Why Is Capital One (COF) Down 2.2% Since Last Earnings Report?

Core Viewpoint - Capital One's recent earnings report shows a significant increase in adjusted earnings and revenues, driven by higher net interest income and non-interest income, despite rising expenses and provisions [2][4]. Financial Performance - Adjusted earnings for Q2 2025 were $5.48 per share, exceeding the Zacks Consensus Estimate of $3.83 and up from $4.06 in the previous quarter [2]. - Total net revenues reached $12.49 billion, a 25% sequential increase, surpassing the Zacks Consensus Estimate of $12.22 billion [4]. - Net interest income (NII) increased by 25% year over year to $10 billion, with net interest margin (NIM) expanding by 69 basis points to 7.62% [4]. - Non-interest income grew 26% to $2.5 billion, driven by higher service charges and customer-related fees [4]. Expense and Provision Analysis - Non-interest expenses rose to $6.99 billion, an 18% increase, attributed to nearly all cost components except other expenses [5]. - Provision for credit losses surged to $11.43 billion from $2.37 billion in the prior quarter, indicating increased risk management measures [6]. Credit Quality Metrics - The allowance for credit losses as a percentage of reported loans held for investment was 5.43%, up 20 basis points [6]. - The 30-plus-day-performing delinquency rate decreased by 16 basis points to 3.13%, while the net charge-off rate declined by 16 basis points to 3.24% [6]. Capital Ratios - As of June 30, 2025, the Tier 1 risk-based capital ratio improved to 15.1% from 14.9%, and the common equity Tier 1 capital ratio rose to 14% from 13.6% [7]. Share Repurchase Activity - During the reported quarter, Capital One repurchased 0.76 million shares for $150 million [8]. Future Outlook - Management anticipates that the full quarter benefit from the Discover acquisition will contribute an additional 40 basis points increase in NIM [10]. - Integration costs from the acquisition are expected to exceed the previously announced $2.8 billion [10]. - Despite a downward trend in estimates, Capital One holds a Zacks Rank 2 (Buy), indicating expectations for above-average returns in the coming months [13].