Capital One's Q3 Profits Surge 1.6% Boosted by Strong Interest Earnings

Capital One Financial Corp.'s third-quarter profit rose 1.6% thanks to higher interest rates, which boosted gains from credit card debt payments. The company's net interest income, reflecting the difference between interest earned on loans and interest paid on deposits, increased by about 9% in the third quarter to $8.1 billion. The consumer credit company performed better in a sector facing an overall decline in interest income, benefiting from the higher interest rates applied to credit card debt compared to mortgages and other loan types. Discover Financial Services, announced earlier this year to be acquired by Capital One in a $35 billion transaction, reported a 10% increase in quarterly net interest income. Despite positive income figures, the company is bracing for potential consumer pressure due to high interest rates, slower wage growth, and declining household savings. Capital One's provisions for credit losses increased in the third quarter, reaching $2.48 billion, up from $2.28 billion the previous year. The firm's net charge-off rate, reflecting the percentage of loans deemed uncollectible, rose to 3.27% from 2.56% in the same period last year. However, this increase in charge-offs is viewed by executives and analysts as a return to pre-pandemic norms rather than a sign of worsening conditions. Capital One's adjusted net income for the quarter ended September 30 was $1.73 billion, or $4.51 per share, compared to $1.71 billion, or $4.45 per share, the previous year. Total net revenue also rose 7% to $10 billion.