10-QPeriod: Q1 FY2018

CAPITAL ONE FINANCIAL CORP Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 2, 2018For Securities:COFCOF-PLCOF-PICOF-PKCOF-PNCOF-PJ

Summary

Capital One Financial Corporation reported a strong first quarter of 2018, with net income soaring by 66% to $1.3 billion, or $2.62 per diluted share, compared to $810 million, or $1.54 per diluted share, in the first quarter of 2017. This significant earnings growth was primarily driven by a substantial increase in interest income, benefiting from growth in their domestic credit card and auto loan portfolios and higher interest rates, coupled with a notable reduction in the provision for credit losses. The company's total net revenue also saw a healthy 6% increase to $6.9 billion. This growth was supported by a strong performance in the Credit Card segment, which reported a 161% increase in net income, and solid contributions from the Consumer Banking and Commercial Banking segments. Capital One's capital position remains robust, with a Common Equity Tier 1 capital ratio of 10.5% as of March 31, 2018, exceeding regulatory requirements. The company also continued its share repurchase program, buying back approximately $200 million in common stock during the quarter, signaling confidence in its financial health and commitment to returning value to shareholders.

Financial Highlights

41 data points
Beta

Revenue

$6.91B

Net Income

$1.35B

19.5% Net Margin

EPS (Diluted)

$2.62

Total Assets

$362.86B

Cash & Equivalents

$14.32B

Free Cash Flow

$1.40B

Financial Statements
Beta
Revenue$6.91B
Operating Income$1.34B
Interest Expense$919.00M
Net Income$1.35B
EPS (Basic)$2.64
EPS (Diluted)$2.62
Shares Outstanding (Basic)486.90M
Shares Outstanding (Diluted)490.80M

Key Highlights

  • 1Net income significantly increased by 66% to $1.3 billion in Q1 2018 compared to $810 million in Q1 2017.
  • 2Diluted earnings per share rose by 70% to $2.62 in Q1 2018 from $1.54 in Q1 2017.
  • 3Total net revenue grew by 6% to $6.9 billion in Q1 2018.
  • 4Provision for credit losses decreased by 16% to $1.7 billion in Q1 2018, primarily due to a smaller allowance build in the domestic credit card portfolio.
  • 5The Credit Card segment saw a substantial 161% increase in net income, driven by loan growth and higher interchange fees.
  • 6Common Equity Tier 1 capital ratio was healthy at 10.5% as of March 31, 2018.
  • 7Capital One repurchased approximately $200 million of its common stock during the first quarter of 2018.

Frequently Asked Questions

The primary driver of Capital One's increased profitability was a substantial rise in interest income, fueled by growth in their domestic credit card and auto loan portfolios, along with the benefit of higher interest rates. This was complemented by a significant decrease in the provision for credit losses.

The Credit Card segment was a standout performer, with net income increasing by 161%. The Consumer Banking segment also showed strong growth, with net income up 72%, while the Commercial Banking segment reported a 20% increase in net income. The 'Other' category reported a net loss.

Capital One maintained a strong capital position with a Common Equity Tier 1 capital ratio of 10.5%. The company also demonstrated its commitment to shareholder returns by repurchasing approximately $200 million of its common stock in the first quarter of 2018, as part of its ongoing stock repurchase program.

In the first quarter of 2018, Capital One continued its strategy to exit certain business areas, including selling the substantial majority of its mortgage servicing rights and its online retail brokerage business.