Capital One Earnings: Strong Credit Card Loan Growth Is Offset by Rising Credit Costs

Narrow-moat-rated Capital One reported earnings that were in line with our expectations as rising credit costs and one-time charges led to a decline in earnings. Net revenue increased 5% from last year and 1% from last quarter to $9.5 billion. Meanwhile, earnings per share fell 45% from last year to $1.67, inclusive of a special assessment from the FDIC that reduced earnings per share by $0.57. These results translate to a return on tangible equity of 7.2%, or 9.7% when adjusted for the FDIC assessment. As we incorporate these results, we do not plan to materially alter our $146 fair value estimate for Capital One, and we see the shares as slightly undervalued.