Shares of Capital One Financial Corporation (COF – Analyst Report) fell nearly 5% in the after-market trading session following the second-quarter 2015 earnings miss. The company reported adjusted earnings from continuing operations of $1.78 per share, which lagged the Zacks Consensus Estimate of $1.97. Moreover, earnings came in below the prior-year quarter figure of $2.04 per share.
Capital One Financial Corporation – Earnings Surprise | FindTheBest
Results were affected by a reduction in non-interest income and elevated expense level as well as provisions. Credit quality continued to reflect weakness. However, higher net interest income remained a headwind during the quarter.
The reported quarter results excluded the impact of restructuring charges of $147 million and a build in the U.K. PPI reserve of $78 million. After considering these non-recurring items, net income from continuing operations came in at $863 million or $1.50 per share.
Performance Details
Capital One's net revenue totaled $5.67 billion, up 4% year over year. However, the figure missed the Zacks Consensus Estimate of $5.76 billion.
Net interest income climbed 5% year over year to $4.54 billion, mainly due to a 5% rise in total interest income, partly offset by 1% increase in interest expenses. Also, net interest margin inched up 1 basis points (bps) year over year to 6.56%.
Non-interest income declined 2% year over year to $1.14 billion on the back of lower service charges and other customer-related fees as well as other income. These were, however, partly offset by higher interchange fees.
Non-interest expenses rose 11% year over year to $3.31 billion. The increase was mainly attributable to a rise in salaries and associate benefit costs, marketing costs as well as professional services costs. Nevertheless, these were partially offset by a fall in amortization of intangibles and occupancy and equipment costs.
The efficiency ratio deteriorated to 58.30% from 54.48% in the year-ago quarter. A rise in efficiency ratio indicates lower profitability.
Credit Quality
Capital One's credit quality worsened during the quarter. Net charge-off rate descended 3 bps year over year to 1.64%.
