Capital One (NYSE:COF) is set to announce its Q3 2023 earnings on Wednesday, with expectations indicating a year-over-year drop in earnings, while revenues are projected to rise. This follows a trend from the previous quarter where earnings surpassed the Zacks Consensus Estimate due to an increase in net interest income (NII) and fee income, despite a year-over-year net interest margin decline.
In recent history, COF has underperformed in three out of the last four quarters according to the Zacks Consensus Estimate. The estimate for COF's total average earning assets for Q3 2023 stands at $440.9 billion, indicating a 7% increase from the previous year.
The company's NII is expected to have been positively impacted by enhanced card operations and increased interest rates. NII is projected at $7.26 billion, marking a 3.7% year-over-year increase. Interchange fees, a significant part of COF's fee income, are estimated at $1.23 billion for Q3, representing a 2.8% rise from the previous year.
However, persistent growth in expenses due to elevated marketing costs and technology upgrades, along with inflation issues, are expected to have inflated operating expenses. In light of global economic slowdown risks and more stringent financial conditions, COF is likely to have reserved funds for potential bad loans.
The surge in provisions and expenses has also posed challenges for the company. Despite these hurdles, COF continues to demonstrate resilience with its steady growth in revenues and fee income. The forthcoming announcement of their Q3 2023 earnings will provide further insight into the company's financial performance amidst these challenging market conditions.
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