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.Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.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 excl ...

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Capital One's Q4 Performance - Card purchase volumes surged by 7% to $1729 billion, indicating strong consumer spending [1] - Net charge-off rate increased to 6% from 53% a year ago, partly due to the end of the Walmart card partnership and loss sharing agreement [1][2] - 30-day-plus delinquency rate improved year-over-year, dropping to 453% from 461% [3] - Average loans increased by 6%, driven by steady top-line growth and strong margins in the domestic card business [2] Consumer Banking Segment - Auto originations grew by 53% year-over-year, attributed to market growth and the company's strong position in pursuing resilient growth [4] - Ending loans in the consumer banking portfolio increased by 4% year-over-year [5] - Consumer deposits rose by 7% to $3183 billion at the end of the quarter [5] - Credit tightening measures in anticipation of credit score inflation and declining vehicle values resulted in relatively low originations [5] Consumer Trends and Economic Outlook - The US consumer remains a source of strength in the economy, with a strong labor market and stable unemployment rates [7] - Real incomes are growing steadily as inflation settles, though some consumers face pressure due to incomes not keeping up with inflation [7][8] - Consumer debt servicing burdens are stable near pre-pandemic levels, with higher bank account balances compared to pre-pandemic times [8] - The proportion of customers making minimum payments is above pre-pandemic levels, observed across the credit spectrum [9] Strategic Developments - The acquisition of Discover Financial Services remains on track and is expected to close early this year [6]

Financial Performance - Net income was $1.1 billion, or $2.67 per diluted common share for Q4 2024[8] - Adjusted net income per diluted common share was $3.09 for Q4 2024[8] - Pre-provision earnings decreased 13% to $4.1 billion for Q4 2024[8] - Provision for credit losses was $2.6 billion for Q4 2024[8] Capital and Liquidity - Common equity Tier 1 capital ratio was 13.5% at December 31, 2024[9] - Total liquidity reserves were $123.8 billion as of December 31, 2024, including $43.2 billion in cash and cash equivalents[20] - Tangible book value per share decreased 5% to $106.97[9] Loans and Deposits - Period-end loans held for investment increased 2%, or $7.5 billion, to $327.8 billion[9] - Period-end total deposits increased $9.1 billion to $362.7 billion, with insured deposits comprising 82% of the total at $297.8 billion[9] Credit Card Segment - Credit Card net interest income was $5.779 billion in Q4 2024, up 1% from the previous quarter and 10% year-over-year[32] - Credit Card purchase volume increased 7% year-over-year[33] - Domestic Card net charge-off rate was 6.06%[39] Consumer and Commercial Banking - Consumer Banking ending deposits increased $22.2 billion, or 7%, year-over-year[43] - Commercial Banking revenue increased $65 million, or 7%, quarter-over-quarter[47]

Core Insights - Capital One reported revenue of $10.19 billion for the quarter ended December 2024, reflecting a year-over-year increase of 7.2% [1] - Earnings per share (EPS) reached $3.09, up from $2.24 in the same quarter last year, with an EPS surprise of +16.17% compared to the consensus estimate of $2.66 [1] Financial Performance Metrics - Net Interest Margin was reported at 7%, slightly below the average estimate of 7.1% from 10 analysts [4] - The net charge-off rate stood at 3.6%, slightly above the average estimate of 3.5% based on nine analysts [4] - Efficiency Ratio was 59.8%, higher than the average estimate of 56.4% from nine analysts [4] - Average Balance of Total interest-earning assets was $460.64 billion, exceeding the estimated $459.48 billion [4] - Total Capital Ratio was reported at 16.4%, compared to the average estimate of 16.2% from five analysts [4] Revenue Breakdown - Total net revenue from Credit Card operations was $7.36 billion, slightly below the average estimate of $7.40 billion, with a year-over-year increase of 8.4% [4] - Total net revenue from Consumer Banking was $2.14 billion, below the estimated $2.22 billion, representing a year-over-year change of +1.3% [4] - Total net revenue from Domestic Credit Card operations was $7 billion, exceeding the average estimate of $6.95 billion, with a year-over-year increase of 8.7% [4] - Total net revenue from Other operations was -$268 million, better than the estimated -$402.73 million, with a year-over-year change of +0.8% [4] - Total net revenue from Commercial Banking was $953 million, surpassing the average estimate of $859.94 million, reflecting a year-over-year increase of 10.6% [4] Stock Performance - Capital One shares returned +6.1% over the past month, outperforming the Zacks S&P 500 composite's +1.2% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Group 1 - Capital One reported quarterly earnings of $3.09 per share, exceeding the Zacks Consensus Estimate of $2.66 per share, and up from $2.24 per share a year ago, representing an earnings surprise of 16.17% [1] - The company posted revenues of $10.19 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 0.32%, and an increase from $9.51 billion year-over-year [2] - Capital One has outperformed the S&P 500 with a 7.1% gain since the beginning of the year compared to the S&P 500's 2% gain [3] Group 2 - The current consensus EPS estimate for the upcoming quarter is $3.74 on revenues of $9.97 billion, and for the current fiscal year, it is $15.22 on revenues of $40.66 billion [7] - The Zacks Industry Rank for Financial - Consumer Loans is in the bottom 38% of over 250 Zacks industries, indicating potential challenges for stock performance [8]

Core Viewpoint - Capital One Financial reported mixed fourth-quarter results, exceeding earnings expectations but slightly missing revenue targets [1][2]. Financial Performance - Adjusted EPS for Q4 2024 was $3.09, surpassing consensus estimates of $2.83 and showing an 85% increase from $1.67 in Q4 2023 [3][6]. - Total revenue for the quarter was $10.19 billion, slightly below the estimate of $10.21 billion, reflecting a 7.1% year-over-year increase from $9.51 billion [3][7]. - Net income rose by 56% to $1.1 billion, indicating strong performance despite competitive challenges [2][3]. Business Overview - Capital One is a major U.S. bank known for its extensive credit card offerings, being the third-largest Visa and MasterCard issuer [4]. - The company also operates in auto and consumer banking, contributing to a diversified portfolio [4]. Strategic Initiatives - The company is focusing on digital transformation to enhance customer experience and operational efficiency [5]. - A proposed $35 billion merger with Discover Financial Services is a key strategic growth initiative, pending regulatory approval [5][9]. Operational Metrics - The efficiency ratio increased to 59.75%, indicating rising expenses as a percentage of revenue, with non-recurring items adjusted to 57.64% [8]. - Provision for credit losses rose to $2.64 billion, reflecting cautious credit risk management amid economic uncertainties [8]. Market Position and Future Outlook - Credit card loans grew by 4% to $162.5 billion, while auto loans increased by 2% to $76.8 billion, demonstrating strong consumer demand [6]. - Management has emphasized a strategic focus on growth through acquisitions and digital transformation, with the Discover acquisition potentially enhancing market reach [11][12].

Financial Performance - Net interest income for Q4 2024 was $8,098 million, an increase of 8% compared to Q4 2023, which was $7,519 million[4]. - Total net revenue for Q4 2024 reached $10,190 million, reflecting a 7% increase from $9,506 million in Q4 2023[4]. - Net income available to common stockholders for Q4 2024 was $1,022 million, a decrease of 40% from $1,692 million in Q4 2023[4]. - Basic earnings per common share for Q4 2024 was $2.67, down 40% from $4.42 in Q4 2023[4]. - Total net revenue for Q4 2024 was $10,190 million, reflecting a 2% increase from Q3 2024 and an 8% increase compared to Q4 2023[26]. - Income from continuing operations before income taxes for Q4 2024 was $1,134 million, a decrease of 37% from Q3 2024 and a 10% decrease year-over-year[26]. - Income from continuing operations, net of tax, was $849 million in Q4 2024, down 36% from Q3 2024 but up 10% from Q4 2023[28]. - Net income for Q4 2024 was $1.096 billion, a decrease of 55.8% compared to $1.777 billion in Q3 2024[44]. Credit Losses and Risk Management - Provision for credit losses in Q4 2024 was $2,642 million, up 6% from $2,857 million in Q4 2023[4]. - The provision for credit losses in Q4 2024 was $2,642 million, a 6% increase from Q3 2024 and a 12% increase year-over-year[9]. - The net charge-off rate increased to 3.59% in Q4 2024, up from 3.27% in Q3 2024 and 2.70% in Q4 2023[7]. - The allowance for credit losses was $16,258 million at the end of Q4 2024, a decrease of 2% from Q3 2024 and an increase of 6% year-over-year[7]. - Total net charge-offs rose to $3.59 billion in Q4 2024, up from $2.70 billion in Q4 2023, reflecting a 69% increase[18]. - The total consumer banking net charge-off rate increased to 2.38% in Q4 2024 from 2.25% in Q4 2023, a rise of 13 basis points[18]. - The total nonperforming loans rate was 0.61% in Q4 2024, up from 0.48% in Q4 2023, reflecting a 13 basis point increase[18]. - The total allowance for credit losses increased by $1.105 billion from the previous year, reflecting a proactive approach to managing credit risk[19]. Expenses and Efficiency - Total non-interest expense for Q4 2024 was $6,089 million, a 15% increase compared to $5,717 million in Q4 2023[4]. - The efficiency ratio for Q4 2024 was 59.75%, compared to 53.07% in Q3 2024 and 55.23% in Q4 2023[7]. - Total non-interest expense for Q4 2024 was $6,089 million, a 15% increase from Q3 2024 and a 7% increase year-over-year[9]. - The efficiency ratio (GAAP) for Q4 2024 was 59.75%, an increase from 54.93% in Q4 2023, reflecting a decline in operational efficiency[40]. - The adjusted operating efficiency ratio (non-GAAP) for Q4 2024 improved to 44.15%, compared to 42.35% in Q4 2023, showing enhanced operational performance[40]. Assets and Deposits - Total assets as of Q4 2024 were $490,144 million, representing a 2% increase from $478,464 million in Q4 2023[6]. - Total deposits rose by 3% to $362.71 billion in Q4 2024 from $353.63 billion in Q3 2024[12]. - Total cash and cash equivalents decreased by 12% to $43.23 billion in Q4 2024 from $49.30 billion in Q3 2024[11]. - Period-end deposits grew by 7% year-over-year to $318,329 million, with average deposits increasing by 6% to $303,873 million[30]. - Total assets increased to $488.3 billion in Q4 2024, up from $472.6 billion in Q4 2023, representing a growth of 3.32% year-over-year[44]. Capital and Equity - Common equity at the end of Q4 2024 was $55,938 million, a 5% increase from $53,244 million at the end of Q4 2023[6]. - Total capital increased to $61.805 billion in Q4 2024, compared to $59.124 billion in Q4 2023[36]. - Common equity Tier 1 capital ratio was 13.5% as of December 31, 2024, slightly down from 13.6% in September 2024[36]. - Tangible common equity (period-end) for Q4 2024 was $40,782 million, up from $37,955 million in Q4 2023, reflecting a growth of 7.7%[42]. Loan Performance - Loans held for investment at the end of Q4 2024 totaled $327,775 million, a 2% increase from $320,472 million at the end of Q4 2023[6]. - Domestic credit card loans reached $155.62 billion in Q4 2024, reflecting a 5% increase compared to Q4 2023[17]. - Average loans held for investment in Q4 2024 were $157,326 million, a 2% increase from Q3 2024 and an 8% increase year-over-year[26]. - Period-end loans held for investment increased to $155,618 million, a 4% rise from Q3 2024 and a 5% increase year-over-year[28]. - The average yield on loans held for investment improved by 91 basis points year-over-year to 8.70%[30].

Core Viewpoint - Capital One (COF) is expected to report an increase in quarterly earnings and revenues for Q4 and full-year 2024, with results influenced by net interest income growth and higher loans and deposits, despite rising expenses and lower non-interest income [1][2]. Financial Performance - The consensus estimate for total average earning assets is $459.5 billion, reflecting a 2.8% increase year-over-year, while the company's own estimate is $453.8 billion [5]. - The net interest income (NII) is projected to be $8.12 billion, indicating an 8% growth, with the company's estimate at $7.92 billion [6]. - Interchange fees, which account for over 60% of fee income, are expected to rise to $1.29 billion, a 5.9% increase, with the company's estimate at $1.31 billion [7]. - Service charges and other customer-related fees are estimated at $478.3 million, suggesting a 12.8% growth, while other non-interest income is expected to decline by 20.8% to $309.1 million [8]. Expenses and Provisions - Total non-interest expenses are estimated at $5.97 billion, reflecting a 4.4% year-over-year increase, driven by higher marketing costs and technology investments [10]. - The provision for credit losses is estimated at $2.77 billion, indicating a 3.2% decrease from the previous year [11]. Earnings Outlook - The Zacks Consensus Estimate for earnings is $2.66, revised slightly downward, indicating an 18.8% growth year-over-year, while sales are expected to reach $10.16 billion, a 6.9% increase [13]. - The Earnings ESP for Capital One is -2.71%, suggesting low chances of beating the consensus estimate [12]. Future Expectations - The company anticipates higher marketing investments in the second half of 2024 compared to the first half, with an expected operating efficiency ratio in the low 42% for 2024, down from 43.5% in 2023 [14].

Group 1: Economic Context - The December 2024 Consumer Price Index report indicated that core inflation rose less than expected, leading to optimism that the Federal Reserve could lower interest rates in 2025 [1] - The bond market responded with a decline in 10-year US Treasury yields to 4.60%, which is beneficial for individuals and companies regarding loans [2] Group 2: Banking Sector Performance - Major bank stocks experienced significant gains, with Goldman Sachs up 9.4%, Bank of New York Mellon up 8.2%, Citi up 9.7%, and Wells Fargo up 8.7% from January 13 to 17 [3] - The banking and finance sector is showing renewed excitement, partly due to expectations of a more favorable regulatory environment under the new administration [4] Group 3: Regulatory Environment - Experts suggest that potential deregulation could lead to a more favorable landscape for banks, with expectations of less regulation, lower capital requirements, and increased M&A activity [6] - The anticipated easing of regulations may particularly benefit larger banks, allowing them to enhance profitability and explore new revenue streams [6][7] Group 4: Investment Opportunities - US Bancorp (USB) is trading at $48 per share with a favorable outlook and a 4.16% dividend yield, making it an attractive option for investors [9] - M&T Bank (MTB) is trading at $195, with a solid dividend yield of 2.76% and a $2 billion share buyback target for 2025, indicating strong earnings potential [10] - Capital One (COF) has seen a 7% year-to-date increase in share price and a 49% increase over the past year, with analysts raising earnings expectations, despite facing a lawsuit from the US Consumer Financial Protection Bureau [11][12]