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Capital One Financial (COF.N) missed Wall Street expectations for first-quarter profit on Tuesday, as the consumer lender set aside more money to cover potential bad loans.
Shares of the company fell 2.5% in extended trading. The stock has plunged 16.5% so far this year.
Provisions are funds set aside by lenders to cover potential loan losses, serving as a key buffer against defaults and an indicator of how they view future credit risk. They mainly depend on the macroeconomic environment and lending volumes.
While consumer spending stayed strong in the first quarter, driven by higher-income households and steady wage growth, top banking executives have cautioned that prolonged elevated oil prices could negatively impact the U.S. economy.
The McLean, Virginia-based company set aside $4.07 billion in provision for credit losses in the quarter, compared with expectations of $3.77 billion, according to estimates compiled by LSEG.
Truist analyst Brian Foran also pointed towards net interest margin - which measures the profitability of lending operations - declining 39 basis points sequentially, hurt by higher cash and lower loans.
Capital One is the sixth-largest U.S. bank by assets and a major heavyweight in credit cards, which is among the costliest types of loans.
Net interest income — the difference between what the bank earns on loans and pays out on deposits — rose to $12.15 billion in the quarter from $8 billion a year earlier.
Capital One completed the acquisition of rival Discover Financial Services in May 2025, adding billions of dollars in loans to its balance sheet.
Excluding one-time items, Capital One's profit was $4.42 per share in the three months ended March 31, compared with Wall Street expectations of $4.55 per share.
