Capital One Financial
Capital One Financial (COF), which is a bank holding company that specializes in credit cards, auto loans, and banking and savings products, was among the S&P 500’s top losses on Wednesday. After gaining for two consecutive trading weeks, Capital One Financial started this week on a weaker note and declined as the week progressed.
Strong 1Q18 EPS
Capital One Financial opened lower on April 25 and declined to four-week low price levels. Capital One Financial fell amid the release of its mixed 1Q18 earnings report. According to management, the adjusted EPS (earnings per share) in 1Q18 was $2.65—higher than analysts’ forecast of $2.33. The credit losses in 1Q18 declined 16%, while loans increased by $7 billion—compared to the same period of 2017. Credit card purchase volumes increased 18% YoY.
Despite Capital One Financial’s strong earnings, the stock fell due to the revenue miss and disappointing net interest margin. In 1Q18, the revenues were $6.91 billion—below the market’s expectation of $6.94 billion. The Fed’s interest rate hikes usually result in an improved net interest margin in the banking sector. However, Capital One Financial’s net interest margin declined by 10 basis points compared to 1Q17 and increased by 5 basis points compared to 1Q17. Capital One Financial’s net interest margin was weaker than its peers’ net interest margins, which already released their earnings. The market sentiment on Capital One Financial was dented and weighed on the price on Wednesday.
On April 25, Capital One Financial declined 4.8% and closed the day at $92.76. Capital One Financial is part of the S&P 500 financials sector, which declined 0.06% on Wednesday.