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Capital One (COF) Q4 Earnings Beat on Loans, Stock Down 2.6%
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Capital One’s (COF - Free Report) fourth-quarter 2021 earnings of $5.41 per share easily surpassed the Zacks Consensus Estimate of $5.14. The bottom line improved 2% from the year-ago quarter’s adjusted number.
Results benefited from a solid rise in loan balances, which supported net interest income and margin. Higher consumer confidence aided credit card business and non-interest income.
However, an increase in operating expenses was a headwind. During the quarter, the company recorded provision for credit losses. Perhaps these were the primary reasons for investors’ bearish stance, as COF’s shares lost 2.6% in after-hours trading.
Net income available to common shareholders (GAAP basis) was $2.3 billion, down 7% from the prior-year quarter.
In 2021, adjusted earnings per share of $27.11 beat the consensus estimate of $26.64 and witnessed substantial improvement from $5.79 earned in 2020. Net income available to common shareholders (GAAP basis) was $12 billion or $26.94 per share, up significantly from $2.38 billion or $5.18 per share in 2020.
Revenues & Expenses Rise, Loan Balance Up
Total net revenues in the quarter were $8.12 billion, up 11% from the prior-year quarter. The top line also beat the Zacks Consensus Estimate of $7.93 billion.
In 2021, total net revenues grew 7% to $30.44 billion. The top line also outpaced the Zacks Consensus Estimate of $30.25 billion.
Net interest income improved 10% from the prior-year quarter to $6.45 billion.
Net interest margin surged 55 basis points (bps) to 6.60%. This was largely driven by lower rates on interest-bearing liabilities, higher yields and average card balances and a fall in average cash balance.
Non-interest income of $1.67 billion increased 14%. This was primarily attributable to growth in net interchange fees (up 23%) and service charges and other customer-related fees (up 29%).
Non-interest expenses were $4.68 billion, rising 17%. The increase was mainly due to a 77% surge in marketing expenses. Adjusted expenses increased 16% to $4.68 billion.
Efficiency ratio was 57.63%, up from 54.64% in the year-ago quarter. A rise in efficiency ratio indicates deterioration in profitability.
As of Dec 31, 2021, loans held for investment were $277.3 billion, up 6% from the prior quarter. Total deposits, as of the same date, rose 2% to $311 billion.
Credit Quality: A Mixed Bag
Provision for credit losses jumped 44% year over year to $381 million.
However, the 30-plus day performing delinquency rate declined 16 bps to 2.25%. Net charge-off rate decreased 59 bps year over year to 0.79%. Allowance, as a percentage of reported loans held for investment, was 4.12%, down 207 bps.
Capital Ratios Deteriorates
As of Dec 31, 2021, Tier 1 risk-based capital ratio was 14.5%, down from 15.3% a year ago. Common equity Tier 1 capital ratio was 13.1% as of Dec 31, 2021, down from 13.7%.
Share Repurchase Update
During the quarter, Capital One repurchased 17 million shares for $$2.6 billion. This completed the company’s $7.5 billion buyback authorization.
Our View
Capital One’s strategic acquisitions, rise in demand for consumer loans and steady improvement in the card business position it well for long-term growth. However, mounting expenses remain a major near-term concern.
Capital One Financial Corporation Price, Consensus and EPS Surprise
Performance & Earnings Date Other Consumer Loan Providers
Ally Financial’s (ALLY - Free Report) fourth-quarter 2021 adjusted earnings of $2.02 per share surpassed the Zacks Consensus Estimate by a penny. The bottom line showed a rise of 26.3% from the year-ago quarter’s number.
Results benefited primarily from an improvement in revenues and higher loans and deposit balances. However, a rise in expenses and higher provisions hurt Ally Financial’s results to some extent.
Credit Acceptance Corporation (CACC - Free Report) is slated to report fourth-quarter and full-year 2021 results on Jan 31.
Over the past 30 days, the Zacks Consensus Estimate for Credit Acceptance’s quarterly earnings has been stable at $12.72. This indicates a 34.9% increase from the prior-year quarter.
Enova International (ENVA - Free Report) is slated to report fourth-quarter and full-year 2021 results on Feb 3.
Over the past 30 days, the Zacks Consensus Estimate for Enova International’s quarterly earnings has been unchanged at $1.14. This indicates a 52.3% decrease from the prior-year quarter.
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Capital One (COF) Q4 Earnings Beat on Loans, Stock Down 2.6%
Capital One’s (COF - Free Report) fourth-quarter 2021 earnings of $5.41 per share easily surpassed the Zacks Consensus Estimate of $5.14. The bottom line improved 2% from the year-ago quarter’s adjusted number.
Results benefited from a solid rise in loan balances, which supported net interest income and margin. Higher consumer confidence aided credit card business and non-interest income.
However, an increase in operating expenses was a headwind. During the quarter, the company recorded provision for credit losses. Perhaps these were the primary reasons for investors’ bearish stance, as COF’s shares lost 2.6% in after-hours trading.
Net income available to common shareholders (GAAP basis) was $2.3 billion, down 7% from the prior-year quarter.
In 2021, adjusted earnings per share of $27.11 beat the consensus estimate of $26.64 and witnessed substantial improvement from $5.79 earned in 2020. Net income available to common shareholders (GAAP basis) was $12 billion or $26.94 per share, up significantly from $2.38 billion or $5.18 per share in 2020.
Revenues & Expenses Rise, Loan Balance Up
Total net revenues in the quarter were $8.12 billion, up 11% from the prior-year quarter. The top line also beat the Zacks Consensus Estimate of $7.93 billion.
In 2021, total net revenues grew 7% to $30.44 billion. The top line also outpaced the Zacks Consensus Estimate of $30.25 billion.
Net interest income improved 10% from the prior-year quarter to $6.45 billion.
Net interest margin surged 55 basis points (bps) to 6.60%. This was largely driven by lower rates on interest-bearing liabilities, higher yields and average card balances and a fall in average cash balance.
Non-interest income of $1.67 billion increased 14%. This was primarily attributable to growth in net interchange fees (up 23%) and service charges and other customer-related fees (up 29%).
Non-interest expenses were $4.68 billion, rising 17%. The increase was mainly due to a 77% surge in marketing expenses. Adjusted expenses increased 16% to $4.68 billion.
Efficiency ratio was 57.63%, up from 54.64% in the year-ago quarter. A rise in efficiency ratio indicates deterioration in profitability.
As of Dec 31, 2021, loans held for investment were $277.3 billion, up 6% from the prior quarter. Total deposits, as of the same date, rose 2% to $311 billion.
Credit Quality: A Mixed Bag
Provision for credit losses jumped 44% year over year to $381 million.
However, the 30-plus day performing delinquency rate declined 16 bps to 2.25%. Net charge-off rate decreased 59 bps year over year to 0.79%. Allowance, as a percentage of reported loans held for investment, was 4.12%, down 207 bps.
Capital Ratios Deteriorates
As of Dec 31, 2021, Tier 1 risk-based capital ratio was 14.5%, down from 15.3% a year ago. Common equity Tier 1 capital ratio was 13.1% as of Dec 31, 2021, down from 13.7%.
Share Repurchase Update
During the quarter, Capital One repurchased 17 million shares for $$2.6 billion. This completed the company’s $7.5 billion buyback authorization.
Our View
Capital One’s strategic acquisitions, rise in demand for consumer loans and steady improvement in the card business position it well for long-term growth. However, mounting expenses remain a major near-term concern.
Capital One Financial Corporation Price, Consensus and EPS Surprise
Capital One Financial Corporation price-consensus-eps-surprise-chart | Capital One Financial Corporation Quote
Currently, Capital One carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance & Earnings Date Other Consumer Loan Providers
Ally Financial’s (ALLY - Free Report) fourth-quarter 2021 adjusted earnings of $2.02 per share surpassed the Zacks Consensus Estimate by a penny. The bottom line showed a rise of 26.3% from the year-ago quarter’s number.
Results benefited primarily from an improvement in revenues and higher loans and deposit balances. However, a rise in expenses and higher provisions hurt Ally Financial’s results to some extent.
Credit Acceptance Corporation (CACC - Free Report) is slated to report fourth-quarter and full-year 2021 results on Jan 31.
Over the past 30 days, the Zacks Consensus Estimate for Credit Acceptance’s quarterly earnings has been stable at $12.72. This indicates a 34.9% increase from the prior-year quarter.
Enova International (ENVA - Free Report) is slated to report fourth-quarter and full-year 2021 results on Feb 3.
Over the past 30 days, the Zacks Consensus Estimate for Enova International’s quarterly earnings has been unchanged at $1.14. This indicates a 52.3% decrease from the prior-year quarter.