Summary
Capital One Financial Corporation reported a significant decrease in net income available to common shareholders for the second quarter and first six months of 2012 compared to the prior year. This decline was primarily driven by substantial acquisition-related charges, particularly those stemming from the HSBC U.S. card acquisition, including a $1.2 billion provision for credit losses and merger-related expenses. The company also incurred charges related to regulatory settlements for cross-sell activities and a provision for mortgage repurchase losses. Despite the reported net income drop, the company saw significant growth in its balance sheet due to the completion of two major acquisitions: ING Direct in February 2012 and HSBC's U.S. card business in May 2012. Total assets and loans held for investment increased substantially. While reported credit quality metrics, such as delinquency and charge-off rates, improved, this was partly due to the inclusion of acquired loans that are accounted for differently. The company's capital ratios remained strong and above regulatory requirements, although the Tier 1 common ratio saw a slight decrease following the HSBC acquisition due to increased risk-weighted assets.
Financial Highlights
39 data points| Revenue | $5.05B |
| Operating Income | $1.70B |
| Interest Expense | $615.00M |
| Net Income | $93.00M |
| EPS (Basic) | $0.16 |
| EPS (Diluted) | $0.16 |
| Shares Outstanding (Basic) | 578.00M |
| Shares Outstanding (Diluted) | 583.00M |
Key Highlights
- 1Net income available to common shareholders decreased significantly by 90% year-over-year for Q2 2012 to $92 million ($0.16 per diluted share), primarily due to acquisition-related charges.
- 2The company completed two major acquisitions in 2012: ING Direct (February) and HSBC's U.S. card business (May), significantly increasing its asset base and customer reach.
- 3Total loans held for investment grew by 49% to $202.7 billion as of June 30, 2012, driven by these acquisitions.
- 4Net charge-off rates improved year-over-year, with the overall net charge-off rate falling to 1.53% in Q2 2012 from 2.91% in Q2 2011. However, adjusted rates excluding certain acquired loans paint a different picture.
- 5Non-interest expense increased by 39% year-over-year in Q2 2012, largely due to higher operating expenses and merger-related costs associated with the recent acquisitions.
- 6Regulatory capital ratios remained robust, with the Tier 1 common ratio at 9.9% and the total risk-based capital ratio at 14.0% as of June 30, 2012, well above regulatory minimums.