10-QPeriod: Q1 FY2014

CAPITAL ONE FINANCIAL CORP Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 6, 2014For Securities:COFCOF-PLCOF-PICOF-PKCOF-PNCOF-PJ

Summary

Capital One Financial Corporation (COF) reported a net income of $1.154 billion for the first quarter of 2014, an increase of 9% from $1.056 billion in the first quarter of 2013. Diluted earnings per common share rose to $1.96 from $1.77. Total net revenue for the quarter was $5.37 billion, a slight decrease of 3% from $5.55 billion in the prior year period. The company saw a notable 17% reduction in its provision for credit losses, driven by an improved credit outlook and lower charge-offs, which decreased by 14% year-over-year. Capital ratios remain strong, with the Common Equity Tier 1 capital ratio at 12.98% under the new Basel III Standardized Approach. The company also announced an increase in its share repurchase program, with the Board authorizing up to $2.5 billion in common stock repurchases through the end of the first quarter of 2015. The Credit Card segment, while experiencing lower net interest income due to portfolio run-off, demonstrated improved credit metrics with a lower net charge-off rate. The Consumer Banking segment saw a decrease in net income, primarily due to net interest margin compression, while the Commercial Banking segment experienced higher provision for credit losses, leading to a decrease in segment net income.

Financial Highlights

39 data points
Beta

Revenue

$5.37B

Net Income

$1.15B

21.5% Net Margin

EPS (Diluted)

$1.96

Total Assets

$290.50B

Free Cash Flow

$3.03B

Financial Statements
Beta
Revenue$5.37B
Operating Income$1.12B
Interest Expense$403.00M
Net Income$1.15B
EPS (Basic)$1.99
EPS (Diluted)$1.96
Shares Outstanding (Basic)571.00M
Shares Outstanding (Diluted)580.30M

Key Highlights

  • 1Net income increased by 9% to $1.154 billion, with diluted EPS rising to $1.96.
  • 2Total net revenue decreased slightly by 3% to $5.37 billion, impacted by lower net interest income.
  • 3Provision for credit losses decreased by 17% to $735 million due to improved credit outlook and lower charge-offs.
  • 4Net charge-off rate improved by 28 basis points to 1.92% compared to the prior year quarter.
  • 5Common Equity Tier 1 capital ratio stood at a strong 12.98% under Basel III Standardized Approach.
  • 6The company's Board authorized a $2.5 billion stock repurchase program through Q1 2015.
  • 7The Credit Card segment's net charge-off rate improved, despite a decrease in average loans due to portfolio run-off.

Frequently Asked Questions

The increase in net income was primarily driven by a decrease in the provision for credit losses due to an improved credit outlook and lower charge-offs, partially offset by a decrease in net interest income attributable to lower average interest-earning assets.

Capital One's capital position remains strong. The Common Equity Tier 1 capital ratio was 12.98% as of March 31, 2014, calculated under the Basel III Standardized Approach, subject to transition provisions. The company's banks also remained 'well capitalized' under Prompt Corrective Action requirements.

Capital One expects to return to year-over-year growth in its Domestic Card business in the second half of 2014, despite ongoing portfolio run-off. The company anticipates strong credit results driven by resilience and robust credit risk underwriting, with normal seasonal patterns.

Total loans held for investment decreased by 2% to $192.9 billion as of March 31, 2014, compared to December 31, 2013. This decrease was mainly due to the expected run-off in acquired home loans and certain credit card loans, partially offset by growth in auto loans and commercial real estate loans.