Capital One Earnings Stifled by Loan Loss Provision

Banking, finance, and taxes

Published: October 16, 2014 4:42 pm

Last Updated: April 27, 2020 6:31 pm

Capital One Financial Corp. (NYSE: COF) reported its third-quarter earnings as $1.86 per share on $5.6 billion in revenue, against Thomson Reuters consensus estimates of $1.94 in earnings per share and $5.56 billion in revenue. In the third-quarter of the previous year, the company recorded its earnings at $1.86 per share and $5.65 billion in revenue.

No guidance was given for the fourth quarter, but Thomson Reuters has consensus estimates of $1.77 in earnings per share and $5.64 billion in revenue.

Period-end deposits fell less than 1% to $204.3 billion. Average deposits also fell less than 1% to $205.2 billion. The interest-bearing rate remained flat at 0.60%.

Period-end loans held for investment increased 2% to $201.6 billion, noting its largest percentage growth in Auto period-end loans that grew 4%. Average loans held for investment increased 2% to $199.4 billion.

Tangible book value per share was recorded at $48.72. The common equity Tier 1 capital ratio under Basel III standardized approach was 12.7% at the end of September.

Capitol One boosted its loan loss provision by 17% year-over-year to $993 million. Domestic credit card loans rose 3% to $73.1 billion. Apparently the company is a little nervous about getting paid on some of those loans.

Some notable statistics from the report were net income for the third quarter reading at $1.1 billion and provision for credit losses increasing 41% to $993 million. Capital One also maintained its dividend at $0.30.

Richard D. Fairbank, chair and chief executive officer, said:

Capital One delivered another quarter of solid results for the company and across our businesses, and we continued to return capital to our shareholders as we execute our announced $2.5 billion share repurchase program.

Baird has a rating of Outperform for Capital One and Oppenheimer reiterated its rating of Outperform but lowered its price target to $97 from $98.

Shares of Capital One decreased by less than 1% on the day to $78.53 from the previous close of $79.21. The initial reaction in the after-hours has been negative, with shares down around 2% to $77.01.

The stock has a consensus price target of $92.59 and a 52-week trading range $67.86 to $85.39. The company has a market cap of $45 billion.

ALSO READ: Goldman Sachs Blows Out Earnings and Raises Dividend

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