CAPITAL ONE FINANCIAL CORP Quarterly Report for Q2 Ended Jun 30, 2018

Summary

Capital One Financial Corporation (COF) reported a strong second quarter and first six months of 2018, with net income increasing significantly year-over-year. This improvement was driven by a lower provision for credit losses, a substantial gain from the sale of the consumer home loan portfolio, and increased net interest income from loan growth and higher yields. The company also maintained robust capital ratios, exceeding regulatory minimums. Key business developments during the period include the announced exclusive credit card program agreement with Walmart, Inc., effective August 2019, and the sale of the majority of its consumer home loan portfolio. The company also continued its capital return strategy, with its Board of Directors authorizing a new $1.2 billion stock repurchase program. Investors should note the continued strategic shift away from certain loan portfolios and the ongoing investment in technology and infrastructure.

Key Highlights

• 1Net income surged by 84% to $1.9 billion in Q2 2018 and by 76% to $3.3 billion in the first six months of 2018, compared to the prior year.
• 2Total net revenue increased by 7% to $7.2 billion in Q2 2018 and by 7% to $14.1 billion in the first six months of 2018.
• 3Provision for credit losses decreased significantly by 29% in Q2 2018 and 22% in the first six months of 2018, attributed to improved credit trends and lower charge-offs.
• 4The company recorded a net gain of $400 million from the sale of its consumer home loan portfolio and related servicing.
• 5Common Equity Tier 1 capital ratio improved to 11.1% as of June 30, 2018, up from 10.3% at the end of 2017.
• 6A new stock repurchase program of up to $1.2 billion was authorized, commencing in Q3 2018.
• 7Net interest margin saw a slight decrease of 22 basis points in Q2 2018 to 6.66% due to higher interest expenses, despite growth in loan portfolios and higher yields.

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