Capital One Surges After Crushing Q3 Profit Estimates
Financial giant's stock climbs as a sharp reduction in credit loss provisions and strong loan growth signal confidence in the U.S. consumer.
Capital One Financial Corp. (COF) shares jumped Tuesday after the financial services giant reported third-quarter earnings that significantly outpaced Wall Street expectations, driven by a dramatic decrease in funds set aside for bad loans and robust growth metrics.
The McLean, Virginia-based company posted adjusted earnings of $5.95 per share, soaring past the analyst consensus of $4.23. Total net revenue climbed 23% year-over-year to $15.4 billion, according to the . The market reacted positively to the news, with Capital One's stock rising over 1% to $217.05 in morning trading, approaching its 52-week high of $231.82.
The standout figure in the report was the company's provision for credit losses, which fell by $8.7 billion from the previous quarter to $2.7 billion. This substantial reduction, which included a $760 million loan reserve release, signals management's growing confidence in the quality of its loan portfolio and the resilience of its consumer base, offering a potent counter-narrative to broader market anxieties over inflation and rising interest rates.
"In the third quarter, our adjusted earnings, top-line growth, credit results, and capital generation continued to be strong," said CEO Richard D. Fairbank during the company's earnings call. "The Discover integration continues to go well and we are well positioned to capitalize on the opportunities that lie in front of us."
Profitability was further bolstered by a significant expansion in the bank's net interest margin (NIM), a key indicator of lending profitability. Capital One's NIM increased by 74 basis points to 8.36%, a result that impressed analysts and suggests the company is effectively navigating the current interest rate environment.
The successful integration of Discover Financial Services, which was acquired in May 2025, is also beginning to bear fruit. The deal contributed significantly to growth, adding $26.5 billion in credit card purchase volume and nearly $100 billion in loans to the company's balance sheet. This strategic acquisition has broadened Capital One's scale, creating a formidable competitor in the U.S. credit card and payments landscape.
Wall Street analysts responded favorably to the strong quarterly performance, reiterating their bullish stance on the company. Morgan Stanley raised its price target to $267, while Evercore ISI and Barclays lifted their targets to $255 and $257, respectively, with all firms maintaining "Overweight" ratings. Wells Fargo also held its "Overweight" rating with a price target of $265, signaling strong conviction from the analyst community.
Looking ahead, investors will be closely watching whether Capital One can maintain its optimistic credit outlook amid persistent macroeconomic headwinds. However, the powerful combination of improved profitability, disciplined risk management, and the successful execution of a landmark acquisition has positioned the company on solid footing as it closes out the year.