Capital One Falls After Earnings Report, Makes $5.15B Bet on Brex

Capital One Financial Corporation shares tumbled in premarket trading Friday after the bank reported fourth-quarter earnings that missed analyst expectations and announced a major acquisition. The company disclosed it would acquire payments startup Brex for $5.15 billion in a deal split evenly between cash and stock, marking another ambitious move by CEO Richard Fairbank. The dual announcement sent COF stock down 3.78% to $227.01 in premarket trading as of 9:03 AM EST, following a 1.76% gain to $235.07 at Thursday’s close.

Capital One’s Q4 Miss Highlights Rising Costs

Capital One reported fourth-quarter earnings of $3.86 per share, falling short of the consensus estimate of $4.11 per share. The bank’s quarterly revenue reached $15.58 billion, slightly exceeding analyst expectations of $15.48 billion. Net income for the quarter totaled $2.1 billion, reflecting solid performance across major business units despite increased credit costs.

The company’s provision for credit losses rose $1.4 billion to $4.1 billion, including net charge-offs of $3.8 billion and a $302 million loan reserve build. Total non-interest expenses jumped 13% to $9.3 billion, driven by a 38% increase in marketing and an 8% rise in operating expenses. Net interest margin declined 10 basis points to 8.26%, though the bank maintained strong capital ratios with a CET1 ratio of 14.3%.

CEO Richard Fairbank emphasized the company’s strong fundamentals, stating that fourth-quarter and full-year results reflected solid top-line growth and stable credit performance. Total loans reached $453.6 billion with particular strength in credit card lending, while deposits climbed to $475.8 billion. Despite the near-term headwinds, Fairbank highlighted the bank’s strategic positioning for long-term growth.

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Strategic Brex Acquisition Reshapes Growth Outlook

The $5.15 billion Brex acquisition represents a significant strategic expansion for Capital One, following last year’s $35 billion purchase of Discover Financial. Brex, previously valued at $12.3 billion, has seen its valuation decline more than 50%, reflecting broader headwinds facing fintech companies. The startup pioneered the integration of corporate cards, banking, and spend management software, serving clients including Robinhood, Zoom, and Anthropic.

Fairbank described the deal as accelerating Capital One’s journey to build a payments company at the frontier of the technology revolution, particularly in the business payments marketplace. Brex CEO Pedro Franceschi noted that combining the startup’s technology with Capital One’s reach and resources would enable faster growth than as a standalone firm. The acquisition aims to expand the bank’s digital capabilities and enterprise reach.

Capital One stock carries a KO Score of 73 with a “Strong Buy” analyst consensus. The company has a market capitalization of $150.3 billion, a forward P/E ratio of 10.85, and analyst price targets ranging from $216 to $310, with an average of $278.30. The bank’s 52-week range spans $143.22 to $259.64, with an average trading volume of 4.08 million shares.

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.