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Highlights
- Net income increased year-over-year to $1.1 billion, up from $706 million in Q4 2023.
- Total net revenue grew by 2% to $10.2 billion, driven by strong loan and deposit growth.
- Credit Card loans rose 4%, and total deposits increased by 3%, reflecting steady business expansion.
Capital One (NYSE:COF) reported its Q4 2024 financial results, showing strong year-over-year growth despite a quarterly decline in net income. The company’s net income for the quarter was $1.1 billion, or $2.67 per diluted share, a decrease from $1.8 billion ($4.41/share) in Q3 2024, but a significant improvement from $706 million ($1.67/share) in Q4 2023. Adjusted net income was reported at $3.09 per share, signaling operational strength in a challenging quarter.
Revenue Growth and Expense Increases
Capital One's total net revenue for Q4 2024 was $10.2 billion, reflecting a 2% increase from the previous quarter. This growth was primarily driven by an increase in loans and deposits, although it was offset by rising non-interest expenses, which surged 15% to $6.1 billion. The quarterly expense increase was largely due to $140 million in Discover integration expenses and $75 million in legal reserve activity, both impacting profitability.
Despite the rise in expenses, the company’s credit metrics demonstrated resilience. Credit Card loans, a key driver of Capital One’s revenue, rose 4% to $162.5 billion, while total loans increased 2% to $327.8 billion. Total deposits also showed steady growth, up 3% to $362.7 billion.
Credit and Loan Reserve Metrics
Capital One's credit performance showed mixed results in Q4 2024. The company reported net charge-offs of $2.9 billion, indicating some pressure on credit quality, particularly in a higher-interest-rate environment. However, this was partly offset by a $245 million loan reserve release, which helped stabilize the company’s credit position. The loan reserve release, alongside strong revenue performance, helped soften the blow from the charge-offs.
In terms of net interest margin, the company saw a slight decline of 8 basis points, bringing it to 7.03%. This decrease was attributed to higher funding costs and competitive pressures on pricing, although the impact was relatively modest considering the challenging macroeconomic conditions.
Capital One maintained a strong capital position throughout the quarter, ending with a Common Equity Tier 1 (CET1) ratio of 13.5%. This demonstrates the company’s ability to absorb shocks and continue growing its business. The strong CET1 ratio also positions the company well for its ongoing integration of Discover, which is set to close in early 2025, pending shareholder approval on February 18th.
Strategic Outlook
Despite the quarterly decline in net income, Capital One remains positive about its long-term growth trajectory. The strong loan and deposit growth, coupled with a solid capital position, underscores the company’s resilience and its ability to weather economic volatility. Going forward, the company will continue to focus on its integration of Discover, which is expected to further strengthen its market position and broaden its offerings.
