Capital One Financial Corp. (COF) shares tumbled in Thursday's after-hours trading following a mixed earnings report that saw the bank miss bottom-line expectations while simultaneously announcing a blockbuster acquisition.
The bank reported fourth quarter earnings of $3.86 per share, falling short of the $4.11 consensus estimate. Revenue provided a bright spot at $15.58 billion, edging past analyst expectations of $15.48 billion.
On the same day, Capital One confirmed it's acquiring fintech startup Brex Inc. for $5.15 billion in a deal split evenly between cash and stock. That's a significant bet on the corporate card and expense management space.
Breaking Down the Quarter
The numbers tell a story of growing revenue facing headwinds from rising costs and credit concerns. Total net revenue climbed 1% to $15.6 billion, but expenses surged 13% to $9.3 billion. Marketing spending jumped 38%, while operating expenses rose 8%.
Credit metrics showed continued normalization. The provision for credit losses increased by $1.4 billion to $4.1 billion, with net charge-offs hitting $3.8 billion. The bank also built $302 million in loan reserves. Net interest margin dipped 10 basis points to 8.26%.
Pre-provision earnings dropped 12% to $6.2 billion, reflecting the squeeze from higher expenses and narrower margins.
Management's Take
"Our fourth quarter and full year results reflect solid top-line growth and strong and stable credit performance," said CEO Richard D. Fairbank.
Fairbank struck an optimistic tone despite the miss: "Years of strategic preparation and our choices to consistently invest to sustain long-term growth and returns enable our results and put us in a strong position going forward. I'm struck by the number and quality of the opportunities we have before us."
Capital One stock dropped 4.42% to $225.75 in extended trading Thursday.
