Capital One Financial Corp. reported a robust 55% increase in fourth-quarter net income from a year earlier, driven by expanding net interest margins and growth in credit-card loans.
The McLean, Virginia-based lender released fourth-quarter results on Tuesday (Wednesday AEDT), reporting a rise in net income to US$1.1 billion (A$1.75 billion), or $2.67 per share, compared to $639 million, or $1.67 per share, a year earlier.
Adjusted earnings per share reached $3.09, surpassing analysts’ estimates of $2.83, while revenues were reported at US$10.19 billion versus $10.21 billion expected.
Founder, Chairman, and Chief Executive Officer Richard D. Fairbank noted, “Our fourth-quarter results included steady top-line growth in our domestic card business, strong originations, a return to loan growth in our auto business, and stable credit results across our businesses.”
Net interest margin, a critical profitability metric, widened to 7% from 6.7% in the same quarter last year.
Meanwhile, provisions for credit losses fell to $2.6 billion, while net charge-offs totalled $2.9 billion.
Capital One’s credit-card loans rose 4% to $162.5 billion, and auto loans climbed 2% to $76.8 billion, reflecting resilient consumer spending amidst economic optimism.
Non-interest income, which includes interchange and service fees, grew 5% to $2.1 billion.
The lender is also in the process of acquiring Discover Financial Services in a $35 billion all-stock deal that could establish the combined entity as the largest U.S. credit card issuer by loan volume. Shareholders of both companies are set to vote on the merger on 18 February, with federal regulatory approval still pending.
Despite positive earnings, Capital One faces challenges, including a lawsuit filed by the U.S. Consumer Financial Protection Bureau (CFPB) alleging that the bank withheld over $2 billion in interest payments from savings account customers. Capital One has denied the allegations and vowed to defend itself in court.
At the time of writing, Capital One Financial (NYSE: COF) stock was trading at US$193.33, easing 1% in after-hours trade from Tuesday's close of $193.21. The stock reached a day low of $193.21 and a day high of $194.14. Capital One Financial's market cap stands at US$73.66 billion.