On January 21, Capital One Financial announced a 60% increase in fourth-quarter profit, attributed to higher interest income. Strong consumer spending, driven by optimism for the economy and declining interest rates, has boosted revenue from interest payments on credit card debt.
Capital One, a major issuer of Visa and Mastercard credit cards in the U.S., relies heavily on its credit card business, which accounts for nearly half of its loan portfolio. The company, based in McLean, Virginia, saw its net interest income rise by almost 8% in the fourth quarter to around $8.1 billion.
Despite its pending acquisition of Discover Financial for $35.3 billion, Capital One reported a decrease in provision for credit losses to $2.64 billion from $2.86 billion the previous year. CEO Richard Fairbank highlighted the company's solid performance, emphasizing growth in its card and auto businesses.
Non-interest income, driven primarily by interchange income and service charges, increased by 5% to $2.09 billion. The company's net income available to common stockholders rose to $1.02 billion, or $2.67 per share, in the fourth quarter of 2023, up from $639 million, or $1.67 per share, a year earlier.
Capital One's shares surged by 36% in 2024. The U.S. Consumer Financial Protection Bureau accused the lender of wrongdoing regarding its "high-interest" savings account, alleging over $2 billion in unpaid interest. Capital One refuted the claims and expressed its intention to defend itself in court.