Capital One (COF) Q2 Earnings Miss on Y/Y Increase in Provisions

Core Viewpoint - Capital One's second-quarter 2024 adjusted earnings fell short of expectations, reflecting challenges in expenses and provisions despite some positive trends in net interest income and loan balances [1][2]. Financial Performance - Adjusted earnings per share were $3.14, below the Zacks Consensus Estimate of$3.28, and down from $3.52 in the prior-year quarter [1]. - Total net revenues increased by 5.5$9.51 billion, meeting the Zacks Consensus Estimate [2]. - Net interest income rose 6.1% year over year to $7.55 billion, with a net interest margin expansion of 22 basis points to 6.70$1.96 billion, up 3.2% from the prior-year quarter, driven by higher net interchange fees and service charges [2]. Expense and Efficiency Metrics - Non-interest expenses increased by 3.2% year over year to $4.95 billion, attributed to rising costs across most components [2]. - The efficiency ratio improved to 52.03$3.91 billion, significantly higher than anticipated [4]. - The 30-plus-day-performing delinquency rate rose to 3.36%, and the net charge-off rate increased to 3.36% [4]. - Allowance as a percentage of reported loans held for investment was 5.23%, up 53 basis points year over year [4]. Capital Ratios and Profitability - As of June 30, 2024, the Tier 1 risk-based capital ratio improved to 14.5%, and the common equity Tier 1 capital ratio rose to 13.2% [5]. - Return on average assets decreased to 0.50%, down from 1.23% in the prior-year period, while return on average common equity fell to 3.99% from 10.70% [5]. Strategic Outlook - Capital One's strategic acquisitions and demand for consumer loans position it for long-term growth, although elevated expenses and a challenging macroeconomic environment present near-term concerns [6].