Capital One shares rose about 4% after third-quarter results beat expectations on resilient credit, Discover integration progress and higher net interest income, though the stock is still down 13.5% year to date. Marketing expense rose 14% to $1.6 billion, and CEO Richard Fairbank plans to “lean harder” into marketing in 2027, a spending level that Bank of America and Deutsche Bank have flagged as a concern. Adjusted EPS of $6.69 beat the $5.50 consensus, but a $225 million reserve release helped lift earnings. Discover synergies reached about $1.8 billion annualized, ahead of plan, though Morgan Stanley warned of a possible loss of about $700 million in swipe-fee revenue if a proposed Visa and Mastercard settlement is approved. The authors trimmed their position and downgraded the stock to hold-equivalent before earnings, and say the strong quarter does not yet resolve their concern about spending.
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Capital One beat analyst estimates on profit and slightly on revenue in the third quarter, with revenue of $16.3 billion (up 6%) and adjusted net income of nearly $4.1 billion, or $6.69 per share, versus $5.50 expected. Card purchase volume rose 11% to nearly $255 billion, helped by moving debit card transactions onto its own network after acquiring Discover. Consumer banking revenue grew 17% to $3.3 billion, and loans held for investment rose 13% to just over $94 billion, though the article warns loan growth may slow after the Federal Reserve's rate hike at the end of September. Commercial banking revenue was flat at $901 million. Discover synergies reached an annualized $1.8 billion, with integration costs above $2.8 billion, which management expects to fall to zero by 2028.
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Capital One Financial posted better-than-expected third-quarter results, with revenue up 6.4% year over year to $16.34 billion against a $16.27 billion consensus, and adjusted EPS up 12% to $6.69 versus an estimated $5.50. Net interest income rose about 4% quarter over quarter, beating estimates by $134 million, while net discount and interchange fees climbed 3.5% to $2.34 billion, which the article links to the company's ownership of the Discover network. Non-interest expense of $8.86 billion was above the $8.75 billion consensus, though marketing spending of $1.59 billion came in below forecasts. Provisions for credit losses of $2.9 billion were well below the roughly $3.6 billion expected, and a $225 million allowance release boosted earnings. CEO Richard Fairbank said Discover integration has delivered about $1.8 billion of annualized synergies so far and expects lost interchange revenue if the proposed Visa and Mastercard settlement receives final court approval, roughly offsetting the remaining synergies; shares rose about 4% after hours to $210.
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