10-QPeriod: Q3 FY2017

CAPITAL ONE FINANCIAL CORP Quarterly Report for Q3 Ended Sep 30, 2017

Filed November 1, 2017For Securities:COFCOF-PLCOF-PICOF-PKCOF-PNCOF-PJ

Summary

Capital One Financial Corporation's (COF) third quarter 2017 results show a solid increase in net income, driven by growth in interest income from its credit card and auto loan portfolios and higher yields due to rising interest rates. Total net revenue grew by 8% year-over-year for the quarter. The company also benefited from a lower income tax provision. However, these positive trends were partially offset by a 15% increase in the provision for credit losses, primarily due to higher charge-offs in the credit card and auto loan segments, and increased operating expenses related to investments in technology and restructuring activities. Despite an increase in the net charge-off rate, the company's capital position remains strong, with a Common Equity Tier 1 capital ratio of 10.7% as of September 30, 2017. Capital One also announced a new stock repurchase program, authorizing up to $1.85 billion in repurchases, signaling confidence in its financial stability and commitment to returning capital to shareholders. The company's outlook suggests continued earnings per share growth for the remainder of 2017 and into 2018, assuming stable economic conditions.

Financial Highlights

42 data points
Beta

Revenue

$6.99B

Net Income

$1.11B

15.8% Net Margin

EPS (Diluted)

$2.14

Total Assets

$361.40B

Cash & Equivalents

$8.79B

Free Cash Flow

$2.77B

Financial Statements
Beta
Revenue$6.99B
Operating Income$2.98B
Interest Expense$720.00M
Net Income$1.11B
EPS (Basic)$2.16
EPS (Diluted)$2.14
Shares Outstanding (Basic)484.90M
Shares Outstanding (Diluted)489.00M

Key Highlights

  • 1Net income available to common stockholders increased by 9% to $1,047 million in Q3 2017 compared to Q3 2016.
  • 2Total net revenue increased by 8% to $6,985 million in Q3 2017 compared to Q3 2016.
  • 3The provision for credit losses increased by 15% to $1,833 million in Q3 2017 compared to Q3 2016, driven by higher charge-offs.
  • 4The net charge-off rate for the total company increased by 51 basis points to 2.61% in Q3 2017 compared to Q3 2016.
  • 5Loans held for investment increased by 3% to $252,422 million as of September 30, 2017, compared to December 31, 2016.
  • 6Common Equity Tier 1 capital ratio was strong at 10.7% as of September 30, 2017.
  • 7The company announced a stock repurchase program of up to $1.85 billion.

Frequently Asked Questions

Capital One reported net income of $1.107 billion for the third quarter of 2017, an increase of 10% compared to $1.005 billion in the third quarter of 2016. Net income available to common stockholders was $1,047 million, up 9% year-over-year.

Total loans held for investment increased by 3% to $252.4 billion as of September 30, 2017, compared to December 31, 2016. This growth was primarily driven by increases in auto and domestic credit card loan portfolios. However, the net charge-off rate for the total company rose by 51 basis points to 2.61% in Q3 2017 compared to the prior year's quarter, mainly due to growth and seasoning in the credit card portfolio and higher losses in the auto loan portfolio.

Capital One maintained a strong capital position, with its Common Equity Tier 1 capital ratio at 10.7% as of September 30, 2017, exceeding regulatory minimums. The company also announced a stock repurchase program authorized by its Board of Directors for up to $1.85 billion of its common stock from the third quarter of 2017 through the second quarter of 2018, alongside its quarterly dividend of $0.40 per share, indicating a commitment to returning capital to shareholders.

The provision for credit losses increased by 15% to $1.833 billion in Q3 2017. This rise was primarily attributed to higher charge-offs in the domestic credit card portfolio due to growth and seasoning, increased charge-offs in the taxi medallion lending portfolio, an allowance build for estimated hurricane-related losses, and an initial quarterly allowance build related to the Cabela’s acquisition. Higher charge-offs in the auto loan portfolio due to recent growth and declines in used car auction prices also contributed.