Analyst Note| Michael Miller |
Narrow-moat-rated Capital One reported fourth-quarter results that were mostly in line with our expectations, though credit costs did come in higher than we had anticipated and were a drag on bottom-line results. The bank’s net revenue increased 3% from last quarter and 11% year over year to $9.04 billion. On the other hand, earnings per share fell 44% from last year to $3.03, which translates to a return on tangible equity of 14.22%. The primary culprit behind the drop in earnings was credit provisioning, with the bank building $1 billion in reserves versus a $145 million release of reserves last year. While much of the increase was driven by strong loan growth, higher net charge-offs also played a role as the bank’s credit losses rise from historic lows.