A smaller provision for loan losses helped Capital One Financial counteract sluggish lending and higher expenses during the third quarter.
The McLean, Va., company said Thursday that it earned $1.5 billion in the quarter, up 36% from the third quarter of 2017. Earnings per diluted share were $2.99, or 13 cents higher than the mean estimate of analysts surveyed by FactSet Research Systems.
Across the $362.9 billion-asset company, loans held for investment were 5% lower at the end of the third quarter than they were a year earlier.
Capital One’s consumer banking unit, which includes its auto lending business, reported a 21% percent decrease in loans held for investment.
In the company’s flagship U.S. credit card unit, loans held for investment were 2% higher at the end of the third quarter than they were in the same period last year.
Meanwhile, noninterest expenses across the company rose by 6%, led by higher marketing costs. In a press release announcing the results on Tuesday, Capital One CEO Richard Fairbank called attention to the firm’s investments in digital capabilities.
"Our digital and technology transformation is accelerating, and is powering our ability to grow new customer relationships and deepen engagement with new and existing customers," he said.
With the U.S. economy showing strength in the third quarter, credit quality at Capital One showed no signs of deterioration. Across the entire company, the net charge-off rate of 2.41% was two-tenths of a percentage point lower than it was a year earlier.
In the firm’s domestic credit card unit, the percentage of loans that were charged off declined, as did the percentage of loans that were at least 30 days delinquent.
Capital One took a provision for credit losses of $1.27 billion during the quarter, down 31% from the same period a year earlier.
The company also benefited from an effective income tax rate of 21.9%, down from 28.3% in the third quarter of 2017.
Earlier Tuesday, the Office of the Comptroller of the Currency
Capital One built its legal reserves by $170 million during the third quarter.
