Analyst Note| Michael Miller |
Narrow-moat Capital One reported a strong third quarter, as good loan growth, net interest margin expansion, and low credit costs combined to drive impressive results. The bank's revenue grew 5% year over year and 6% sequentially. EPS of $6.86 also easily beat the FactSet consensus estimate of $5.28. Earnings were supported by strong credit results, with the company recording a provision for loan-loss benefit of $344 million as it released $770 million in reserves. With the company’s allowance for loan losses at 4.43%, there is still some room for additional reserve releases, but the majority should be behind us at this point. While these were strong results, they do not materially change our thesis for Capital One, and we are maintaining our fair value estimate of $138 per share.