Capital One Surprises The Street With Better Than Expected Results

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.