Capital One’s Net Interest Margin Fell in the Second Quarter

Capital One beat EPS estimates

Capital One Financial (COF) posted second-quarter results on July 19. The company’s EPS stood at $3.22, which beat Wall Street expectations by $0.59. American Express (AXP) posted EPS of $1.84 in the second quarter.

Capital One’s Net Interest Margin Fell in the Second Quarter

Capital One garnered net interest income of $5.5 billion in the second quarter, which implies a fall of 3% sequentially and a 1% rise YoY. During the same period, the company’s net interest margin was 6.66%, a fall on a sequential and YoY basis.

In the second quarter, Capital One’s net interest margin fell by 27 basis points sequentially mainly because of the changes with respect to Capital One’s interest-earning assets as well as increased costs. Mastercard (MA), one of the company’s competitors (IYF), plans to release its earnings for the second quarter on July 26.

Capital One exceeded revenue estimates

Capital One garnered revenues of $7.19 billion in the second quarter, which exceeded analysts’ estimates by $240 million. Of the total net revenues, $4.2 billion was from the company’s credit card segment. This segment ended the second quarter with total loans amounting to $109.7 billion, which implies YoY growth of 8% and a sequential rise of 2%. The strong economy and lower unemployment rates are the primary drivers for the sequential growth in the credit card segment’s loans. In the second quarter, Discover Financial Services (DFS) could also witness higher credit card loans sequentially.

Capital One’s consumer banking segment’s total net revenues amounted to $1.7 billion, which reflects marginal growth of 1% on a YoY basis helped by net interest income. The segment ended the second quarter with total loans of $58.7 billion, reflecting a YoY and sequential decline of 22% and 21%, respectively. The sequential decline was mainly due to the lower consumer confidence amid trade worries.

Capital One’s commercial banking segment’s total net revenues amounted to $758 million in the second quarter, which implies YoY growth of 1% and a sequential rise of 5%. During the same period, the segment had total loans of $67.6 billion, which reflects sequential growth of 3%.