We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Capital One (COF) Beats on Q1 Earnings as Revenues Improve
Read MoreHide Full Article
Capital One Financial Corporation’s (COF - Free Report) first-quarter 2018 adjusted earnings of $2.65 per share surpassed the Zacks Consensus Estimate of $2.34. Also, it compared favorably with the year-ago quarter’s adjusted earnings of $1.75.
Results benefited from rise in revenues and easing margin pressure. While majority of the credit quality metrics worsened during the quarter, a decline in provision for credit losses was a positive. Yet, an increase in expenses was the undermining factor.
After taking into consideration the non-recurring items, net income available to common shareholders for the quarter was $1.28 billion or $2.62 per share, up from $752 million or $1.54 per share in the prior-year quarter.
Revenue Growth Offsets Rise in Costs
Net revenues were $6.91 billion, up nearly 6% from the prior-year quarter. However, the figure marginally missed the Zacks Consensus Estimate of $6.95 billion.
Net interest income increased 4% from the prior-year quarter to $5.72 billion. Also, net interest margin increased 5 basis points (bps) year over year to 6.93%.
Non-interest income increased 12% year over year to $1.19 billion. The increase was mainly driven by rise in net interchange fees, and service charges and other customer-related fees.
Non-interest expenses of $3.57 billion increased 4% from the year-ago quarter. All cost components, except amortization of intangibles and professional services costs, rose year over year.
Efficiency ratio was 51.72% compared with 52.55% in the year-ago quarter. A decrease in efficiency ratio indicates improved profitability.
Credit Quality: Mixed Bag
Net charge-off rate increased 9 bps year over year to 2.59%. Also, the 30-plus day performing delinquency rate increased 11 bps year over year to 2.72%. Likewise, allowance as a percentage of reported loans held for investment was 3.05%, up 15 bps year over year.
However, provision for credit losses declined 16% from the year-ago quarter to $1.67 billion.
Solid Balance Sheet
As of Mar 31, 2018, loans held for investment were $248.26 billion, down 2% from the prior quarter. However, total deposits, as of the same date, increased 3% sequentially to $250.85 billion.
Total stockholder’s equity was $49.20 billion as of Mar 31, 2018, marking a rise of 1% from the previous quarter.
Profitability & Capital Ratios Improve
Return on average assets was 1.48% at the end of the reported quarter, up from 0.90% in the year-ago quarter. Also, return on average common equity was 11.47%, up from 6.73% in the prior-year quarter.
As of Mar 31, 2018, Tier 1 risk-based capital ratio was 12.0%, in line with the prior-year quarter end. Further, common equity Tier 1 capital ratio under Basel III Standardized Approach was 10.5% as of Mar 31, 2018, up from 10.4% as of Mar 31, 2017.
Our Take
Capital One’s strategic acquisitions over years position it well for long-term growth. These buyouts include Cabela’s Incorporated’s credit card portfolio, General Electric Company’s (GE - Free Report) healthcare-related loans and Healthcare Financial Services business, HSBC Holdings plc’s (HSBC - Free Report) credit card business and ING Direct USA, the online banking unit of ING Groep NV (ING - Free Report) .
However, increasing expenses continue to hurt Capital One's profitability. Also, deteriorating credit quality remains a major near-term concern. In fact, asset quality is likely to continue remaining under pressure due to losses in the auto portfolio and U.S. card business.
Capital One Financial Corporation Price, Consensus and EPS Surprise
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Image: Bigstock
Capital One (COF) Beats on Q1 Earnings as Revenues Improve
Capital One Financial Corporation’s (COF - Free Report) first-quarter 2018 adjusted earnings of $2.65 per share surpassed the Zacks Consensus Estimate of $2.34. Also, it compared favorably with the year-ago quarter’s adjusted earnings of $1.75.
Results benefited from rise in revenues and easing margin pressure. While majority of the credit quality metrics worsened during the quarter, a decline in provision for credit losses was a positive. Yet, an increase in expenses was the undermining factor.
After taking into consideration the non-recurring items, net income available to common shareholders for the quarter was $1.28 billion or $2.62 per share, up from $752 million or $1.54 per share in the prior-year quarter.
Revenue Growth Offsets Rise in Costs
Net revenues were $6.91 billion, up nearly 6% from the prior-year quarter. However, the figure marginally missed the Zacks Consensus Estimate of $6.95 billion.
Net interest income increased 4% from the prior-year quarter to $5.72 billion. Also, net interest margin increased 5 basis points (bps) year over year to 6.93%.
Non-interest income increased 12% year over year to $1.19 billion. The increase was mainly driven by rise in net interchange fees, and service charges and other customer-related fees.
Non-interest expenses of $3.57 billion increased 4% from the year-ago quarter. All cost components, except amortization of intangibles and professional services costs, rose year over year.
Efficiency ratio was 51.72% compared with 52.55% in the year-ago quarter. A decrease in efficiency ratio indicates improved profitability.
Credit Quality: Mixed Bag
Net charge-off rate increased 9 bps year over year to 2.59%. Also, the 30-plus day performing delinquency rate increased 11 bps year over year to 2.72%. Likewise, allowance as a percentage of reported loans held for investment was 3.05%, up 15 bps year over year.
However, provision for credit losses declined 16% from the year-ago quarter to $1.67 billion.
Solid Balance Sheet
As of Mar 31, 2018, loans held for investment were $248.26 billion, down 2% from the prior quarter. However, total deposits, as of the same date, increased 3% sequentially to $250.85 billion.
Total stockholder’s equity was $49.20 billion as of Mar 31, 2018, marking a rise of 1% from the previous quarter.
Profitability & Capital Ratios Improve
Return on average assets was 1.48% at the end of the reported quarter, up from 0.90% in the year-ago quarter. Also, return on average common equity was 11.47%, up from 6.73% in the prior-year quarter.
As of Mar 31, 2018, Tier 1 risk-based capital ratio was 12.0%, in line with the prior-year quarter end. Further, common equity Tier 1 capital ratio under Basel III Standardized Approach was 10.5% as of Mar 31, 2018, up from 10.4% as of Mar 31, 2017.
Our Take
Capital One’s strategic acquisitions over years position it well for long-term growth. These buyouts include Cabela’s Incorporated’s credit card portfolio, General Electric Company’s (GE - Free Report) healthcare-related loans and Healthcare Financial Services business, HSBC Holdings plc’s (HSBC - Free Report) credit card business and ING Direct USA, the online banking unit of ING Groep NV (ING - Free Report) .
However, increasing expenses continue to hurt Capital One's profitability. Also, deteriorating credit quality remains a major near-term concern. In fact, asset quality is likely to continue remaining under pressure due to losses in the auto portfolio and U.S. card business.
Capital One Financial Corporation Price, Consensus and EPS Surprise
Capital One Financial Corporation Price, Consensus and EPS Surprise | Capital One Financial Corporation Quote
Capital One carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Investor Alert: Breakthroughs Pending
A medical advance is now at the flashpoint between theory and realization. Billions of dollars in research have poured into it. Companies are already generating substantial revenue, and even more wondrous products are in the pipeline.
Cures for a variety of deadly diseases are in sight, and so are big potential profits for early investors. Zacks names 5 stocks to buy now.
Click here to see them >>