Summary
Capital One Financial Corporation reported solid financial results for the third quarter and first nine months of 2018, with net income increasing significantly year-over-year. Total net revenue remained stable in the third quarter but grew 4% for the nine-month period, driven by strong performance in the Credit Card and Consumer Banking segments. A notable factor contributing to improved profitability was a substantial decrease in the provision for credit losses, largely due to allowance releases reflecting better credit trends, particularly in the domestic credit card and auto loan portfolios. The company also benefited from higher net interest income due to loan portfolio growth and increased yields on interest-earning assets, attributed to rising interest rates. However, this was partially offset by increased non-interest expenses, including a legal reserve build and higher marketing costs, as well as an impairment charge related to investment securities repositioning. The company continued its strategic shift by completing the sale of substantially all of its consumer home loan portfolio in the third quarter, which contributed to a decrease in total assets. Capital One also announced a new, long-term credit card program agreement with Walmart Inc., set to begin in August 2019. Management expressed confidence in the company's capital position, with Common Equity Tier 1 capital ratios remaining strong. The company repurchased approximately $569 million of common stock under its $1.2 billion repurchase program authorized in the third quarter.
Financial Highlights
42 data points| Revenue | $6.96B |
| Operating Income | $4.76B |
| Interest Expense | $1.11B |
| Net Income | $1.50B |
| EPS (Basic) | $3.01 |
| EPS (Diluted) | $2.99 |
| Shares Outstanding (Basic) | 477.80M |
| Shares Outstanding (Diluted) | 480.90M |
Key Highlights
- 1Net income increased by 36% to $1.5 billion ($2.99 per diluted share) in Q3 2018, and by 61% to $4.8 billion ($9.32 per diluted share) for the first nine months of 2018, compared to the prior year periods.
- 2Total net revenue was $7.0 billion for Q3 2018, a slight decrease of 0.3% year-over-year, but increased by 4% to $21.1 billion for the first nine months of 2018.
- 3Provision for credit losses decreased by 31% to $1.3 billion in Q3 2018 and by 25% to $4.2 billion for the nine months, driven by allowance releases reflecting improved credit trends.
- 4Net interest margin decreased slightly to 7.01% in Q3 2018 compared to 7.08% in Q3 2017, primarily due to higher interest expense on deposits.
- 5The sale of the consumer home loan portfolio was completed in Q3 2018, contributing a $99 million gain, and contributing to a decrease in total loans held for investment by 6% to $238.8 billion.
- 6Common Equity Tier 1 capital ratio increased to 11.2% from 10.3% at the end of 2017, demonstrating a strong capital position.
- 7Capital One announced a long-term credit card program agreement with Walmart Inc., commencing August 1, 2019, to be the exclusive issuer for their private label and co-branded credit card program.