Capital One Financial (NYSE:COF) shares are trading lower Friday after the company reported worse-than-expected fourth-quarter adjusted earnings per share results and announced it will acquire Brex. Also, BTIG maintained a Buy rating on the stock, but lowered its price target on the stock from $308 to $270.
Fourth Quarter Results, Brex Acquisition
Capital One reported adjusted earnings per share of $3.86, missing the consensus estimate of $4.11. In addition, the company reported revenue of $15.58 billion, beating the consensus estimate of $15.48 billion.
Total non-interest expense increased 13% to $9.3 billion, driven by a 38% increase in marketing expenses and an 8% increase in operating expenses. Pre-provision earnings declined 12% to $6.2 billion.
Provision for credit losses rose $1.4 billion to $4.1 billion, reflecting $3.8 billion in net charge-offs and a $302 million loan reserve build. Net interest margin declined 10 basis points to 8.26%, while the efficiency ratio came in at 59.95%.
On the balance sheet, Capital One reported a common equity Tier 1 capital ratio of 14.3% at quarter end. Period-end loans held for investment increased 2% to $453.6 billion, led by growth in credit card and consumer banking loans. Total period-end deposits increased 1% to $475.8 billion, while the average rate paid on interest-bearing deposits declined 11 basis points to 3.16%.
Separately, Capital One announced it entered into a definitive agreement to acquire Brex in a stock-and-cash transaction valued at $5.15 billion. The deal is expected to combine Capital One's scale and underwriting capabilities with Brex's AI-native payments, corporate card, and spend management platform. Brex founder and CEO Pedro Franceschi will continue to lead the business following completion of the transaction.
COF Price Action: At the time of writing, Capital One shares are trading 7.19% lower at $218.08, according to data from Benzinga Pro.
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