Why did Capital One reduce its stock repurchase authorization?

Capital One reduced its stock repurchase authorization to $1.0 billion from $1.85 billion primarily due to the estimated near-term adverse impact of the Tax Cuts and Jobs Act on its financial position, as well as to address certain weaknesses identified by the Federal Reserve in its capital planning process during the 2017 CCAR submission.

What is the estimated financial impact of the Tax Cuts and Jobs Act on Capital One?

Capital One estimates that the Tax Act will result in an approximate $1.9 billion charge against net income. This is mainly due to the reduction in the corporate tax rate, which necessitates a write-down of deferred tax assets, and other anticipated impacts such as a one-time tax on unrepatriated foreign earnings.

Will Capital One continue to pay its dividend?

Yes, Capital One expects to maintain its quarterly dividend of $0.40 per share, subject to the approval of its Board of Directors. This decision indicates a commitment to returning capital to shareholders despite the recent adjustments.

What does the resubmission of the capital plan to the Federal Reserve mean?

The resubmission of the capital plan indicates that the Federal Reserve identified certain weaknesses in Capital One's previous capital planning process. By resubmitting, Capital One is working to address these concerns. However, there is a risk that if the Federal Reserve objects to the resubmitted plan, it could restrict future capital distributions.

CAPITAL ONE FINANCIAL CORP 8-K SEC Disclosure

Summary

Capital One Financial Corporation (COF) filed an 8-K on December 25, 2017, to announce actions related to the Federal Reserve's 2017 Comprehensive Capital Analysis and Review (CCAR) process and the impact of the Tax Cuts and Jobs Act (Tax Act). The company resubmitted its capital plan to the Federal Reserve to address identified weaknesses. In conjunction with this, Capital One's Board of Directors reduced the authorized common stock repurchase program to up to $1.0 billion for the remaining 2017 CCAR period, a decrease from the previously announced $1.85 billion. This reduction is intended to mitigate potential adverse impacts on the company's financial position. The primary driver for these adjustments is the significant estimated impact of the Tax Act. Capital One anticipates a charge of approximately $1.9 billion against net income due to the revaluation of deferred tax assets resulting from the corporate tax rate reduction and other provisions of the new law. The company also noted that the Tax Act's elimination of net operating loss carrybacks affected its common equity Tier 1 capital calculation in stress scenarios. Despite these adjustments, the company expects to maintain its quarterly dividend of $0.40 per share.

Key Highlights

1Capital One resubmitted its 2017 CCAR capital plan to the Federal Reserve due to identified weaknesses.
2The Board of Directors reduced authorized common stock repurchases to $1.0 billion for the remaining 2017 CCAR period (ending June 30, 2018), down from $1.85 billion.
3An estimated $1.9 billion charge to net income is expected due to the Tax Cuts and Jobs Act (Tax Act).
4The charge is primarily related to the write-down of deferred tax assets resulting from the corporate tax rate reduction from 35% to 21% and other Tax Act provisions.
5The Tax Act's elimination of net operating loss carrybacks impacted the calculation of common equity Tier 1 capital under stress scenarios.
6Capital One expects to maintain its quarterly dividend of $0.40 per share, subject to Board approval.
7The company cautions that forward-looking statements are subject to risks and uncertainties.

CAPITAL ONE FINANCIAL CORP 8-K Report, Corporate Update (Dec 26, 2017)

Summary

Key Highlights

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