Capital One Financial (COF 78.58, -4.82, -5.78%) opened lower by 4%
after the company reported weaker than expected earnings.
The bank holding company, which offers credit cards, auto loans, deposit accounts, and savings accounts, reported below-consensus fourth quarter earnings of $1.87 per share on revenue of $7.01 bln, which was just shy of expectations.
The company saw a considerable increase in spending on marketing, which jumped 64.9% sequentially to $831 mln. The sharp increase resulted in 10% growth in non-interest expense to $4.1 bln. Operating expenses grew 1% sequentially to $3.30 bln.
Net charge-offs increased 13% to $1.61 bln while the net-charge off rate grew to 2.67% from 2.41% in the prior quarter. The 30+ day delinquency rate increased to 3.84% from 3.48% one year ago. The delinquency rate increased by nearly a percentage point since the first quarter of 2018 when the rate was reported at 2.91%.
The provision for credit losses grew 29.2% sequentially to $1.64 bln.
The allowance for loan and lease losses were little changed sequentially at $7.22 bln. As a percentage of loans held for investment, the allowance decreased to 2.94% from 3.02% in the prior quarter.
Net interest income grew 0.6% to $5.82 bln while non-interest income increased 1.5% to $1.19 bln.
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