On Tuesday evening, Capital One Financial announced its third-quarter results, revealing a 6.4% year-over-year revenue increase to $16.34 billion, surpassing analyst expectations of $16.27 billion. Adjusted earnings per share rose 12% to $6.69, exceeding the $5.50 estimate. The company's net interest income was a key driver, up about 4% quarter over quarter, and exceeded estimates by $134 million.
However, non-interest income fell 1% quarter over quarter, missing forecasts by $30 million. Notably, net discount and interchange fees revenue increased 3.5% sequentially to $2.34 billion, benefiting from Capital One's ownership of the Discover payment network, which enhances its revenue capture from card transactions.
Despite a year-over-year rise in non-interest expenses to $8.86 billion, higher than the $8.75 billion consensus estimate, marketing expenses were lower than expected, allowing for flexibility in future spending. CEO Richard Fairbank emphasized the need for competitive marketing investments to attract new customers, particularly in light of competition with American Express.
The company reported provisions for credit losses of $2.9 billion, significantly below the $3.6 billion forecast, indicating strong credit performance. Capital One's charge-off rates improved, reflecting better credit quality. The integration of Discover is progressing well, with management noting $1.8 billion in annualized synergies achieved so far.
However, Fairbank warned that potential revenue losses from a proposed Visa and Mastercard settlement could offset some of these synergies. Capital One repurchased 12.6 million shares for $2.6 billion in the quarter, maintaining a strong buyback strategy.
Overall, the quarter's results were positive, with the stock rising about 4% in after-hours trading, suggesting investor confidence in the company's direction and performance amidst a competitive landscape