Capital One Financial Corp. (COF.US) disclosed its fiscal 2025 fourth-quarter results on Thursday, concurrently announcing the acquisition of Brex, a fintech company specializing in corporate expense management and accounting, for a total of $5.15 billion. The financial report revealed that Capital One's Q4 revenue reached $15.583 billion, marking a 53% increase compared to the same period last year. Within this, net interest income (NII) amounted to $12.466 billion, a significant surge of 54%. Net profit stood at $2.134 billion, reflecting a substantial 95% year-over-year growth. Adjusted earnings per share were $3.86, falling short of the average analyst expectation of $4.15. The provision for credit losses skyrocketed by 57% from the previous year to $4.142 billion. Notably, net interest income from the company's credit card business soared by 64% in the fourth quarter to $9.48 billion.
However, this profitable segment is now facing criticism from US President Donald Trump, who earlier this month called for a one-year cap on credit card interest rates at 10%. While at the World Economic Forum in Davos, Switzerland this week, Trump reiterated his demand for Congress to implement this 10% interest rate ceiling. In response, Capital One's CEO, Richard Fairbank, argued that such a cap would severely curtail the supply of credit and potentially plunge the US economy into a recession. He further cautioned, "A significant contraction in available credit could send multiple shockwaves throughout the entire economy."
Simultaneously, Capital One disclosed its plan to acquire the privately-held company Brex through a transaction structured with approximately 50% cash and 50% stock. This acquisition is set to become the largest for Capital One since its monumental, roughly $35 billion purchase of Discover Financial Services last year, a deal that created the largest credit card lender in the United States. Fairbank emphasized, "Since our founding, we have been committed to building a payments company at the forefront of the technological revolution. Acquiring Brex will accelerate this mission, particularly within the corporate payments market." The company anticipates finalizing the Brex acquisition by mid-year, with Brex's CEO, Pedro Franceschi, expected to continue leading the business post-transaction.
Brex had previously achieved a valuation of $12.3 billion in January 2022 and had contemplated an initial public offering last year. Following the announcement of the deal, Franceschi remarked in an interview, "If you examine the valuation multiples of public companies comparable to Brex currently trading on the market, the premium offered in this transaction is exceptionally high."
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