Capital One’s COF fourth-quarter 2024 adjusted earnings of $3.09 per share handily surpassed the Zacks Consensus Estimate of $2.66. The bottom line also compared favorably with $2.24 in the prior-year quarter.
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Results gained from higher net interest income (NII) and non-interest income and rise in loans and deposits. Also, provisions declined during the quarter. However, the increase in expenses was the undermining factor.
Results excluded certain non-recurring items, including charges related to Discover Financial DFS integration. After considering these, net income available to common shareholders was $1.02 billion or $2.67 per share, up from $639 million or $1.67 per share in the prior-year quarter. Our estimate for the metric was $924 million.
For 2024, adjusted earnings were $13.96, beating the consensus estimate of $13.53 and rising 12% year over year. Net income available to common shareholders (GAAP) was $4.45 billion or $11.59 per share, down from $4.82 billion or $11.95 per share in 2023.
Capital One’s Revenues Improve, Expenses Rise
Total net revenues for the quarter were $10.19 billion, up 7% from the prior-year quarter. The top line surpassed the Zacks Consensus Estimate of $10.16 billion.
For 2024, total net revenues grew 6% to $39.1 billion. The top line also outpaced the consensus estimate of $39.08 billion.
NII increased 8% year over year to $8.1 billion. NIM expanded 30 basis points (bps) to 7.03%. Our estimates for NII and NIM were $7.92 billion and 6.98%, respectively.
Non-interest income of $2.09 billion grew 5%. The rise was driven by higher service charges and other customer-related fees, and net interchange fees. Our estimate for non-interest income was $2.06 billion.
Non-interest expenses were $6.09 billion, up 7% year over year. The rise was due to an increase in almost all cost components except the amortization of intangibles cots and other expenses. We expected the metric to be $5.97 billion. Adjusted expenses were $5.87 billion, up 8%.
The efficiency ratio was 59.75%, down from 60.14% in the year-ago quarter. A fall in the efficiency ratio indicates an improvement in profitability.
As of Dec. 31, 2024, loans held for investment were $327.8 billion, up 2% from the prior-quarter end. Total deposits were $362.7 billion, rising 3%. Our estimates for loans held for investment and total deposits were $316.4 billion and $362.6 billion, respectively.
Credit Quality of COF: A Mixed Bag
Provision for credit losses was $2.64 billion in the reported quarter, down 8% from the prior-year quarter. We anticipated provisions of $2.77 billion.
The 30-plus-day-performing delinquency rate fell 2 bps year over year to 3.69%. However, the net charge-off rate jumped 38 bps to 3.59%. Allowance, as a percentage of reported loans held for investment, was 4.96%, up 19 bps year over year.
COF’s Capital & Profitability Ratios Improve
As of Dec. 31, 2024, the Tier 1 risk-based capital ratio was 14.8%, up from 14.2% a year ago. The common equity Tier 1 capital ratio was 13.5%, improving from 12.9%.
At the end of the fourth quarter, the return on average assets was 0.90%, up from 0.60% in the year-ago period. Return on average common equity was 7.16%, up from 5.03%.
Capital One’s Share Repurchase Update
During the reported quarter, the company repurchased 0.88 million shares for $150 million.
Our View on COF
Capital One’s strategic acquisitions, decent demand for consumer loans, relatively higher rates and steady improvement in the card business position it well for long-term growth. Also, its deal to acquire Discover Financial will reshape 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 major 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.
Earnings Dates & Expectations of COF’s Peers
SLM Corp. SLM is slated to report fourth-quarter and full-year 2024 numbers on Jan. 23.
Over the past week, the Zacks Consensus Estimate for SLM’s quarterly earnings has been revised 1.8% lower to 54 cents. This indicates a 25% decline from the prior-year quarter.
Navient NAVI is scheduled to announce fourth-quarter and full-year 2024 results on Jan. 29.
Over the past seven days, the Zacks Consensus Estimate for NAVI’s quarterly earnings has moved 16.7% downward to 20 cents. This implies a 71.4% decrease from the prior-year quarter.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
