Image of Capital One Bank headquarters courtesy of Wikipedia

On Thursday consumer lender Capital One Financial Corp posted first quarter profits which missed estimates, as an increase in provisions pared back gains resulting from interest rate hikes.

Lenders overall have benefitted from the rate hikes implemented by the United States Federal Reserve over the past year in its battle with inflation, as it allows them to charge higher interest rates from borrowers.

Net interest income for the lender increased 12% to $7.19 billion in the first quarter.

Despite the increased earnings, rate hikes also increase the costs of borrowing, leaving the economy reeling, and forcing banks to stockpile additional funds in preparation for loans that go into default.

Capital One said provision for credit losses increased to $2.8 billion in the quarter ending in March, increased from $677 million the previous year.

Shares of Capital One have risen 3.6% so far this year, however they fell 4.9% to $91.93 on Thursday in extended trading.

Net profits at the lender were cut by more than half, to $960 million or by $2.31 per share in the first quarter, down from $2.40 billion and $5.62 per share respectively, one year prior.

Data from Refinitiv showed analysts were expecting profits to come in at $3.92 per share.