COF Falls on Q4 Earnings Miss as Costs Rise Y/Y, Announces Brex Deal

Core Viewpoint - Capital One's fourth-quarter 2025 results fell short of expectations, with adjusted earnings of $3.86 per share missing the Zacks Consensus Estimate of $4.12, despite showing year-over-year growth from $3.09 [1][8] Financial Performance - Adjusted earnings for 2025 were $19.61 per share, below the Zacks Consensus Estimate of $19.82, but improved from $13.96 in the previous year [3] - Total quarterly net revenues reached $15.58 billion, a 52.9% increase year over year, surpassing the Zacks Consensus Estimate of $15.37 billion [4] - Net revenues for 2025 were $53.43 billion, up 36.6% year over year, also exceeding the Zacks Consensus Estimate of $53.29 billion [4] - Quarterly net interest income (NII) surged 53.9% year over year to $12.5 billion, with net interest margin (NIM) expanding 123 basis points to 8.26% [4] Expense and Income Analysis - Non-interest income grew 49% year over year to $3.12 billion, driven by higher service charges and customer-related fees [5] - Non-interest expenses rose 53.4% year over year to $9.34 billion, attributed to increases in various cost components, particularly amortization of intangibles [5] - The efficiency ratio increased to 59.95%, indicating a decline in profitability compared to 59.75% in the prior-year quarter [6] Credit Quality - Provision for credit losses was $4.12 billion, a 56.8% increase from the prior-year quarter, with the allowance as a percentage of reported loans held for investment at 5.16%, up 20 basis points [7] - The net charge-off rate decreased by 14 basis points year over year to 3.45%, and the 30-plus-day-performing delinquency rate declined by 28 basis points to 3.41% [7] Strategic Developments - Capital One announced the acquisition of fintech Brex for $5.15 billion in a stock-and-cash deal, expected to close in mid-2026 [10][11] - The acquisition aims to enhance Capital One's position in the business payments marketplace, leveraging Brex's integrated platform [11] Capital Ratios - As of December 31, 2025, the Tier 1 risk-based capital ratio improved to 15.3% from 14.8% a year earlier, while the common equity Tier 1 capital ratio rose to 14.3% from 13.5% [9]