Consumer lender Capital One's Q3 profit rises as high interest rates boost income

Discover Financial Services

24/10/2024 22:15

Oct 24 (Reuters) - Capital One  COF.N  reported a 1.6%
increase in third-quarter profit on Thursday, as elevated
interest rates enabled the consumer lender to earn more from
customers repaying credit card debt. 
    The company has been shielded from the broader industry-wide
weakness in interest income in recent quarters, as rates on
credit card debt are significantly higher than those on
mortgages and other types of loans.
    Capital One's net interest income - the spread between
interest earned on loans and paid out to customers on deposits -
 increased nearly 9% in the third quarter to about $8.1 billion.
    Smaller rival Discover Financial  DFS.N  - which Capital One
agreed to acquire in a $35 billion deal earlier this year - also
reported a 10% increase in quarterly interest income.
   Still, lenders have been preparing for the possibility that
elevated interest rates will strain consumers, who are already
dealing with slower wage growth and dwindling household savings.
   Provisions for credit losses totaled $2.48 billion in the
quarter, compared with $2.28 billion a year earlier. 
        The net charge-off rate, or the percentage of total
loans written off as unlikely to be repaid, at Capital One rose
to 3.27% in the third quarter versus 2.56% a year ago.
  
    These credit trends mirror those of major U.S. lenders,
though executives and analysts have noted that the rising
delinquencies are a return to normal after the pandemic, not a
sign of worsening conditions.
    Adjusted net income rose to $1.73 billion, or $4.51 per
share, in the three months ended Sept. 30. That compares with
$1.71 billion, or $4.45 per share, a year earlier.
    Total net revenue climbed 7% to $10 billion in the quarter. 
    

 (Reporting by Jaiveer Singh Shekhawat and Manya Saini in
Bengaluru; Editing by Tasim Zahid)
 ((Manya.Saini@thomsonreuters.com; X: manya__saini;))