10-QPeriod: Q2 FY2014

CAPITAL ONE FINANCIAL CORP Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 5, 2014For Securities:COFCOF-PLCOF-PICOF-PKCOF-PNCOF-PJ

Summary

Capital One Financial Corporation reported solid financial results for the second quarter and first six months of 2014. Net income increased by 8% to $1.2 billion ($2.04 per diluted share) for the quarter and by 9% to $2.3 billion ($4.00 per diluted share) for the six months compared to the prior year. This performance was driven by a significant decrease in the provision for credit losses due to lower charge-offs and a benefit from mortgage representation and warranty reserves, which more than offset a decline in net interest income due to lower average interest-earning assets and yields in the Credit Card segment. The company also demonstrated strong capital management, with a Common Equity Tier 1 capital ratio of 12.72% under the new Basel III Standardized Approach, and continued its commitment to shareholder returns by repurchasing $1 billion of stock in the quarter and authorizing a further $2.5 billion repurchase program. The company saw growth in its Commercial Banking segment, driven by loan originations, while the Credit Card segment experienced a return to year-over-year growth in the Domestic Card portfolio. The Consumer Banking segment's net income decreased, primarily due to a higher provision for credit losses and net interest margin compression in its auto loans portfolio, although auto originations remained strong. Overall, Capital One is progressing with its strategic initiatives, maintaining a strong balance sheet, and is well-positioned for continued performance.

Financial Highlights

39 data points
Beta

Revenue

$5.47B

Net Income

$1.19B

21.8% Net Margin

EPS (Diluted)

$2.04

Total Assets

$298.32B

Free Cash Flow

$1.64B

Financial Statements
Beta
Revenue$5.47B
Operating Income$1.20B
Interest Expense$397.00M
Net Income$1.19B
EPS (Basic)$2.07
EPS (Diluted)$2.04
Shares Outstanding (Basic)567.50M
Shares Outstanding (Diluted)577.60M

Key Highlights

  • 1Net income increased by 8% year-over-year to $1.2 billion in Q2 2014 and by 9% to $2.3 billion for the first six months of 2014.
  • 2Diluted earnings per share rose by 10% to $2.04 in Q2 2014 and by 11% to $4.00 for the first six months of 2014.
  • 3Provision for credit losses decreased by 8% in Q2 and 13% for the first six months, reflecting improved credit quality.
  • 4Net charge-off rate improved, decreasing by 36 basis points to 1.67% in Q2 2014 compared to the prior year.
  • 5The Common Equity Tier 1 capital ratio was strong at 12.72% under the new Basel III Standardized Approach as of June 30, 2014.
  • 6Capital One completed $1 billion of its $2.5 billion share repurchase program in Q2 2014 and expects to complete the program by Q1 2015.
  • 7Total net revenue saw a modest decrease of 3% to $5.5 billion in Q2 2014, primarily due to a decline in net interest income.

Frequently Asked Questions

For the second quarter of 2014, Capital One reported a net income of $1.2 billion, an increase of 8% compared to the prior year. Diluted earnings per share were $2.04, up 10% from the second quarter of 2013.

The provision for credit losses decreased by 8% year-over-year in the second quarter of 2014, reflecting improved credit quality. The net charge-off rate also improved, declining by 36 basis points to 1.67% compared to the prior year's second quarter.

Capital One maintained a strong capital position, with a Common Equity Tier 1 capital ratio of 12.72% under the Basel III Standardized Approach as of June 30, 2014. The company returned capital to shareholders through $1 billion in share repurchases during the quarter and has authorized a $2.5 billion repurchase program expected to be completed by the first quarter of 2015, in addition to its regular dividend.

The Credit Card segment saw a decrease in net interest income but a reduction in credit losses, leading to a slight decrease in net income. The Consumer Banking segment's net income declined due to higher credit loss provisions and margin compression, despite growth in auto loans. The Commercial Banking segment showed revenue growth driven by loan origination, though net income decreased due to higher credit loss provisions.