Capital One Financial reported stronger-than-expected profits for the first quarter on Tuesday (Wednesday AEST), as higher interest income from its credit card business helped offset broader economic pressures.
The consumer lender posted earnings per share (EPS) of $4.06, comfortably ahead of market expectations of $3.64. Revenue for the quarter totalled $10.0 billion, just shy of the $10.06 billion forecast.
Despite a pullback in discretionary spending by consumers amid ongoing economic uncertainty, Capital One benefited from its credit card business, which is less exposed to broader weakness in consumer lending.
Interest rates on credit card debt remain substantially higher than those on other loan types, such as mortgages, enhancing profitability.
Credit cards account for nearly half of Capital One’s total loan portfolio. The company ranks as the third-largest U.S. issuer of Visa and Mastercard credit cards by balances.
In the first quarter, net interest income - the spread between earnings on loans and payments on deposits - rose 7% year-on-year to $8.01 billion.
However, executives warned that consumer spending could face further pressure in the coming months due to ongoing volatility tied to President Donald Trump’s evolving tariff policies.
Meanwhile, Capital One secured a major regulatory milestone last week as U.S. banking authorities approved its $35.3 billion acquisition of Discover Financial Services. The deal, scheduled to close on May 18, will form the eighth-largest bank in the United States and make Capital One the largest credit card issuer by balances.
In addition to bolstering its credit card footprint, the acquisition gives Capital One access to Discover’s robust card payment network, significantly expanding its payments infrastructure.
Richard D. Fairbank, Founder, Chairman, and Chief Executive Officer, said: “The combination of Capital One and Discover will create a leading consumer banking and payments platform with unique capabilities, modern technology, and powerful brands.”
At the time of writing, Capital One (NYSE: COF) stock was trading at US$175.20, up 2.9% from Tuesday's close of $170.20. Capital One's market cap stands at $65.18 billion.
