COF Up on Q2 Earnings Beat, Discover Deal Boosts NII and Fee Income

Shares of Capital One COF jumped 4% in after-hours trading following the announcement of better-than-expected second-quarter 2025 results. Adjusted earnings of $5.48 per share widely surpassed the Zacks Consensus Estimate of $3.83. The bottom line also compared favorably with $4.06 in the prior quarter.On May 18, Capital One completed the acquisition of Discover Financial Services. Since then, the integration process has been progressing well. Results benefited from higher net interest income (NII) and non-interest income. Also, loans and deposits improved in the quarter. However, the increase in expenses and jump in provisions were undermining factors.Results excluded several non-recurring items, including charges related to the integration with Discover Financial. After considering these, net loss available to common shareholders was $4.34 billion or $8.58 per share against net income of $1.33 billion or $3.45 per share in the last quarter.Capital One’s Revenues Increase, Expenses JumpTotal net revenues for the quarter were $12.49 billion, jumping 25% sequentially. Also, the top line beat the Zacks Consensus Estimate of $12.22 billion.NII surged 25% year over year to $10 billion. NIM expanded 69 basis points (bps) to 7.62%. Non-interest income of $2.5 billion grew 26%. The rise was driven by higher service charges and other customer-related fees, other income and discount and interchange fees. Non-interest expenses were $6.99 billion, up 18%. The rise was due to an increase in almost all cost components except other expenses. Adjusted expenses were $6.4 billion, jumping 14%.The efficiency ratio was 55.96%, down from 59.02% in the last quarter. A rise in the efficiency ratio indicates a deterioration in profitability.As of June 30, 2025, loans held for investment were $439.3 billion, growing 36% from the prior-quarter end. Total deposits were $468.1 billion, rising 27%.COF’s Credit Quality: A Mixed BagProvision for credit losses was $11.43 billion, rising substantially from $2.37 billion in the prior quarter. Additionally, allowance, as a percentage of reported loans held for investment, was 5.43%, up 20 bps.The 30-plus-day-performing delinquency rate fell 16 bps sequentially to 3.13%. Further, the net charge-off rate declined 16 bps to 3.24%.COF’s Capital Ratios ImproveAs of June 30, 2025, the Tier 1 risk-based capital ratio was 15.1%, up from 14.9% as of March 31, 2025. The common equity Tier 1 capital ratio was 14%, improving from 13.6%.Capital One’s Share Repurchase UpdateDuring the reported quarter, the company repurchased 0.76 million shares for $150 million.Our View on Capital OneCapital One’s strategic expansion efforts, decent demand for consumer loans, relatively higher rates and steady improvement in the card business position it well for long-term growth. Also, the acquisition of Discover Financial has reshaped the landscape of the credit card industry, leading to the formation of a behemoth in the industry. However, elevated expenses and weak asset quality amid a tough macroeconomic backdrop are major concerns. Capital One Financial Corporation Price, Consensus and EPS Surprise Capital One Financial Corporation price-consensus-eps-surprise-chart | Capital One Financial Corporation QuoteCurrently, Capital One carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Performance & Earnings Date of COF’s PeersAlly Financial’s ALLY second-quarter 2025 adjusted earnings of 99 cents per share surpassed the Zacks Consensus Estimate of 78 cents. Further, the bottom line reflected a jump of 35.6% from the year-ago quarter.Results benefited from a rise in net finance revenues and other revenues. Further, lower non-interest expenses and reduced provision provided support. However, a decline in net finance receivables and loans and deposits was the undermining factor for ALLY. Navient NAVI is scheduled to announce second-quarter 2025 results on July 30.Over the past seven days, the Zacks Consensus Estimate for NAVI’s quarterly earnings has remained unchanged at 29 cents. This implies a 39.6% decrease from the prior-year quarter.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in the coming year. While not all picks can be winners, previous recommendations have soared +112%, +171%, +209% and +232%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Capital One Financial Corporation (COF): Free Stock Analysis Report Ally Financial Inc. (ALLY): Free Stock Analysis Report Navient Corporation (NAVI): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks