Capital One Financial Corp Reports Q4 Earnings Amid Market Challenges
Net Income: Reported at $706 million for Q4 2023, a decrease from $1.8 billion in Q3 2023 and $1.2 billion in Q4 2022.
Earnings Per Share (EPS): Q4 diluted EPS at $1.67, with an adjusted EPS of $2.24 after excluding adjusting items.
Revenue: Total net revenue saw a 1% increase to $9.5 billion in Q4.
Expenses: Non-interest expenses rose by 18% to $5.7 billion, with marketing and operating expenses up by 29% and 15% respectively.
Credit Losses: Provision for credit losses increased by $573 million to $2.9 billion.
Loan Portfolio: Period-end loans held for investment rose by 2% to $320.5 billion.
Deposits and Capital Ratios: Period-end total deposits increased by 1% to $348.4 billion, with a Common equity Tier 1 capital ratio of 12.9%.
On January 25, 2024, Capital One Financial Corp (NYSE:COF) released its 8-K filing, revealing a mixed financial performance for the fourth quarter of 2023. The company, a diversified financial services holding company known for its credit card lending, auto loans, and commercial lending, reported a net income of $706 million, or $1.67 per diluted common share. This represents a significant decrease from the $1.8 billion net income, or $4.45 per diluted common share, reported in the third quarter of 2023, and also down from $1.2 billion, or $3.03 per diluted common share, in the fourth quarter of the previous year.
Despite the decline in net income, the company's total net revenue increased by 1 percent to $9.5 billion. However, this top-line growth was offset by a substantial 18 percent increase in total non-interest expenses, which totaled $5.7 billion for the quarter. Notably, marketing expenses surged by 29 percent, while operating expenses rose by 15 percent.
Capital One's provision for credit losses also increased significantly, rising by $573 million to reach $2.9 billion. This included net charge-offs of $2.5 billion and a $326 million loan reserve build. The company's net interest margin saw a slight increase of 4 basis points, resulting in a margin of 6.73 percent.
The balance sheet reflects a 2 percent increase in period-end loans held for investment, totaling $320.5 billion, with credit card period-end loans growing by 5 percent to $154.5 billion. Meanwhile, total deposits increased modestly by 1 percent to $348.4 billion.
Richard D. Fairbank, Founder, Chairman, and Chief Executive Officer of Capital One, commented on the results:
We delivered solid results with strong top line growth in 2023," said Fairbank. "Our modern technology capabilities are driving resilient growth, enabling efficiency improvement, and putting us in a strong position to deliver long-term shareholder value."
For the full year of 2023, Capital One reported a 7 percent increase in total net revenue to $36.8 billion and a 6 percent increase in total non-interest expense to $20.3 billion. The provision for credit losses for the year increased by $4.6 billion to $10.4 billion.
Capital One's financial performance in the fourth quarter of 2023 shows resilience in revenue growth but is challenged by rising expenses and credit losses. The company's strategic focus on technology and efficiency may be key to navigating the current financial landscape and sustaining long-term growth. Investors and analysts will likely keep a close watch on how these factors play out in the coming quarters.
For a more detailed analysis of Capital One's financial performance and to access the earnings press release, financial supplement, and earnings release presentation, interested parties can visit the company's Investor Center.
Explore the complete 8-K earnings release (here) from Capital One Financial Corp for further details.
This article first appeared on GuruFocus.
