Rising interest rates and rising card defaults created an interesting split position for Capital One’s earnings picture for Q3.
All in all, the bank had a better than expected Q3 — with profits up 10 percent to $1.1 billion ($2.14 a share), up from $1.01 billion ($1.90 a share) at the same time last year. The result also outdrew analyst predictions of $2.14 per share. The result adjusted — excluding items like a “realignment” of its workforce and the closing on its purchase of the Cabela’s credit card portfolio — Capital One said it reported earnings of $2.42 a share.
Revenue came in at $6.99 billion, up 8 percent from a year ago and also out ahead of analyst estimates from a year prior.
Net charge-off rates, which measure loan losses, were an improved picture when compared to Q2, but were still higher than they were a year ago during Q3. The third financial quarter is historically the one with the fewest charge-offs. At Capital One, the domestic credit card net charge-off rate was up in Q3 0.90 percentage points year over year to 4.64 percent, and provisions for overall credit losses rose 15 percent to $1.83 billion.
Despite the rocky picture with charge-offs — and some concerns circulating that consumers are suffering from an overabundance of credit — Capital One shares were up 2 percent in after-hours trading.