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Press release from PR Newswire

Capital One Reports Second Quarter 2013 Net Income of $1.1 billion, or $1.87 per share

Thursday, July 18, 2013

Capital One Reports Second Quarter 2013 Net Income of $1.1 billion, or $1.87 per share

16:05 EDT Thursday, July 18, 2013

MCLEAN, Va., July 18, 2013 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced net income for the second quarter of 2013 of $1.1 billion, or $1.87 per diluted common share, compared with net income of $1.1 billion, or $1.79 per diluted common share, for the first quarter of 2013 and net income of $93 million, or $0.16 per diluted common share, for the second quarter of 2012.

"We delivered solid performance across each of our businesses during the quarter, and we continue to generate significant capital," said Richard D. Fairbank, Chairman and CEO. "We will continue to tightly manage costs and credit quality, drive resilient growth in businesses we are emphasizing, and focus on returning capital to our investors to deliver sustained shareholder value."

All comparisons below are for the second quarter of 2013 compared with the first quarter of 2013 unless otherwise noted.  

Second Quarter 2013 Income Highlights:

  • Total net revenue increased 2 percent to $5.6 billion
  • Total non-interest expense increased 1 percent to $3.1 billion 
  • Pre-provision earnings increased 2 percent to $2.6 billion 
  • Provision for credit losses decreased 14 percent to $762 million 
  • $183 million charge for mortgage representation & warranty expenses, primarily in discontinued operations

Second Quarter 2013 Balance Sheet Highlights: 

  • Tier 1 common ratio of 12.1 percent, up 30 basis points 
  • Net interest margin of 6.83 percent, up 12 basis points 
  • Period-end loans held for investment increased $179 million, or less than 1 percent, to $191.5 billion
    • Domestic Card period-end loans increased $129 million, or less than 1 percent, to $70.5 billion 
    • Commercial Banking period-end loans increased $1.7 billion, or 4 percent, to $40.8 billion 
    • Auto Finance period-end loans increased $1.4 billion, or 5 percent, to $29.4 billion 
    • Home loans period-end loans decreased $2.8 billion, or 7 percent, to $39.2 billion, driven by run-off of acquired portfolios
  • Average loans held for investment in the quarter decreased $5.4 billion, or 3 percent, to $190.6 billion
    • Domestic Card average loans declined $4.7 billion, or 6 percent, primarily driven by the movement of a portfolio to held for sale
    • Commercial Banking average loans increased $936 million, or 2 percent, to $39.5 billion
    • Auto Finance average loans increased $1.2 billion, or 4 percent, to $28.7 billion 
    • Home loans decreased by $2.5 billion, or 6 percent, to $40.5 billion, driven by run-off of acquired portfolios 
  • Period-end total deposits decreased $2.5 billion, or 1 percent, to $209.9 billion, while average deposits declined $905 million, or less than 1 percent, to $210.7 billion.  
    • Deposit interest rates declined 1 basis point to 0.67 percent.

Detailed segment information will be available in the company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2013.

Earnings Conference Call Webcast Information

The company will hold an earnings conference call on July 18, 2013 at 5:00 PM, Eastern Daylight Time. The conference call will be accessible through live webcast. Interested investors and other individuals can access the webcast via the company's home page (www.capitalone.com). Choose "About Us", then choose "Investors" to access the Investor Center and view and/or download the earnings press release, the financial supplement, including a reconciliation to GAAP financial measures, and the earnings release presentation. The replay of the webcast will be archived on the company's website through August 8, 2013 at 5:00 PM.

Forward Looking Statements

Certain statements in this release are forward-looking statements, which involve a number of risks and uncertainties. Capital One cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information due to a number of factors, including those listed from time to time in reports that Capital One files with the Securities and Exchange Commission, including, but not limited to, the Annual Report on Form 10-K for the year ended December 31, 2012.

About Capital One Capital One Financial Corporation (www.capitalone.com) is a financial holding company whose subsidiaries, which include Capital One, N.A., and Capital One Bank (USA), N. A., had $209.9 billion in deposits and $296.5 billion in total assets as of June 30, 2013. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients through a variety of channels. Capital One, N.A. has more than 900 branch locations primarily in New York, New Jersey, Texas, Louisiana, Maryland, Virginia and the District of Columbia. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index.

 

Exhibit 99.2

Capital One Financial Corporation

Financial Supplement

Second Quarter 2013(1)(2)(3)

Table of Contents

Page

Capital One Financial Corporation Consolidated

Table 1:

Financial Summary?Consolidated

1

Table 2:

Selected Metrics?Consolidated

2

Table 3:

Consolidated Statements of Income

3

Table 4:

Consolidated Balance Sheets

4

Table 5:

Notes to Financial & Selected Metrics and Consolidated Financial Statements (Tables 1 ? 4)

5

Table 6:

Average Balances, Net Interest Income and Net Interest Margin

6

Table 7:

Loan Information and Performance Statistics

7

Business Segment Detail

Table 8:

Financial & Statistical Summary?Credit Card Business

8

Table 9:

Financial & Statistical Summary?Consumer Banking Business

9

Table 10:

Financial & Statistical Summary?Commercial Banking Business

10

Table 11:

Financial & Statistical Summary?Other and Total

11

Table 12:

Notes to Loan and Business Segment Disclosures (Tables 7 ?11)

12

Other

Table 13:

Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures Under Basel I

13

(1)

 

 

The information contained in this Financial Supplement is preliminary and based on data available at the time of the earnings presentation, and investors should refer to our Quarterly Report on Form 10-Q for the period ended June 30, 2013 once it is filed with the Securities and Exchange Commission.

(2)

 

 

References to ING Direct refer to the business and assets acquired and liabilities assumed in the February 17, 2012 acquisition. References to the 2012 U.S. card acquisition refer to the May 1, 2012 transaction in which we acquired substantially all of HSBC's credit card and private-label credit card business in the United States.

(3)

We use the term "acquired loans" to refer to a limited portion of the credit card loans acquired in the 2012 U.S. card acquisition and the substantial majority of loans acquired in the ING Direct and Chevy Chase Bank ("CCB") acquisitions, which were recorded at fair value at acquisition and subsequently accounted for based on estimated cash flows expected to be collected over the life of the loans (under the accounting standard formerly known as "SOP 03-3"). Because SOP 03-3 takes into consideration future credit losses expected to be incurred over the life of the loans, there are no charge-offs or an allowance associated with these loans unless the estimated cash flows expected to be collected decrease subsequent to acquisition. In addition, these loans are not classified as delinquent or nonperforming even though the customer may be contractually past due because we expect that we will fully collect the carrying value of these loans. The accounting and classification of these loans may significantly alter some of our reported credit quality metrics. We therefore supplement certain reported credit quality metrics with metrics adjusted to exclude the impact of these acquired loans.

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 1: Financial Summary?Consolidated (1)(2)

2013

2013

2012

(Dollars in millions, except per share data and as noted) (unaudited)

Q2

Q1

Q2

Earnings

Net interest income

$ 4,553

$ 4,570

$ 4,001

Non-interest income(3)

1,085

981

1,054

Total net revenue(4)

5,638

5,551

5,055

Provision for credit losses

762

885

1,677

Non-interest expense:

    Marketing

330

317

334

    Amortization of intangibles(5)

167

177

157

    Acquisition-related(6)

50

46

133

    Operating expenses

2,512

2,488

2,518

Total non-interest expense

3,059

3,028

3,142

Income from continuing operations before income taxes

1,817

1,638

236

Income tax provision

581

494

43

Income from continuing operations, net of tax

1,236

1,144

193

Loss from discontinued operations, net of tax(3)

(119)

(78)

(100)

Net income

1,117

1,066

93

Dividends and undistributed earnings allocated to participating securities(7)

(4)

(5)

(1)

Preferred stock dividends

(13)

(13)

?

Net income available to common stockholders

$ 1,100

$ 1,048

$ 92

Common Share Statistics

Basic EPS:(7)

    Income from continuing operations, net of tax

$ 2.09

$ 1.94

$ 0.33

    Loss from discontinued operations, net of tax

(0.20)

(0.13)

(0.17)

    Net income per common share

$ 1.89

$ 1.81

$ 0.16

Diluted EPS:(7)

    Income from continuing operations, net of tax

$ 2.07

$ 1.92

$ 0.33

    Loss from discontinued operations, net of tax

(0.20)

(0.13)

(0.17)

    Net income per common share

$ 1.87

$ 1.79

$ 0.16

Weighted average common shares outstanding (in millions) for:

    Basic EPS

581.5

580.5

577.7

    Diluted EPS

588.8

586.3

582.8

Common shares outstanding (period end, in millions)

584.9

584.0

580.7

Dividends per common share

$ 0.30

$ 0.05

$ 0.05

Tangible book value per common share (period end)(8)

41.57

41.87

35.67

Balance Sheet (Period End)

Loans held for investment(9)

$191,512

$191,333

$202,749

Interest-earning assets

265,693

268,479

264,331

Total assets

296,542

300,163

296,572

Interest-bearing deposits

187,768

191,093

193,859

Total deposits

209,865

212,410

213,931

Borrowings

36,231

37,492

35,874

Common equity

40,188

40,443

37,192

Total stockholders' equity

41,041

41,296

37,192

Balance Sheet (Quarterly Average Balances)

Loans held for investment(9)

$190,562

$195,997

$192,632

Interest-earning assets

266,544

272,345

265,019

Total assets

297,766

303,223

295,306

Interest-bearing deposits

189,311

190,612

195,597

Total deposits

210,650

211,555

214,914

Borrowings

36,915

41,574

35,418

Common equity

40,726

40,107

37,533

Total stockholders' equity

41,579

40,960

37,533

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 2: Selected Metrics?Consolidated (1)(2)

2013

2013

2012

(Dollars in millions, except per share data and as noted) (unaudited)

Q2

Q1

Q2

Performance Metrics

Net interest income growth (quarter over quarter)

 

?

%

1

%

17

%

Non-interest income growth(quarter over quarter)

11

(10)

(31)

Total net revenue growth(quarter over quarter)

2

(1)

2

Total net revenue margin(10)

8.46

8.15

7.63

Net interest margin(11)

6.83

6.71

6.04

Return on average assets(12)

1.66

1.51

0.26

Return on average common equity(13)

11.97

11.23

2.05

Return on average tangible common equity(14)

19.70

18.79

3.52

Non-interest expense as a % of average loans held for investment(15)

6.42

6.18

6.52

Efficiency ratio(16)

54.26

54.55

62.16

Effective income tax rate

32.0

30.2

18.2

Full-time equivalent employees (in thousands), period end

39.6

39.3

37.4

Credit Quality Metrics(9)(17)

Allowance for loan and lease losses

$ 4,407

$ 4,606

$ 4,998

Allowance as a % of loans held for investment

2.30

%

2.41

%

2.47

%

Allowance as a % of loans held for investment (excluding acquired loans)

2.74

2.91

3.08

Net charge-offs

$ 969

$ 1,079

$ 738

Net charge-off rate(18)

2.03

%

2.20

%

1.53

%

Net charge-off rate (excluding acquired loans)(18)

2.46

2.69

1.96

30+ day performing delinquency rate

2.35

2.37

2.06

30+ day performing delinquency rate (excluding acquired loans)

2.83

2.90

2.59

30+ day delinquency rate(19)

**

2.74

2.43

30+ day delinquency rate (excluding acquired loans)(19)

**

3.35

3.06

Capital Ratios (20)

Tier 1 common ratio

12.1

%

11.8

%

9.9

%

Tier 1 risk-based capital ratio

12.4

12.2

11.6

Total risk-based capital ratio

14.7

14.4

14.0

Tangible common equity ("TCE") ratio

8.7

8.6

7.4

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 3: Consolidated Statements of Income(1)(2)

Three Months Ended

June 30,

March 31,

June 30,

Six Months Ended June 30,

(Dollars in millions, except per share data) (unaudited)

2013

2013

2012

2013

2012

Interest income:

Loans, including loans held for sale

$ 4,596

$ 4,649

$ 4,257

$ 9,245

$ 7,914

Investment securities

391

374

335

765

633

Other

23

28

24

51

48

    Total interest income

5,010

5,051

4,616

10,061

8,595

Interest expense:

Deposits

318

326

373

644

684

Securitized debt obligations

45

56

69

101

149

Senior and subordinated notes

82

82

87

164

175

Other borrowings

12

17

86

29

172

    Total interest expense

457

481

615

938

1,180

Net interest income

4,553

4,570

4,001

9,123

7,415

Provision for credit losses

762

885

1,677

1,647

2,250

          Net interest income after provision for credit losses

3,791

3,685

2,324

7,476

5,165

Non-interest income:

Service charges and other customer-related fees

534

550

539

1,084

954

Interchange fees, net

486

445

408

931

736

Net other-than-temporary impairment losses recognized in earnings

(4)

(25)

(13)

(29)

(27)

Bargain purchase gain(21)

?

?

?

?

594

Other

69

11

120

80

318

    Total non-interest income

1,085

981

1,054

2,066

2,575

Non-interest expense:

Salaries and associate benefits

1,104

1,080

971

2,184

1,835

Occupancy and equipment

356

350

323

706

593

Marketing

330

317

334

647

655

Professional services

329

307

313

636

606

Communications and data processing

233

210

203

443

375

Amortization of intangibles(5)

167

177

157

344

219

Acquisition-related(6)

50

46

133

96

219

Other

490

541

708

1,031

1,144

    Total non-interest expense

3,059

3,028

3,142

6,087

5,646

Income from continuing operations before income taxes

1,817

1,638

236

3,455

2,094

Income tax provision

581

494

43

1,075

396

Income from continuing operations, net of tax

1,236

1,144

193

2,380

1,698

Loss from discontinued operations, net of tax(3)

(119)

(78)

(100)

(197)

(202)

    Net income

1,117

1,066

93

2,183

1,496

Dividends and undistributed earnings allocated to participating securities(7)

(4)

(5)

(1)

(9)

(8)

Preferred stock dividends

(13)

(13)

?

(26)

?

    Net income available to common stockholders

$ 1,100

$ 1,048

$ 92

$ 2,148

$ 1,488

Basic earnings per common share:(7)

    Income from continuing operations

$ 2.09

$ 1.94

$ 0.33

$ 4.04

$ 3.11

    Loss from discontinued operations

(0.20)

(0.13)

(0.17)

(0.34)

(0.37)

    Net income per basic common share

$ 1.89

$ 1.81

$ 0.16

$ 3.70

$ 2.74

Diluted earnings per common share:(7)

    Income from continuing operations

$ 2.07

$ 1.92

$ 0.33

$ 3.99

$ 3.09

    Loss from discontinued operations

(0.20)

(0.13)

(0.17)

(0.34)

(0.37)

    Net income per diluted common share

$ 1.87

$ 1.79

$ 0.16

$ 3.65

$ 2.72

Weighted average common shares outstanding (in millions) for:

    Basic EPS

581.5

580.5

577.7

581.0

543.3

    Diluted EPS

588.8

586.3

582.8

587.9

548.0

Dividends paid per common share

$ 0.30

$ 0.05

$ 0.05

$ 0.35

$ 0.10

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 4: Consolidated Balance Sheets

June 30,

December 31,

June 30,

(Dollars in millions)(unaudited)

2013

2012

2012

Assets:

Cash and cash equivalents:

Cash and due from banks

$ 2,176

$ 3,440

$ 2,297

Interest-bearing deposits with banks

2,279

7,617

3,352

Federal funds sold and securities purchased under agreements to resell

198

1

330

Total cash and cash equivalents

4,653

11,058

5,979

Restricted cash for securitization investors

377

428

370

Securities available for sale, at fair value

62,602

63,979

55,289

Loans held for investment:

Unsecuritized loans held for investment

151,231

162,059

158,680

Restricted loans for securitization investors

40,281

43,830

44,069

Total loans held for investment

191,512

205,889

202,749

Less: Allowance for loan and lease losses

(4,407)

(5,156)

(4,998)

Net loans held for investment

187,105

200,733

197,751

Loans held for sale, at lower of cost or fair value

6,248

201

1,047

Premises and equipment, net

3,766

3,587

3,556

Interest receivable

1,454

1,694

1,623

Goodwill

13,900

13,904

13,864

Other

16,437

17,334

17,093

Total assets

$ 296,542

$ 312,918

$ 296,572

Liabilities:

Interest payable

$ 324

$ 450

$ 462

Customer deposits:

Non-interest bearing deposits

22,097

22,467

20,072

Interest-bearing deposits

187,768

190,018

193,859

Total customer deposits

209,865

212,485

213,931

Securitized debt obligations

10,831

11,398

13,608

Other debt:

Federal funds purchased and securities loaned or sold under agreements to repurchase

1,766

1,248

1,101

Senior and subordinated notes

12,406

12,686

12,079

Other borrowings

11,228

24,578

9,086

Total other debt

25,400

38,512

22,266

Other liabilities

9,081

9,574

9,113

Total liabilities

255,501

272,419

259,380

Stockholders' equity:

Preferred stock

?

?

?

Common stock

6

6

6

Additional paid-in capital, net

26,339

26,188

25,217

Retained earnings

18,804

16,853

14,905

Accumulated other comprehensive income ("AOCI")

(792)

739

350

Treasury stock, at cost

(3,316)

(3,287)

(3,286)

Total stockholders' equity

41,041

40,499

37,192

Total liabilities and stockholders' equity

$ 296,542

$ 312,918

$ 296,572

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 5: Notes to Financial & Selected Metrics and Consolidated Financial Statements (Tables 1 ? 4)

(1)

Certain prior period amounts have been reclassified to conform to the current period presentation.

(2)

 

Results for Q2 2012 and thereafter include the impact of the May 1, 2012 closing of the 2012 U.S. card acquisition, which resulted in the addition of $28.2 billion in credit card receivables at closing.

(3)

 

 

 

We recorded a provision for mortgage representation and warranty losses of $183 million in Q2 2013, $97 million in Q1 2013 and $180 million in Q2 2012. The majority of the provision for representation and warranty losses is generally included net of tax in discontinued operations, with the remaining amount included pre-tax in non-interest income. The mortgage representation and warranty reserve increased to $1.2 billion as of June 30, 2013, from $994 million as of March 31, 2013 and $899 million as of December 31, 2012.

(4)

 

 

 

Total net revenue was reduced by $192 million in Q2 2013, $265 million in Q1 2013 and $311 million in Q2 2012 for the estimated uncollectible amount of billed finance charges and fees. 

(5)

 

 

 

Includes purchased credit card relationship ("PCCR") intangible amortization of $110 million in Q2 2013, $116 million in Q1 2013, and $88 million in Q2 2012, the substantial majority of which is attributable to the 2012 U.S. card acquisition. Includes core deposit intangible amortization of $43 million in Q2 2013, $44 million in Q1 2013, and $51 million in Q2 2012.

(6)

 

Acquisition-related costs include transaction costs, legal and other professional or consulting fees, restructuring costs, and integration expense.

(7)

 

Dividends and undistributed earnings allocated to participating securities and EPS are computed independently for each period. Accordingly, the sum of each quarter may not agree to the year-to-date total.

(8)

 

 

Tangible book value per common share is a non-GAAP measure calculated based on tangible common equity divided by common shares outstanding. See "Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures Under Basel I" for additional information.

(9)

 

 

Loans held for investment includes acquired loans accounted for based on cash flows expected to be collected. See "Table 12: Notes to Loan and Business Segment Disclosures (Tables 7 ? 11)" for information on the amount of acquired loans for each of the periods presented.

(10)

 

Calculated based on annualized total net revenue for the period divided by average interest-earning assets for the period.

(11)

 

Calculated based on annualized net interest income for the period divided by average interest-earning assets for the period.

(12)

 

Calculated based on annualized income from continuing operations, net of tax, for the period divided by average total assets for the period.

(13)

Prior to Q2 2013, we disclosed return on average total stockholders' equity, which we calculated based on annualized income from continuing operations, net of tax, for the period divided by average stockholders' equity for the period. Effective Q2 2013, we began disclosing return on average common equity ("ROCE"), which is calculated based on the annualized sum of (i) income from continuing operations, net of tax; (ii) less dividends and undistributed earnings allocated to participating securities; (iii) less preferred stock dividends, for the period, divided by average common equity. We believe ROCE is a more useful measure to assess operating performance and capital adequacy because ROCE better reflects income available to common equity holders after taking into account consideration paid on securities senior to our common equity. Our calculation of ROCE may not be comparable to similarly titled measures reported by other companies.

(14)

Prior to Q2 2013, we calculated return on average tangible common equity ("ROTCE"), a non-GAAP measure, based on annualized income from continuing operations, net of tax, for the period divided by average tangible common equity for the period. Effective Q2 2013, we revised our method of calculating ROTCE to reflect the annualized sum of (i) income from continuing operations, net of tax; (ii) less dividends and undistributed earnings allocated to participating securities; (iii) less preferred stock dividends, for the period, divided by average tangible common equity. We believe our revised calculation of ROTCE is a more useful measure to assess operating performance and capital adequacy because the revised calculation better reflects income available to common equity holders after taking into account consideration paid on securities senior to our common equity. Our calculation of ROTCE may not be comparable to similarly titled measures reported by other companies. See "Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures Under Basel I" for additional information.

(15)

 

Calculated based on annualized non-interest expense for the period divided by average loans held for investment for the period.

(16)

 

Calculated based on non-interest expense, excluding goodwill impairment charges, for the period divided by total net revenue for the period.

(17)

 

 

Loans acquired as part of the 2012 U.S. card, ING Direct and CCB acquisitions classified as held for investment are included in the denominator used in calculating our reported credit quality metrics. We supplement certain reported credit quality metrics with metrics adjusted to exclude from the denominator acquired loans accounted for based on estimated expected cash flows to be collected (formerly SOP 03-3).

(18)

 

Calculated based on annualized net charge-offs for the period divided by average loans held for investment for the period.

(19)

 

The 30+ day delinquency rate as of the end of Q2 2013 will be provided in the Quarterly Report on Form 10-Q for the quarter ended June 30, 2013.

(20)

 

 

 

Capital ratios are calculated under Basel I. Ratios as of the end of Q2 2013 are preliminary and therefore subject to change. TCE ratio is a non-GAAP capital ratio. See "Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures Under Basel I" for information on the calculation of each of these ratios.

(21)

 

 

 

A bargain purchase gain of $594 million was recognized in earnings in Q1 2012 attributable to the February 17, 2012 acquisition of ING Direct. The bargain purchase gain represents the excess of the fair value of the net assets acquired in the ING Direct acquisition as of the acquisition date of February 17, 2012 over the consideration transferred.

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 6: Average Balances, Net Interest Income and Net Interest Margin (1)

2013 Q2

2013 Q1

2012 Q2

Average

Interest Income/

Yield/

Average

Interest Income/

Yield/

Average

Interest Income/

Yield/

(Dollars in millions)(unaudited)

Balance

Expense(2)

Rate(2)

Balance

Expense(2)

Rate(2)

Balance

Expense(2)

Rate(2)

Interest-earning assets:

    Loans, including loans held for sale

$196,874

$ 4,596

9.34

%

$200,441

$ 4,649

9.28

%

$193,610

$ 4,257

8.80

%

    Investment securities(3)

63,907

391

2.45

64,798

374

2.31

56,972

335

2.35

    Cash equivalents and other

5,763

23

1.60

7,106

28

1.58

14,437

24

0.66

Total interest-earning assets

$266,544

$ 5,010

7.52

%

$272,345

$ 5,051

7.42

%

$265,019

$ 4,616

6.97

%

Interest-bearing liabilities:

    Interest-bearing deposits

$189,311

$ 318

0.67

%

$190,612

$ 326

0.68

%

$195,597

$ 373

0.76

%

    Securitized debt obligations

10,942

45

1.65

11,758

56

1.91

14,948

69

1.85

    Senior and subordinated notes

12,692

82

2.58

11,984

82

2.74

11,213

87

3.10

    Other borrowings

13,281

12

0.36

17,832

17

0.38

9,257

86

3.72

Total interest-bearing liabilities

$226,226

$ 457

0.81

%

$232,186

$ 481

0.83

%

$231,015

$ 615

1.06

%

Net interest income/spread

$ 4,553

6.71

%

$ 4,570

6.59

%

$ 4,001

5.90

%

Impact of non-interest bearing funding

0.12

0.12

0.14

Net interest margin

6.83

%

6.71

%

6.04

%

Six Months Ended June 30,

2013

2012

Average

Interest Income/

Yield/

Average

Interest Income/

Yield/

(Dollars in millions)(unaudited)

Balance

Expense(2)

Rate(2)

Balance

Expense(2)

Rate(2)

Interest-earning assets:

    Loans, including loans held for sale

$198,648

$ 9,245

9.31

%

$173,472

$ 7,914

9.12

%

    Investment securities(3)

63,930

765

2.39

53,757

633

2.36

    Cash equivalents and other

6,430

51

1.59

10,438

48

0.92

Total interest-earning assets

$269,008

$10,061

7.48

%

$237,667

$ 8,595

7.23

%

Interest-bearing liabilities:

    Interest-bearing deposits

$189,958

$ 644

0.68

%

$173,611

$ 684

0.79

%

    Securitized debt obligations

11,348

101

1.78

15,567

149

1.91

    Senior and subordinated notes

12,340

164

2.66

10,740

175

3.26

    Other borrowings

15,544

29

0.37

9,399

172

3.66

Total interest-bearing liabilities

$229,190

$ 938

0.82

%

$209,317

$ 1,180

1.13

%

Net interest income/spread

$ 9,123

6.66

%

$ 7,415

6.11

%

Impact of non-interest bearing funding

0.12

0.13

Net interest margin

6.78

%

6.24

%

____________

(1) Certain prior period amounts have been reclassified to conform to the current period presentation.

(2) Interest income and interest expense and the calculation of average yields on interest-earning assets and average rates on interest-bearing liabilities include the impact of hedge accounting.

(3) Prior to Q2 2013, average balances for investment securities were calculated based on fair value amounts. Effective Q2 2013, average balances are calculated based on the amortized cost of investment securities. The impact of this change on prior period yield is not material.

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 7: Loan Information and Performance Statistics(1)(2)(3)

2013

2013

2012

(Dollars in millions)(unaudited)

Q2

Q1

Q2

Period-end Loans Held For Investment

Credit card:

    Domestic credit card

$ 70,490

$ 70,361

$ 80,798

    International credit card

7,820

8,036

8,116

      Total credit card

78,310

78,397

88,914

Consumer banking:

    Automobile

29,369

27,940

25,251

    Home loan

39,163

41,931

48,224

    Retail banking

3,686

3,742

4,140

      Total consumer banking

72,218

73,613

77,615

Commercial banking:

    Commercial and multifamily real estate

18,570

17,878

16,254

    Commercial and industrial

21,170

20,127

18,467

      Total commercial lending

39,740

38,005

34,721

    Small-ticket commercial real estate

1,065

1,145

1,335

      Total commercial banking

40,805

39,150

36,056

Other loans

179

173

164

      Total

$ 191,512

$ 191,333

$ 202,749

Average Loans Held For Investment

Credit card:

    Domestic credit card

$ 69,966

$ 74,714

$ 71,468

    International credit card

7,980

8,238

8,194

      Total credit card

77,946

82,952

79,662

Consumer banking:

    Automobile

28,677

27,477

24,487

    Home loan

40,532

43,023

48,966

    Retail banking

3,721

3,786

4,153

      Total consumer banking

72,930

74,286

77,606

Commercial banking:

    Commercial and multifamily real estate

18,084

17,454

15,838

    Commercial and industrial

20,332

19,949

18,001

      Total commercial lending

38,416

37,403

33,839

    Small-ticket commercial real estate

1,096

1,173

1,388

      Total commercial banking

39,512

38,576

35,227

Other loans

174

183

137

      Total

$ 190,562

$ 195,997

$ 192,632

Net Charge-off Rates

Credit card:

    Domestic credit card

4.28

%

4.43

%

2.86

%

    International credit card

5.08

4.59

5.49

      Total credit card

4.36

4.45

3.13

Consumer banking:

    Automobile

1.28

1.78

1.11

    Home loan

0.03

0.04

0.09

    Retail banking

1.50

1.85

1.27

      Total consumer banking

0.60

0.78

0.48

Commercial banking:

    Commercial and multifamily real estate

0.04

0.01

0.18

    Commercial and industrial

0.03

0.04

0.10

      Total commercial lending

0.03

0.03

0.14

    Small-ticket commercial real estate

0.45

1.41

1.46

      Total commercial banking

0.04

0.07

0.19

Other loans

13.10

14.53

18.04

      Total

2.03

%

2.20

%

1.53

%

30+ Day Performing Delinquency Rates

Credit card:

    Domestic credit card

3.05

%

3.37

%

2.79

%

    International credit card

3.84

4.04

4.84

      Total credit card

3.13

%

3.44

%

2.97

%

Consumer banking:

    Automobile

6.03

%

5.58

%

5.20

%

    Home loan

0.12

0.14

0.15

    Retail banking

0.68

0.83

0.69

     Total consumer banking

2.55

%

2.24

%

1.82

%

Nonperforming Asset Rates(4)

Credit card:

    International credit card

1.20

%

1.13

%

?

%

      Total credit card

0.12

%

0.12

%

?

%

Consumer banking:

    Automobile

0.50

%

0.40

%

0.41

%

    Home loan

1.08

1.02

0.94

    Retail banking

1.11

1.24

2.21

      Total consumer banking

0.84

%

0.80

%

0.83

%

Commercial banking:

    Commercial and multifamily real estate

0.56

%

0.76

%

1.28

%

    Commercial and industrial

0.65

0.64

0.81

      Total commercial lending

0.61

%

0.69

%

1.03

%

    Small-ticket commercial real estate

1.11

2.42

1.25

      Total commercial banking

0.62

%

0.74

%

1.04

%

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 8: Financial & Statistical Summary?Credit Card Business(1)(2)(3)

2013

2013

2012

(Dollars in millions) (unaudited)

Q2

Q1

Q2

Credit Card

Earnings:

Net interest income

$ 2,804

$ 2,830

$ 2,350

Non-interest income

832

821

771

Total net revenue

3,636

3,651

3,121

Provision for credit losses

713

743

1,711

Non-interest expense

1,819

1,848

1,863

Income (loss) from continuing operations before taxes

1,104

1,060

(453)

Income tax provision (benefit)

385

374

(156)

Income (loss) from continuing operations, net of tax

$ 719

$ 686

$ (297)

Selected performance metrics:

Period-end loans held for investment

$ 78,310

$ 78,397

$ 88,914

Average loans held for investment

77,946

82,952

79,662

Average yield on loans held for investment(5)

15.94

%

15.16

%

13.42

Total net revenue margin(6)

18.66

17.61

15.67

Net charge-off rate

4.36

4.45

3.13

30+ day performing delinquency rate

3.13

3.44

2.97

30+ day delinquency rate(7)

**

3.53

2.97

Nonperforming loan rate(4)

0.12

0.12

?

Card loan premium amortization and other intangible accretion (8)

$ 57

$ 57

$ 59

PCCR intangible amortization

110

116

88

Purchase volume(9)

50,788

45,098

45,228

Domestic Card

Earnings:

Net interest income

$ 2,536

$ 2,556

$ 2,118

Non-interest income

737

724

708

Total net revenue

3,273

3,280

2,826

Provision for credit losses

647

647

1,600

Non-interest expense

1,635

1,633

1,634

Income (loss) from continuing operations before taxes

991

1,000

(408)

Income tax provision (benefit)

353

356

(144)

Income (loss) from continuing operations, net of tax

$ 638

$ 644

$ (264)

Selected performance metrics:

Period-end loans held for investment

$ 70,490

$ 70,361

$ 80,798

Average loans held for investment

69,966

74,714

71,468

Average yield on loans held for investment(5)

15.91

%

15.07

%

13.33

Total net revenue margin(6)

18.71

17.56

15.82

Net charge-off rate

4.28

4.43

2.86

30+ day performing delinquency rate

3.05

3.37

2.79

30+ day delinquency rate(7)

**

3.37

2.79

Purchase volume(9)

$ 47,273

$ 41,831

$ 41,807

International Card

Earnings:

Net interest income

$ 268

$ 274

$ 232

Non-interest income

95

97

63

Total net revenue

363

371

295

Provision for credit losses

66

96

111

Non-interest expense

184

215

229

Income (loss) from continuing operations before taxes

113

60

(45)

Income tax provision (benefit)

32

18

(12)

Income (loss) from continuing operations, net of tax

$ 81

$ 42

$ (33)

Selected performance metrics:

Period-end loans held for investment

$ 7,820

$ 8,036

$ 8,116

Average loans held for investment

7,980

8,238

8,194

Average yield on loans held for investment

16.19

%

15.97

%

14.18

Total net revenue margin

18.20

18.01

14.40

Net charge-off rate

5.08

4.59

5.49

30+ day performing delinquency rate

3.84

4.04

4.84

30+ day delinquency rate(7)

**

4.93

4.84

Nonperforming loan rate(4)

1.20

1.13

?

Purchase volume(9)

$ 3,515

$ 3,267

$ 3,421

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 9: Financial & Statistical Summary?Consumer Banking Business(1)(2)

2013

2013

2012

(Dollars in millions) (unaudited)

Q2

Q1

Q2

Consumer Banking

Earnings:

Net interest income

$ 1,478

$ 1,478

$ 1,496

Non-interest income

189

181

185

Total net revenue

1,667

1,659

1,681

Provision for credit losses

67

175

44

Non-interest expense

910

890

959

Income from continuing operations before taxes

690

594

678

Income tax provision

246

211

240

Income from continuing operations, net of tax

$ 444

$ 383

$ 438

Selected performance metrics:

Period-end loans held for investment

$ 72,218

$ 73,613

$ 77,615

Average loans held for investment

72,930

74,286

77,606

Average yield on loans held for investment

5.99

%

5.93

%

6.17

%

Auto loan originations

$ 4,525

$ 3,789

$ 4,306

Period-end deposits

169,789

172,605

173,966

Average deposits

170,733

171,089

174,416

Deposit interest expense rate

0.64

%

0.64

%

0.70

%

Core deposit intangible amortization

$ 35

$ 37

$ 42

Net charge-off rate

0.60

%

0.78

%

0.48

%

30+ day performing delinquency rate

2.55

2.24

1.82

30+ day delinquency rate(7)

**

2.81

2.47

Nonperforming loan rate

0.78

0.74

0.79

Nonperforming asset rate(4)

0.84

0.80

0.83

Period-end loans serviced for others

$ 14,313

$ 14,869

$ 16,108

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 10: Financial & Statistical Summary?Commercial Banking Business(1)(2)

2013

2013

2012

(Dollars in millions) (unaudited)

Q2

Q1

Q2

Commercial Banking

Earnings:

Net interest income

$ 457

$ 454

$ 427

Non-interest income

93

84

82

Total net revenue(10)

550

538

509

Provision for credit losses

(14)

(35)

(94)

Non-interest expense

269

258

251

Income from continuing operations before taxes

295

315

352

Income tax provision

105

112

124

Income from continuing operations, net of tax

$ 190

$ 203

$ 228

Selected performance metrics:

Period-end loans held for investment

$ 40,805

$ 39,150

$ 36,056

Average loans held for investment

39,512

38,576

35,227

Average yield on loans held for investment

3.84

%

3.91

%

4.27

%

Period-end deposits

$ 30,869

$ 30,275

$ 27,784

Average deposits

30,746

30,335

27,943

Deposit interest expense rate

0.26

%

0.28

%

0.33

%

Core deposit intangible amortization

$ 8

$ 7

$ 9

Net charge-off rate

0.04

%

0.07

%

0.19

%

Nonperforming loan rate

0.60

0.71

0.99

Nonperforming asset rate(4)

0.62

0.74

1.04

Risk category:(11)

Noncriticized

$ 39,168

$ 37,359

$ 33,745

Criticized performing

1,087

1,191

1,524

Criticized nonperforming

244

277

356

Total risk-rated loans

40,499

38,827

35,625

Acquired commercial loans

306

323

431

Total commercial loans

$ 40,805

$ 39,150

$ 36,056

% of period-end commercial loans held for investment:

Noncriticized

96.0

%

95.4

%

93.6

%

Criticized performing

2.7

3.1

4.2

Criticized nonperforming

0.6

0.7

1.0

Total risk-rated loans

99.3

99.2

98.8

Acquired commercial loans

0.7

0.8

1.2

Total commercial loans

100.0

%

100.0

%

100.0

%

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 11: Financial & Statistical Summary?Other and Total(1)(2)

2013

2013

2012

(Dollars in millions) (unaudited)

Q2

Q1

Q2

Other

Earnings:

Net interest expense

$ (186)

$ (192)

$ (272)

Non-interest income

(29)

(105)

16

Total net revenue

(215)

(297)

(256)

Provision for credit losses

(4)

2

16

Non-interest expense

61

32

69

Income (loss) from continuing operations before taxes

(272)

(331)

(341)

Income tax benefit

(155)

(203)

(165)

Income (loss) from continuing operations, net of tax

$ (117)

$ (128)

$ (176)

Selected performance metrics:

Period-end loans held for investment

$ 179

$ 173

$ 164

Average loans held for investment

174

183

137

Period-end deposits

9,207

9,530

12,181

Average deposits

9,171

10,131

12,555

Total

Earnings:

Net interest income

$ 4,553

$ 4,570

$ 4,001

Non-interest income

1,085

981

1,054

Total net revenue

5,638

5,551

5,055

Provision for credit losses

762

885

1,677

Non-interest expense

3,059

3,028

3,142

Income from continuing operations before taxes

1,817

1,638

236

Income tax provision

581

494

43

Income from continuing operations, net of tax

$ 1,236

$ 1,144

$ 193

Selected performance metrics:

Period-end loans held for investment

$ 191,512

$ 191,333

$ 202,749

Average loans held for investment

190,562

195,997

192,632

Period-end deposits

209,865

212,410

213,931

Average deposits

210,650

211,555

214,914

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 12: Notes to Loan and Business Segment Disclosures (Tables 7 ? 11)

(1)

Certain prior period amounts have been reclassified to conform to the current period presentation.

(2)

 

 

 

Loans acquired as part of the 2012 U.S. card, ING Direct and CCB acquisitions are included in the denominator used in calculating our reported credit quality metrics. We therefore present certain reported credit quality metrics, adjusted to exclude from the denominator acquired loans accounted for based on estimated cash flows expected to be collected over the life of the loans (formerly SOP 03-3). The table below presents amounts related to acquired loans accounted for under SOP 03-3.

2013

2013

2012

(Dollars in millions) (unaudited)

Q2

Q1

Q2

Acquired loans accounted for under SOP 03-3:

Period-end unpaid principal balance

$ 33,620

$ 36,216

$ 43,333

Period-end loans held for investment

32,275

34,943

41,673

Average loans held for investment

33,144

35,706

42,182

(3)

 

Results for Q2 2012 and thereafter include the impact of the May 1, 2012 closing of the 2012 U.S. card acquisition, which resulted in the addition of approximately $28.2 billion in credit card receivables at closing.

(4)

 

 

 

Nonperforming assets consist of nonperforming loans, real estate owned ("REO") and other foreclosed assets. The nonperforming asset ratios are calculated based on nonperforming assets for each category divided by the combined period-end total of loans held for investment, REO and other foreclosed assets for each respective category. The nonperforming loan ratios are calculated based on nonperforming loans for each category divided by period-end loans held for investment for each respective category.

(5)

 

 

The transfer of the Best Buy Stores, L.P. ("Best Buy") portfolio to held for sale resulted in an increase in the average yield for Domestic Card and Total Card of 168 basis points and 152 basis points, respectively, in Q2 2013 and 107 basis points and 97 basis points, respectively, in Q1 2013.

(6)

 

 

The transfer of the Best Buy portfolio to held for sale resulted in an increase in the net revenue margin for Domestic Card and Total Card of 188 basis points and 169 basis points, respectively, in Q2 2013 and 123 basis points and 112 basis points, respectively, in Q1 2013.

(7)

 

The 30+ day delinquency rate as of the end of Q2 2013 will be provided in our Quarterly Report on Form 10-Q for the period ended June 30, 2013.

(8)

 

Represents the net reduction in interest income attributable to non-SOP 03-3 card loan premium amortization and other intangible accretion associated with the 2012 U.S. card acquisition.

(9)

Includes credit card purchase transactions, net of returns. Excludes cash advance transactions.

(10)

 

 

Because some of our tax-related commercial investments generate tax-exempt income or tax credits, we make certain reclassifications within our Commercial Banking business results to present revenues on a taxable-equivalent basis, calculated assuming an effective tax rate approximately equal to our federal statutory tax rate of 35%.

(11)

 

Criticized exposures correspond to the "Special Mention," "Substandard" and "Doubtful" asset categories defined by bank regulatory authorities.

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 13: Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital Measures Under Basel I

In addition to disclosing regulatory capital measures under Basel I, we also report certain non-GAAP capital measures that management uses in assessing its capital adequacy. These non-GAAP measures include average tangible common equity, tangible common equity ("TCE") and TCE ratio. The table below provides the details of the calculation of our Basel I regulatory capital and non-GAAP capital measures. While our non-GAAP capital measures are widely used by investors, analysts and bank regulatory agencies to assess the capital position of financial services companies, they may not be comparable to similarly titled measures reported by other companies.

2013

2013

2012

(Dollars in millions)(unaudited)

Q2

Q1

Q2

Average Equity to Non-GAAP Average Tangible Common Equity

Average total stockholders' equity

$ 41,579

$ 40,960

$ 37,533

Less: Average goodwill and other intangible assets(1)

(15,974)

(16,141)

(15,689)

      Noncumulative perpetual preferred stock(2)

(853)

(853)

?

Average tangible common equity(3)

$ 24,752

$ 23,966

$ 21,844

Stockholders' Equity to Non-GAAP Tangible Common Equity

Total stockholders' equity

$ 41,041

$ 41,296

$ 37,192

Less: Goodwill and other intangible assets(1)

(15,872)

(15,992)

(16,477)

      Noncumulative perpetual preferred stock(2)

(853)

(853)

?

Tangible common equity(3)

$ 24,316

$ 24,451

$ 20,715

Total Assets to Tangible Assets

Total assets

$ 296,542

$ 300,163

$ 296,572

Less: Assets from discontinued operations

(310)

(309)

(310)

Total assets from continuing operations

296,232

299,854

296,262

Less: Goodwill and other intangible assets(1)

(15,872)

(15,992)

(16,477)

Tangible assets

$ 280,360

$ 283,862

$ 279,785

Non-GAAP TCE Ratio

Tangible common equity(3)

$ 24,316

$ 24,451

$ 20,715

Tangible assets

280,360

283,862

279,785

TCE ratio(3)

8.7

%

8.6

%

7.4

%

Regulatory Capital Ratios(4)

Total stockholders' equity

$ 41,041

$ 41,296

$ 37,192

Less: Net unrealized gains on AFS securities recorded in AOCI(5)

503

(583)

(422)

          Net (gains) losses on cash flow hedges recorded in AOCI(5)

175

15

34

          Disallowed goodwill and other intangible assets

(14,309)

(14,361)

(14,563)

          Disallowed deferred tax assets

?

?

(758)

          Noncumulative perpetual preferred stock(2)

(853)

(853)

?

          Other

(5)

(4)

(12)

Tier 1 common capital

26,552

25,510

21,471

Plus: Noncumulative perpetual preferred stock(2)

853

853

?

      Tier 1 restricted core capital items(6)

2

1

3,636

Tier 1 capital

27,407

26,364

25,107

Plus: Long-term debt qualifying as Tier 2 capital

2,124

2,121

2,318

      Qualifying allowance for loan and lease losses

2,781

2,738

2,740

      Other Tier 2 components

12

11

15

Tier 2 capital

4,917

4,870

5,073

Total risk-based capital(7)

$ 32,324

$ 31,234

$ 30,180

Risk-weighted assets(8)

$ 220,204

$ 216,458

$ 216,341

Tier 1 common ratio(9)

12.1

%

11.8

%

9.9

%

Tier 1 risk-based capital ratio(10)

12.4

12.2

11.6

Total risk-based capital ratio(11)

14.7

14.4

14.0

___________________

(1)  Includes impact from related deferred taxes.

(2)  Noncumulative perpetual preferred stock qualifies for Tier 1 capital; however, it is not includable in Tier 1 common capital.

(3)  TCE ratio is a non-GAAP measure calculated based on tangible common equity divided by tangible assets.

(4)  Regulatory capital ratios as of the end of Q2 2013 are preliminary and therefore subject to change.

(5)  Amounts presented are net of tax.

(6)  Consists primarily of trust preferred securities.

(7)  Total risk-based capital equals the sum of Tier 1 capital and Tier 2 capital.

(8)  Calculated based on prescribed regulatory guidelines.

(9)  Tier 1 common ratio is a regulatory measure calculated based on Tier 1 common capital divided by risk-weighted assets.

(10) Tier 1 risk-based capital ratio is a regulatory capital measure calculated based on Tier 1 capital divided by risk-weighted assets.

(11) Total risk-based capital ratio is a regulatory capital measure calculated based on total risk-based capital divided by risk-weighted assets.

 

SOURCE Capital One Financial Corporation

For further information: Investor Relations, Jeff Norris, 703.720.2455, or Danielle Dietz, 703.720.2455, or Media Relations, Julie Rakes, 804.284.5800, or Tatiana Stead, 703.720.2352

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