10-QPeriod: Q2 FY2016

CAPITAL ONE FINANCIAL CORP Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 1, 2016For Securities:COFCOF-PLCOF-PICOF-PKCOF-PNCOF-PJ

Summary

Capital One Financial Corporation reported a solid second quarter for 2016, demonstrating robust revenue growth and improved profitability compared to the prior year period. Total net revenue increased by 10% year-over-year, driven by strong performance in the Credit Card segment, which benefited from increased purchase volume and net interest income. The Consumer Banking segment saw a slight revenue decline due to the planned run-off of its acquired home loan portfolio, while the Commercial Banking segment showed healthy loan growth. The company's net income available to common stockholders grew by 5% to $871 million in Q2 2016, with diluted earnings per share rising to $1.69 from $1.50 in Q2 2015. This performance was supported by disciplined expense management, although the provision for credit losses increased by 41% due to higher charge-offs and an increased allowance build driven by loan growth and portfolio seasoning, particularly in the credit card and auto loan portfolios, as well as adverse conditions in the oil and gas portfolio. Capital One also made progress on its capital return strategy, completing its $3.125 billion 2015 Stock Repurchase Program and announcing a new $2.5 billion repurchase program for 2016. The company's capital ratios remained strong, exceeding regulatory requirements and demonstrating a well-capitalized position.

Financial Highlights

39 data points
Beta

Revenue

$6.25B

Net Income

$942.00M

15.1% Net Margin

EPS (Diluted)

$1.69

Total Assets

$339.12B

Free Cash Flow

$2.28B

Financial Statements
Beta
Revenue$6.25B
Operating Income$1.96B
Interest Expense$478.00M
Net Income$942.00M
EPS (Basic)$1.70
EPS (Diluted)$1.69
Shares Outstanding (Basic)511.70M
Shares Outstanding (Diluted)516.50M

Key Highlights

  • 1Total net revenue increased by 10% to $6.25 billion in Q2 2016 compared to Q2 2015.
  • 2Net income available to common stockholders increased by 5% to $871 million in Q2 2016 compared to Q2 2015.
  • 3Diluted earnings per common share increased by 13% to $1.69 in Q2 2016 compared to $1.50 in Q2 2015.
  • 4The provision for credit losses increased significantly by 41% to $1.59 billion, primarily due to higher charge-offs and allowance builds.
  • 5Loans held for investment increased by 2% to $234.6 billion as of June 30, 2016, driven by growth in auto, commercial, and credit card portfolios.
  • 6The Common Equity Tier 1 capital ratio was 10.9% as of June 30, 2016, remaining strong and above regulatory minimums.
  • 7Capital One completed its 2015 Stock Repurchase Program and announced a new $2.5 billion repurchase authorization for 2016.

Frequently Asked Questions

Capital One reported a net income of $942 million for the second quarter of 2016, a 9% increase from $863 million in the second quarter of 2015. Net income available to common stockholders was $871 million, up 5% from $830 million in the prior year.

The provision for credit losses increased significantly by 41% to $1.59 billion in the second quarter of 2016, compared to $1.13 billion in the second quarter of 2015. This increase was attributed to higher charge-offs and a larger allowance build, driven by loan growth, portfolio seasoning, and adverse industry conditions in the oil and gas and taxi medallion portfolios.

Total net revenue increased by 10% to $6.25 billion in the second quarter of 2016. This growth was primarily driven by a 16% increase in net interest income, fueled by loan growth in the credit card and commercial portfolios, and a 2% increase in non-interest income, largely due to higher net interchange fees from increased purchase volume.

For the full year 2016, Capital One expects the charge-off rate in its Domestic Card business to be around four percent, with expected quarterly seasonal variability. For 2017, they anticipate the charge-off rate to be in the low four percent range, also with seasonal variability.