COF Capital One Financial Corporation

By AnnaMaria Andriotis 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 20, 2018).

Capital One Financial Corp.'s second-quarter profit rose sharply as consumer card spending surged and credit losses fell.

Net income for the quarter surged 84% to $1.91 billion, or $3.71 a share, from $1.04 billion, or $1.94 a share, in the year-ago period. Revenue rose 7% to $7.2 billion from $6.7 billion.

Results beat analyst estimates, and shares were up 2% in after-hours trading Thursday.

The loan performance of the company, which has a large subprime card business, often serves as a gauge for consumers' willingness to spend and their ability to pay back their debts. After rising for many quarters on a year-over-year basis, the company's net charge-off rate for its domestic card business fell to 4.72% in the second quarter compared with 5.11% a year prior. That was the first year-over-year decline in this metric since the second quarter of 2015.

Richard Fairbank, Capital One's chief executive, said performance in the domestic card business has turned a corner

"We are now on the good side of growth math," he said on an earnings call Thursday. "Credit performance on the loans booked during our growth surge [between 2014 and 2016] has now turned and is improving year over year."

Also helping Capital One's loan performance is its recent acquisition of the credit-card portfolio of outdoor-gear retailer Cabela's, whose cardholders tend to have high credit scores.

Provisions for future credit losses in Capital One's domestic card business fell 18% from a year ago. Purchase card volume increased 17% from a year prior, while card balances rose 8%.

Non-interest expenses totaled $3.4 billion, mostly unchanged from a year prior as the company continues to invest in becoming more of a digital bank.

Capital One also is looking to become a bigger force in merchant card partnerships. The bank is in talks to become the issuer of Walmart Inc. credit cards, according to people familiar with the matter, a change that would be a major shakeup in the card industry. Synchrony Financial has been Walmart's exclusive card issuer since 1999.

Mr. Fairbank said Capital One is looking for a merchant partner with a strong brand and commitment to the card program as an avenue of growth.

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com

(END) Dow Jones Newswires

July 20, 2018 02:47 ET (06:47 GMT)

Capital One Financial (NYSE:COF)
Historical Stock Chart
From Jun 2024 to Jul 2024

Capital One Financial (NYSE:COF)
Historical Stock Chart
From Jul 2023 to Jul 2024