Growth in NII, Fee Income Likely to Aid Capital One's Q2 Earnings

Core Viewpoint - Capital One (COF) is expected to report second-quarter 2025 results on July 22, with anticipated year-over-year increases in earnings and revenues [1] Financial Performance - In the last reported quarter, COF's earnings exceeded the Zacks Consensus Estimate, driven by higher net interest income (NII) and non-interest income, while provisions declined [2] - The consensus estimate for COF's second-quarter earnings is $3.82, reflecting a 21.7% increase from the prior-year quarter, with total revenues expected to rise by 28.6% to $12.22 billion [14] Key Factors and Estimates - NII is projected to grow by 19.4% year-over-year to $9.01 billion, supported by a favorable lending environment and stable interest rates [4] - The total average earning assets are estimated at $479.9 billion, indicating a 6.4% rise from the previous year [3] - Interchange fees, constituting over 60% of fee income, are expected to increase by 18.8% year-over-year to $1.48 billion [5] - Total non-interest income is estimated at $2.31 billion, suggesting a 17.8% rise from the prior year [7] Expenses and Asset Quality - Total non-interest expenses are projected to reach $7.54 billion, reflecting a significant year-over-year increase of 52.5% due to rising marketing costs and technology investments [7] - The provision for credit losses is estimated at $2.67 billion, indicating a 31.6% decrease from the previous year [8] Strategic Developments - In May, Capital One completed the acquisition of Discover Financial Services for $35 billion, enhancing its position in the credit card industry [10] - The merger is expected to generate expense synergies of $1.5 billion by 2027 and adjusted non-GAAP EPS accretion of over 15% by 2027 [12]