Capital One Stock Is Trading Above Its Near Term Potential

SectorFinancial Markets
CountryMiddle east

Share to Linkedin Capital One's revenue of $28. 5 billion for the full year 2020 was marginally lower than the 2019 figure. This was primarily due to a 2% drop in net interest income driven by lower yields on average earning assets, a decline in outstanding domestic card loans, and higher deposit balances. However, the weakness in NII was almost offset by a 7% y-o-y growth in non-interest income, mainly due to an unrealized valuation gain of $535 million on equity investment in Snowflake Inc.

On the profitability front, COF's net income slipped almost 50% y-o-y to $2. 7 billion. This drop could be attributed to a build-up in provisions for credit losses from $6. 2 billion to $10. 3 billion coupled with higher compensation costs. Net Interest Income contributes around 80% of the total revenues for Capital One. Hence, changes in interest rates can have a significant impact on COF's top-line. Further, the consumer spending level is also more...