Capital One Earnings Stifled by Loan Loss Provision
Capital One Financial reported disappointing third-quarter earnings but better-than-expected revenue.
Capital One Financial Corp. (NYSE: COF) reported its third-quarter earnings as $1.86 per share on $5.6 billion in revenue, against Thomson Reuters consensus estimates of $1.94 in earnings per share and $5.56 billion in revenue. In the third-quarter of the previous year, the company recorded its earnings at $1.86 per share and $5.65 billion in revenue.
No guidance was given for the fourth quarter, but Thomson Reuters has consensus estimates of $1.77 in earnings per share and $5.64 billion in revenue.
Period-end deposits fell less than 1% to $204.3 billion. Average deposits also fell less than 1% to $205.2 billion. The interest-bearing rate remained flat at 0.60%.
Period-end loans held for investment increased 2% to $201.6 billion, noting its largest percentage growth in Auto period-end loans that grew 4%. Average loans held for investment increased 2% to $199.4 billion.
Tangible book value per share was recorded at $48.72. The common equity Tier 1 capital ratio under Basel III standardized approach was 12.7% at the end of September.
Capitol One boosted its loan loss provision by 17% year-over-year to $993 million. Domestic credit card loans rose 3% to $73.1 billion. Apparently the company is a little nervous about getting paid on some of those loans.
Some notable statistics from the report were net income for the third quarter reading at $1.1 billion and provision for credit losses increasing 41% to $993 million. Capital One also maintained its dividend at $0.30.
Richard D. Fairbank, chair and chief executive officer, said:
Capital One delivered another quarter of solid results for the company and across our businesses, and we continued to return capital to our shareholders as we execute our announced $2.5 billion share repurchase program.
Baird has a rating of Outperform for Capital One and Oppenheimer reiterated its rating of Outperform but lowered its price target to $97 from $98.
Shares of Capital One decreased by less than 1% on the day to $78.53 from the previous close of $79.21. The initial reaction in the after-hours has been negative, with shares down around 2% to $77.01.
The stock has a consensus price target of $92.59 and a 52-week trading range $67.86 to $85.39. The company has a market cap of $45 billion.
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Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
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