What Could Affect Capital One’s Consumer Banking Business in Q2?



COF’s Consumer Banking segment

The components of Capital One Financial Corporation’s (COF) Consumer Banking business’s total revenues are interest income and non-interest income. Higher spending among retail consumers could lead to higher demand for loans, which is expected to boost the company’s Consumer Banking business performance. 

In the second quarter, this segment is expected to see increased interest income due to a healthier US economy. Favorable macroeconomic variables typically encourage increased spending.

Among Capital One’s competitors, Discover Financial Services (DFS) expects to witness increased loans due to higher spending. Mastercard (MA) and Visa (V) are also expected to benefit in the June quarter, primarily due to a rise in oil prices.

Performance in Q1 2018

Capital One’s (COF) Consumer Banking business generated total net revenues of ~$1.8 billion in the first quarter for a YoY (year-over-year) increase of 4.0%. The business garnered net interest income of ~$1.6 billion in the first quarter, which reflects a YoY increase of 6.0%. This increase was primarily due to its auto loan portfolio, increased interest rates, and increased margins and deposit volumes.

Capital One’s Consumer Banking business is expected to benefit from higher interest rates, which could improve its interest income. This segment reported a decline in its non-interest income from $195.0 million in the first quarter of 2017 to $174.0 million in the first quarter for a YoY decrease of 11.0%. COF’s Consumer Banking business’s non-interest expenses saw a YoY fall of 4.0% in the first quarter.

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