Capital One Shares Rise 5% on Q3 Earnings Beat, Improving Credit Quality

3-line summary

• Capital One Financial's third-quarter adjusted diluted EPS of $6.69 beat the roughly $5.50 consensus by about 22%; GAAP diluted EPS was $5.61, up from $4.83 a year earlier, with total net revenue of $16.34 billion (up about 6% year-over-year, in line with estimates) and non-interest expense down 2% quarter-over-quarter to $8.9 billion.
• Pre-provision earnings rose 10% to $7.5 billion; the net charge-off rate fell 50 basis points quarter-over-quarter to 2.73%, easing credit-quality concerns, while net interest margin rose 40 basis points to 8.41% and the provision for credit losses was $2.9 billion, including a $22.5 million loan-loss reserve release.
• Shares rose about 4.9% in after-hours trading to $211.37, well below the 52-week high of $259.64; integration costs tied to the Discover and Brex acquisitions were about $385 million, roughly in line with analyst expectations. Ahead of the results, JPMorgan had cut its price target to $227 in early October and Morgan Stanley to $267 in mid-October.

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