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Capital One COF is slated to report first-quarter 2025 results on April 22, after market close. Its quarterly earnings and revenues are expected to have witnessed an increase on a year-over-year basis.
In the last reported quarter, COF’s earnings surpassed the Zacks Consensus Estimate. The results gained from higher net interest income (NII) and non-interest income, and a rise in loans and deposits. Also, provisions declined during the quarter. However, the increase in expenses was the undermining factor.
Capital One has a decent earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in two quarters and lagged in the other two of the trailing four quarters.
Capital One Financial Corporation Price and EPS Surprise
Capital One Financial Corporation price-eps-surprise | Capital One Financial Corporation Quote
Key Factors Driving COF’s Q1 Performance & Estimates
NII: The Federal Reserve kept interest rates unchanged at 4.25%-4.5% on account of persistent inflation and concerns regarding tariff policies. This is likely to have positively impacted COF’s NII during the quarter. Further, the yield curve steepened during the quarter. This is likely to have increased investment yields on interest-earning assets, partially offset by higher funding costs.
The overall lending scenario improved during the quarter, with a rising demand for consumer loans. The Zacks Consensus Estimate for total average earning assets of $461 billion indicates a 3% rise from the prior-year quarter’s reported figure. Our estimate for the metric is $451.3 billion.
Also, Capital One’s efforts to strengthen its card operations are expected to have provided some support. The consensus estimate for NII of $8.02 billion indicates 7.1% growth. Our estimate for NII is pegged at $7.88 billion.
Fee income: Capital One’s interchange fees (constituting more than 60% of fee income) are likely to have improved in the quarter under review, given increased card usage. The Zacks Consensus Estimate for interchange fees is $1.22 billion, suggesting a 6.9% year-over-year increase. Our estimate for the metric is $1.24 billion.
The consensus estimate for service charges and other customer-related fees of $494.1 million implies 6.9% growth. The Zacks Consensus Estimate for other non-interest income is pegged at $278.2 million, indicating a 9.4% year-over-year decline. Our estimates for service charges and other customer-related fees, and other non-interest income are $471.8 million and $305.3 million, respectively.
The consensus estimate for total non-interest income of $2 billion suggests a rise of 4.7% from the prior-year quarter. We expect the metric to be $2.02 billion.
Expenses: Capital One has been witnessing a persistent rise in expenses over the past several quarters because of higher marketing costs. The company’s investment in technology upgrades leads to higher costs. These, along with inflation pressure, are expected to have resulted in an increase in operating expenses in the first quarter.
Also, the pending acquisition of Discover Financial Services DFS is expected to have resulted in some merger-related charges in the to-be-reported quarter.
Our estimate for total non-interest expenses stands at $5.40 billion, implying a year-over-year rise of 5.2%.
Asset Quality: Capital One is expected to have set aside a decent amount for potential bad loans on account of a higher for longer interest rate backdrop, inflationary pressure and recessionary fears.
Our estimate for provision for credit losses is pegged at $2.6 billion, indicating a 3.2% fall from the year-ago quarter.