ago period. Return on average common equity was 9.03%, rising from 7.11%.

Our View

Capital One’s strategic acquisitions, decent 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 tough macroeconomic backdrop are major near-term concerns.

Capital One Financial Corporation Price, Consensus and EPS Surprise


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 Finance Stocks

Ally Financial’s ALLY first-quarter 2024 adjusted earnings of 45 cents per share surpassed the Zacks Consensus Estimate of 33 cents. However, the bottom line reflects a decline of 45.1% from the year-ago quarter.

ALLY’s results were primarily aided by an improvement in other revenues. However, a decline in net financing revenues, along with higher expenses and provisions, were the undermining factors.

Navient Corporation NAVI reported first-quarter 2024 adjusted earnings per share (excluding regulatory-related and restructuring expenses) of 63 cents, surpassing the Zacks Consensus Estimate of 58 cents. The company reported 86 cents in the prior-year quarter.

NAVI’s results were driven by a rise in total other income and a fall in expenses. However, a decline in NII affected the results.

Buy 5 Stocks BEFORE Election Day

Biden or Trump? Zacks is releasing a FREE Special Report, Profit from the 2024 Presidential Election (no matter who wins).

Since 1950, presidential election years have been strong for the market. This report names 5 timely stocks to ride the wave of electoral excitement.

They include a medical manufacturer that gained +11,000% in the last 15 years… a rental company absolutely crushing its sector… an energy powerhouse planning to grow its already large dividend by 25%... an aerospace and defense standout that just landed a potentially $80 billion contract… and a giant chipmaker building huge plants in the U.S. 

Don’t Wait. Download FREE >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Capital One Financial Corporation (COF) : Free Stock Analysis Report

Ally Financial Inc. (ALLY) : Free Stock Analysis Report

Navient Corporation (NAVI) : Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.