10-QPeriod: Q3 FY2023

CAPITAL ONE FINANCIAL CORP Quarterly Report for Q3 Ended Sep 30, 2023

Filed November 2, 2023For Securities:COFCOF-PLCOF-PICOF-PKCOF-PNCOF-PJ

Summary

Capital One Financial Corporation (COF) reported solid results for the third quarter of 2023, demonstrating resilience in a challenging economic environment. Total net revenue increased by 6% year-over-year to $9.4 billion, driven by higher net interest income fueled by growth in the credit card loan portfolio and increased asset yields. Net income rose by 6% to $1.8 billion, or $4.45 per diluted share, primarily due to the increase in net interest income, although this was partially offset by a higher provision for credit losses reflecting continued credit normalization. The company's balance sheet remains robust, with total assets growing 4% to $471.4 billion, largely driven by an increase in cash balances. Deposits also saw a significant increase of 13% to $346.0 billion, supporting asset growth. Capital ratios remain strong, with the Common Equity Tier 1 (CET1) capital ratio at 13.0% as of September 30, 2023, well above regulatory requirements. While the credit card segment continues to be the primary driver of earnings, the company is also navigating an increase in net charge-offs and delinquency rates, particularly in its credit card portfolio, which management attributes to continued credit normalization. The company returned $232 million to shareholders through dividends and $150 million through share repurchases in the quarter, underscoring its commitment to capital return.

Financial Highlights

42 data points
Beta

Revenue

$9.37B

Net Income

$1.79B

19.1% Net Margin

EPS (Diluted)

$4.45

Total Assets

$471.44B

Cash & Equivalents

$45.30B

Free Cash Flow

$6.87B

Financial Statements
Beta
Revenue$9.37B
Operating Income$4.18B
Interest Expense$3.45B
Net Income$1.79B
EPS (Basic)$4.46
EPS (Diluted)$4.45
Shares Outstanding (Basic)382.50M
Shares Outstanding (Diluted)383.30M

Key Highlights

  • 1Total net revenue increased 6% to $9.4 billion in Q3 2023 compared to Q3 2022.
  • 2Net income increased 6% to $1.8 billion, or $4.45 per diluted share, in Q3 2023.
  • 3Net interest income grew by 6% to $7.4 billion, driven by higher loan balances and yields, particularly in the credit card segment.
  • 4Provision for credit losses increased by 37% to $2.3 billion, reflecting continued credit normalization.
  • 5Net charge-off rate increased by 132 basis points to 2.56% in Q3 2023, primarily due to credit normalization in the credit card portfolio.
  • 6Total deposits increased by 13% to $346.0 billion as of September 30, 2023.
  • 7Common Equity Tier 1 (CET1) capital ratio stood at a strong 13.0% as of September 30, 2023.

Frequently Asked Questions

Capital One's net interest income increased primarily due to higher average loan balances in its credit card loan portfolio and higher asset yields, benefiting from a rising interest rate environment. This was partially offset by an increase in interest expense on deposits.

Credit quality metrics showed signs of normalization, with the net charge-off rate increasing by 132 basis points to 2.56% and the 30+ day delinquency rate increasing by 50 basis points to 3.71%. Management attributes these increases to continued credit normalization within the credit card loan portfolio.

Capital One maintains a strong capital position with a Common Equity Tier 1 (CET1) capital ratio of 13.0% as of September 30, 2023, which is well above regulatory requirements. The company returned capital to shareholders through dividends ($232 million) and share repurchases ($150 million) during the third quarter.

The Credit Card segment was the largest contributor to net income, generating $1.3 billion in the third quarter. Consumer Banking's net income was $611 million, while Commercial Banking's net income was $214 million. The 'Other' category reported a net loss of $301 million.