10-QPeriod: Q3 FY2003

CAPITAL ONE FINANCIAL CORP Quarterly Report for Q3 Ended Sep 30, 2003

Filed November 10, 2003For Securities:COFCOF-PLCOF-PICOF-PKCOF-PNCOF-PJ

Summary

Capital One Financial Corporation's third quarter 2003 report (ending September 30, 2003) shows continued growth in its managed loan portfolio, reaching $67.3 billion. Net income for the quarter was $276.3 million, a modest increase from the previous year's $258.8 million, with diluted EPS of $1.17. The company benefited from a lower provision for loan losses due to improving credit metrics and a shift towards higher credit quality loans. Despite a decrease in net interest margin driven by declining asset yields, overall revenue and net income saw positive trends. Significant increases in marketing expenses were noted, reflecting strategic investments in market opportunities and brand building. The company also adopted new accounting standards, including FIN 46 for Variable Interest Entities, which resulted in a one-time charge.

Key Highlights

  • 1Managed loan portfolio grew to $67.3 billion by September 30, 2003, up from $56.9 billion in the prior year period.
  • 2Net income for the third quarter of 2003 was $276.3 million, an increase from $258.8 million in the third quarter of 2002.
  • 3Diluted earnings per share for the third quarter of 2003 were $1.17, compared to $1.13 in the prior year.
  • 4Provision for loan losses decreased significantly to $364.1 million from $674.1 million in the prior year's quarter, reflecting improved credit quality.
  • 5Marketing expenses increased substantially to $316.0 million from $185.8 million in the prior year's quarter, driven by strategic investments.
  • 6The company adopted FIN 46 (Consolidation of Variable Interest Entities), resulting in a $15.0 million charge for a cumulative effect of an accounting change.
  • 7Total assets grew to $43.4 billion from $37.4 billion at the end of the prior year.

Frequently Asked Questions

For the third quarter ended September 30, 2003, Capital One reported a net income of $276.3 million, which translates to diluted earnings per share of $1.17. This represents an increase compared to the $258.8 million net income and $1.13 diluted EPS reported in the same quarter of the previous year.

Capital One's managed loan portfolio continued to grow, reaching $67.3 billion. The company saw a significant decrease in the provision for loan losses, falling to $364.1 million from $674.1 million in the prior year's quarter. This improvement was attributed to better credit metrics and a strategic shift towards higher credit quality loans.

Capital One adopted FASB Interpretation No. 46 (FIN 46) regarding the consolidation of Variable Interest Entities (VIEs) effective July 1, 2003. This adoption resulted in a one-time charge of $15.0 million, net of tax, for the cumulative effect of a change in accounting principle. Other accounting pronouncements like SFAS 150 and SFAS 149 were also adopted and did not have a material impact.

Marketing expenses saw a substantial increase to $316.0 million for the quarter, up from $185.8 million in the prior year's quarter. This increase was driven by strategic investments to capitalize on market opportunities, originate higher credit quality loans, and continued branding efforts, including the "What's in Your Wallet" campaign.