C&I, fee income boost Capital One's 1Q profit

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Capital One Financial said Thursday that its first-quarter profits climbed 5% from a year earlier to $1.35 billion as strong growth in commercial lending and fee income more than made up for slower gains in credit card and auto lending, its two largest business lines.

Earnings per share of $2.86 beat by 14 cents the mean estimates of analysts polled by FactSet Research Systems.

Net interest income at the $373 billion-asset company climbed just 1% year over year to $5.8 billion as a 52% increase in deposit costs largely erased increased income on loans and investment securities. Fee income increased 8%, however, to $1.3 billion, driven largely by an 18% increase in interchange income from credit and debit cards.

Commercial lending was a bright spot in the quarter. Led by commercial and industrial loans, total commercial and commercial real estate loans increased 8% year over year to $71.2 billion.

Credit card loans increased 2% year over year to nearly $110 billion, while car loans increased 3% to $56.4 billion.

Credit quality trends were mixed. Its net charge-off rate on credit card loans fell 13 basis points from last year’s first quarter to 4.9% but increased 29 basis points from the fourth quarter. Thirty-day delinquency rates on credit cards fell 29 basis points from the fourth quarter to 3.71% but were up year over year.

In auto lending, the charge-off rate fell sharply from 1.98% in the fourth quarter to 1.44% at March 31, but was up year over year.

Capital One, of McLean, Va., reported its results after markets closed Thursday. Its shares were up 1% to $89 in after-hours trading.

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