10-QPeriod: Q2 FY2017

CAPITAL ONE FINANCIAL CORP Quarterly Report for Q2 Ended Jun 30, 2017

Filed July 28, 2017For Securities:COFCOF-PLCOF-PICOF-PKCOF-PNCOF-PJ

Summary

Capital One Financial Corporation (COF) reported solid financial results for the second quarter and first six months of 2017. Net income available to common stockholders increased by 9% to $948 million in Q2 2017 compared to the prior year, and decreased by 8% to $1.7 billion for the first six months of 2017. Total net revenue saw a 7% increase in Q2 and a 6% increase year-to-date, primarily driven by higher interest income from loan growth in auto and credit card portfolios and increased yields due to higher interest rates. Non-interest income also saw a boost from higher net interchange fees. However, the company experienced a significant increase in the provision for credit losses, up 13% in Q2 and 22% year-to-date, largely due to higher charge-offs in the credit card and auto loan portfolios, as well as in the commercial banking segment due to specific portfolio pressures. Despite this, Capital One demonstrated strong capital positions, with its Common Equity Tier 1 capital ratio at 10.7% as of June 30, 2017, exceeding regulatory minimums. The company also announced a new $1.85 billion stock repurchase program, indicating confidence in its future performance and a commitment to returning capital to shareholders.

Financial Highlights

41 data points
Beta

Revenue

$6.70B

Net Income

$1.04B

15.5% Net Margin

EPS (Diluted)

$1.94

Total Assets

$350.59B

Cash & Equivalents

$7.01B

Free Cash Flow

$3.60B

Financial Statements
Beta
Revenue$6.70B
Operating Income$1.84B
Interest Expense$655.00M
Net Income$1.04B
EPS (Basic)$1.96
EPS (Diluted)$1.94
Shares Outstanding (Basic)484.00M
Shares Outstanding (Diluted)488.10M

Key Highlights

  • 1Net income available to common stockholders increased 9% year-over-year to $948 million in Q2 2017.
  • 2Total net revenue grew 7% in Q2 2017 to $6.7 billion, driven by higher interest income and net interchange fees.
  • 3Provision for credit losses increased significantly by 13% in Q2 2017 to $1.8 billion, primarily due to higher charge-offs in credit card and auto loans.
  • 4Loans held for investment decreased slightly by 1% to $244.3 billion at period-end but increased by 5% on average during Q2.
  • 5The Common Equity Tier 1 capital ratio stood at a strong 10.7% as of June 30, 2017.
  • 6Capital One announced a new $1.85 billion stock repurchase program, signaling confidence and a commitment to shareholder returns.
  • 7Net charge-off rate increased by 66 basis points to 2.67% in Q2 2017, reflecting portfolio seasoning and impacts in the auto loan segment.

Frequently Asked Questions

Capital One reported a net income available to common stockholders of $948 million for Q2 2017, an increase of 9% compared to $871 million in Q2 2016. Diluted earnings per common share also improved to $1.94 from $1.69 year-over-year.

The provision for credit losses increased significantly due to higher charge-offs in the domestic credit card loan portfolio, stemming from portfolio seasoning and growth, and higher charge-offs in the auto loan portfolio, attributed to recent growth and declines in used car auction prices. Commercial banking also contributed to higher charge-offs due to industry conditions impacting oil and gas and taxi medallion lending portfolios.

Capital One maintained a strong capital position. The Common Equity Tier 1 capital ratio was 10.7% as of June 30, 2017, up from 10.1% at the end of 2016, comfortably exceeding regulatory minimums.

The company expects an annual efficiency ratio in the 51% range and projects earnings per share growth between 7% and 11%, assuming stable economic conditions. They also expect the full-year 2017 charge-off rate in the domestic card business to be in the high 4%s to around 5%.