Capital One Announces Stress Test Results

Rhea-AI Summary

Capital One Financial (NYSE: COF) announced its preliminary Stress Capital Buffer (SCB) Requirement of 5.5%, effective October 1, 2024, following the Federal Reserve's 2024 Comprehensive Capital Analysis and Review (CCAR). This SCB is an increase from the previously disclosed 4.8%, which remains effective until the end of Q3 2024. The company has posted a summary of its stress test results on its website, detailing its performance under the Federal Reserve's severely adverse scenario. Investors can access this information via the Investor Center on the Capital One website.

Positive

• Capital One’s SCB Requirement has increased to 5.5% for 2024, indicating a stronger capital position.
• The company has transparently posted its stress test results online, providing detailed insights for investors.

Negative

• The increased SCB Requirement from 4.8% to 5.5% could indicate higher capital reserves needed, potentially impacting profitability.

Insights

Financial Analyst

Capital One’s Stress Capital Buffer Requirement (SCB) has increased from 4.8% to 5.5%. This means the company needs to hold more capital to absorb potential losses in the event of an economic downturn, as calculated by the Federal Reserve's Comprehensive Capital Analysis and Review process.

The implications for stakeholders are multifaceted. In the short term, this increase may be viewed negatively by investors because it can limit the company's ability to deploy capital towards other profitable ventures, such as lending or share repurchases. It might exert downward pressure on the stock, especially if investors perceive the need for greater capital reserves as an indication of potential vulnerabilities.

In the long term, however, a higher SCB can be a positive signal. It reflects the company’s resilience to severe economic scenarios, thereby providing assurance of its stability and sound risk management. This is particularly important for a financial institution like Capital One, allowing it to maintain investor confidence and potentially attract a more risk-averse investor base.

Investors should also understand capital buffer requirements. These are additional capital reserves that banks must hold, beyond minimum regulatory capital levels. Higher buffers are a safeguard against economic stress, ensuring that banks remain solvent during downturns.

Market Research Analyst

From a market perspective, the increase in Capital One's SCB to 5.5% could be a double-edged sword. On one hand, it shows regulatory rigor and the company’s robust risk assessment framework, which can be reassuring for long-term investors. On the other hand, it also implies potential restrictions on immediate capital utilization options.

Comparing industry standards, Capital One’s new SCB is relatively aligned with other major financial institutions that generally hold SCBs in the range of 3.5% to 7%. Therefore, this adjustment does not put Capital One at a competitive disadvantage but aligns it with industry norms.

However, retail investors should be aware that companies with higher SCBs might have less flexibility in managing their capital during favorable economic conditions. This can impact their ability to deliver higher returns in the short term. Understanding these trade-offs is important for making informed investment decisions.

MCLEAN, Va.--(BUSINESS WIRE)-- Capital One Financial Corporation (NYSE: COF) today announced the company’s preliminary Stress Capital Buffer Requirement (“SCB”), as calculated by the Federal Reserve 2024 Comprehensive Capital Analysis and Review process (“CCAR”), is 5.5 percent, effective October 1, 2024. Capital One’s previously disclosed SCB of 4.8 percent, as calculated by the Board of Governors of the Federal Reserve System 2023 CCAR process, will remain in effect through the end of the third quarter of 2024.

Capital One also posted a summary of the company’s stress test results on its website (www.capitalone.com). This summary shows the results of Capital One’s modeling of the Federal Reserve's severely adverse scenario. From the home page, select “About” choose “Investors” to access the Investor Center, select "Financials", and then choose “Stress Test Results” to view the current summary.

Forward-Looking Statements

Certain statements in this release may constitute forward-looking statements, which involve a number of risks and uncertainties. Forward-looking statements often use words such as “will,” “anticipate,” “target,” “expect,” “think,” “estimate,” “intend,” “plan,” “goal,” “believe,” “forecast,” “outlook” or other words of similar meaning. Any forward looking statements made by Capital One or on its behalf speak only as of the date they are made or as of the date indicated, and Capital One does not undertake any obligation to update forward-looking statements as a result of new information, future events or otherwise. Capital One cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information due to a number of factors. For additional information on factors that could materially influence forward-looking statements included in this earnings press release, see the risk factors set forth under “Part I—Item 1A. Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (the “SEC”) and Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the SEC.

About Capital One

Capital One Financial Corporation (www.capitalone.com) is a financial holding company which, along with its subsidiaries, had $351.0 billion in deposits and $481.7 billion in total assets as of March 31, 2024. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients through a variety of channels. Capital One, N.A. has branches and Cafés located primarily in New York, Louisiana, Texas, Maryland, Virginia and the District of Columbia. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol “COF” and is included in the S&P 100 index.

Additional information about Capital One can be found at Capital One About, or on LinkedIn at linkedin.com/company/capital-one/.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240628328911/en/

Sie Soheili

Sie.Soheili@capitalone.com



Danielle Dietz

Danielle.Dietz@capitalone.com

Source: Capital One Financial Corporation

FAQ

What is the new Stress Capital Buffer Requirement for Capital One (COF)?

Capital One's new preliminary Stress Capital Buffer Requirement is 5.5%, effective October 1, 2024.

When does Capital One's new Stress Capital Buffer Requirement take effect?

The new SCB Requirement of 5.5% takes effect on October 1, 2024.

What was Capital One's previous Stress Capital Buffer Requirement?

Capital One's previously disclosed SCB Requirement was 4.8%.

How can investors access Capital One's stress test results?

Investors can access Capital One's stress test results through the Investor Center on the company's website by selecting 'About,' choosing 'Investors,' then 'Financials,' and finally 'Stress Test Results.'

What does the increase in Capital One's SCB Requirement mean?

The increase in Capital One's SCB Requirement to 5.5% suggests a need for higher capital reserves, which could impact profitability.