Hot Financial stock to watch: Capital One Financial Corp. (NYSE: COF)

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Capital One Financial Corp. (NYSE: COF) stock rose over 2.8% in the pre-market session (as of 9:04 am GMT-5; Source: Google finance) after the company posted better than expected results for the fourth quarter of FY 19.

Domestic card ending loan balances rose by 10.5% year-over-year on the back of the addition of the acquired Walmart portfolio and strong growth of branded cards, which was partially offset by the choice to exit several small partnership portfolios in the second quarter. Branded card loans, which exclude all private label and co-branded cards, grew 5.7% from the prior-year quarter. Domestic card average loans for the fourth quarter were up 9.3% compared to the fourth quarter of 2018.

COF in the fourth quarter of FY 19 has reported the adjusted earnings per share of $2.49, beating the analysts’ estimates for the adjusted earnings per share of $2.37, according to analysts polled by FactSet. The company had reported the adjusted revenue growth of 5.9 percent to $7.43 billion in the fourth quarter of FY 19, beating the analysts’ estimates for revenue of $7.35 billion. The revenue growth is driven by the growth in average loans and strong noninterest income. Noninterest expense was up 1.6% compared to the prior-year quarter. Revenue margin had declined 31 basis points. More than 100% of the decline was due to the revenue-sharing agreement on the acquired Walmart portfolio. The charge-off rate for the fourth quarter was 4.32%, which is a 32 basis point improvement year-over-year, on the back of the addition of the acquired Walmart portfolio.

Moreover, the average loans for the fourth quarter rose 5.5% from the prior-year quarter. The auto business has posted solid year-over-year origination growth at a modest acceleration of loan growth along with stable credit results and loan yields, all in a marketplace with increasing competitive intensity. Further, Ending loan balances grew up 5.9% year-over-year. Quarterly average loan balances rose up 6.5% compared to the fourth quarter a year ago. Average deposits had increased 4.4%

Additionally, the company’s common equity Tier 1 capital ratio on a Basel III standardized basis in the fourth quarter stood at 12.2%. In the fourth quarter, the company had purchased approximately 941 million or 10 million Capital One common shares. The company now has completed approximately $1.4 billion of the 2019 CCAR authorization of $2.2 billion.

For fiscal 2020, the company expects marketing expense to be moderately higher than full year 2019 marketing expense.

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