How Does Capital One Make Money? — It’s More Than Just Credit Cards


Capital One Bank is among the 20 greatest banks by way of property within the United States. To be actual, it’s #10 as of September 30, 2022.

It makes some huge cash too. In 2021, the newest yr for which we have now complete information, Capital One Bank reported greater than $12 billion in benefit sooner than taxes. 

Where does all that cash come from? The large image in fact isn’t that difficult. Capital One earns nearly all of its source of revenue from hobby on bank cards, shopper loans, and business loans, and from debit and bank card transaction charges. Here’s the way it all suits in combination.

How Much Money Does Capital One Make?

Capital One Bank earned $12.39 billion in 2021.

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The financial institution’s source of revenue and bills fall into two main classes: hobby and noninterest. 

Capital One’s Interest Income Sources

Capital One earned $25.77 billion in gross hobby source of revenue in 2021

Most of that hobby source of revenue comes from price range lent to consumers. That contains:

Capital One additionally treats source of revenue it earns from funding securities as hobby source of revenue. Finally, it earns an overly small quantity of hobby on working money held in its personal accounts as smartly.

Interest Income Source % of Interest Income
Credit playing cards 60%
Consumer banking loans 23%
Commercial banking loans 8%
Other loans 3%
Investments and money 6%
Total 100%

Capital One’s Interest Expenses

Capital One had $1.6 billion in hobby bills in 2021.

Capital One’s hobby source of revenue dwarfs its hobby bills, however the ones bills do nonetheless minimize into its benefit. After accounting for them, Capital One netted $24.2 billion in hobby source of revenue in 2021.

Capital One’s greatest hobby expense is the hobby it can pay on buyer deposit accounts, like financial savings accounts and certificate of deposit. (It is a financial institution, finally.) The relaxation is going to Capital One’s personal debt carrier — this is, the hobby it can pay on in the past borrowed price range.

Interest Expense Type % of Interest Expenses
Interest paid on deposits 60%
Securitized debt tasks 7%
Senior and subordinate notes 31%
Other varieties of debt and liabilities 2%
Total 100%

Capital One’s Noninterest Income

Capital One earned $6.26 billion in noninterest source of revenue in 2021.

Most of that (62%) comes from interchange charges, often referred to as swipe charges. Interchange charges are transaction processing charges paid by way of traders to bank card issuers like Capital One. Every time you utilize your Capital One bank card, Capital One will get a small minimize of the quantity paid — in most cases 1.5% to a few.5%, relying at the cost community and whether or not the transaction happens on-line or in particular person.

Most of the remainder of Capital One’s noninterest source of revenue comes from carrier fees and different charges charged to consumers. As banks and bank card issuers pass, Capital One isn’t recognized for charging over the top charges, and it doesn’t rate overdraft charges in any respect on shopper checking accounts. But the costs it does rate nonetheless upload up:

  • Credit card annual charges
  • Installment mortgage origination charges
  • Wire switch charges
  • Bank take a look at charges
  • Paper remark charges
Noninterest Income Type % of Noninterest Income
Interchange charges 62%
Service fees and different buyer charges 25%
Other charges 13%
Total 100%

Capital One’s Noninterest Expenses

Capital One had $16.57 billion in noninterest bills in 2021.

This expense class encompasses the entire bills Capital One incurs to run its trade:

  • Salaries, wages, and advantages
  • Real property, referred to as “occupancy” in accounting parlance
  • Office apparatus
  • Marketing actions
  • Telecommunications and knowledge processing
  • Professional services and products
  • Various overhead bills

The sheer measurement of Capital One’s noninterest bills displays simply how necessary the financial institution’s hobby source of revenue is for its base line. Were it now not for hobby source of revenue, Capital One’s noninterest bills would go away it deep within the pink — interchange charges and repair fees merely aren’t sufficient to stay tempo.

Noninterest Expense Type % of Noninterest Expenses
Salaries and advantages 45%
Occupancy and gear 12%
Marketing 17%
Professional services and products 9%
Communications and knowledge 8%
Other bills 9%

Capital One’s 2021 Provision Credit

Capital One had one different important supply of noninterest source of revenue in 2021: a provision credit score.

A provision credit score is an accounting artifact that offsets unhealthy debt from earlier years. Each yr, banks like Capital One stay monitor of unpaid money owed — past-due bank card balances and loans, most commonly — and make their best possible bet as to what quantity of money they’ll in fact lose on the ones money owed. They write off the quantity as a loss.

Those losses don’t all the time materialize. When the financial institution determines they’ve written off an excessive amount of for phantom long run losses, they use a provision credit score to recuperate the variation.

In 2021, Capital One took a provision credit score of $1.94 billion. That credit score accounted for six% of its general source of revenue.

Income Type % of Total Income
Interest source of revenue 76%
Noninterest source of revenue 18%
Provision credit score 6%
Total 100%

Where Did We Get This Data?

We were given the entire information for this record from Capital One’s 2021 Annual Report, which covers the fiscal yr that ended on December 31, 2021.

As a publicly traded corporate, Capital One is needed by way of regulation to record an in depth annual monetary remark with the Securities and Exchange Commission. The remark, referred to as a 10-Ok, runs greater than 200 pages and breaks down Capital One’s property, liabilities, and revenues in excruciating element.

The 10-Ok makes up the majority of Capital One’s annual reviews. You can in finding the 2021 model on the hyperlink above, starting on web page 19.

If you don’t have time to pore over masses of pages of numbers and felony jargon, we have now the highlights for you right here.

Final Word

It’s spectacular that Capital One earned over $12 billion in 2021, a yr marked by way of traditionally low rates of interest and reasonably low charges of bank card usage. 

In 2022, rates of interest had been a lot upper and customers leaned on bank cards greater than they’ve in years. Despite a more difficult financial setting total, it stands to explanation why that Capital One took good thing about the favorable rate of interest setting and endured printing cash.

Or possibly now not. We’ll must stay up for the financial institution’s subsequent annual record to make sure.

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