The upward trend in costs continued in the first quarter of 2023.Įxpense levels are expected to remain elevated, given the company’s continued investments in technology and infrastructure as well as inorganic expansion efforts. The increase was mainly due to a rise in marketing costs and inflationary pressure. The company’s credit quality is likely to remain under pressure in the near term, given the rising loan balance and deteriorating macroeconomic outlook.Ĭapital One’s expenses witnessed a CAGR of 6.2% for the last five years (ended 2022). Similarly, NCOs declined in 2018, 20, while witnessing a jump in 20.īoth provisions and NCOs increased in the first quarter of 2023. Though provisions fell in 2018 and were a benefit in 2021, these increased in the rest of the years till 2022. Provision for credit losses and net charge-offs (NCOs) have been steadily rising. However, the company’s asset quality has been deteriorating. Based on its earnings strength and solid liquidity position, Capital One’s enhanced capital deployment plans look sustainable. The company also has a share repurchase plan in place. In July 2021, it hiked the same by 50% to 60 cents per share. After slashing the quarterly dividend by 75% in 2020 based on the Federal Reserve’s requirements, Capital One restored the same to 40 cents per share in 2021. Our estimates for NII reflect a CAGR of 4.2% by 2025.ĬOF’s capital-deployment initiatives look encouraging. Nevertheless, with the Federal Reserve expected to keep interest rates high in the near term (although the pace of the rate hikes will slow down), NII and NIM are likely to witness continued improvements. economy from the coronavirus-induced mayhem), which hurt COF’s net interest income (NII) and net interest margin (NIM). ![]() ![]() We expect total revenues to grow 3.1%, 2.5% and 7.3% in 2023, 20, respectively.Īfter slashing rates thrice in 2019, the central bank cut interest rates to near zero in March 2020 (to cushion the U.S. Revenue prospects look encouraging on the back of the company’s solid credit card and online banking businesses as well as decent loan demand. Also, the acquisitions of Beech Street Capital and GE's healthcare unit reflect Capital One’s revenue diversifying efforts. In 2019, it acquired KippsDeSanto and thus, forayed into the merger and acquisitions market. In 2021, COF acquired TripleTree, LLC, which will further enhance its investment banking capabilities. Opportunistic buyouts over the years have been driving revenues. The uptrend continued in the first quarter of 2023. ![]() Looking at its fundamentals, while the company’s revenues declined marginally in 2020, the same witnessed a five-year (2017-2022) compound annual growth rate (CAGR) of 4.7%.
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