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Capital One Reports Third Quarter 2019 Net Income of $1.3 billion, or $2.69 per share

October 24, 2019 at 4:05 PM EDT
Excluding adjusting items, Third Quarter 2019 Net Income of $3.32 per share(1)

MCLEAN, Va., Oct. 24, 2019 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced net income for the third quarter of 2019 of $1.3 billion, or $2.69 per diluted common share, compared with net income of $1.6 billion, or $3.24 per diluted common share in the second quarter of 2019, and with net income of $1.5 billion, or $2.99 per diluted common share in the third quarter of 2018. Excluding adjusting items, net income for the third quarter of 2019 was $3.32 per diluted common share(1).

"Our marketing and technology investments are building our momentum and creating great value," said Richard D. Fairbank, Founder, Chairman and Chief Executive Officer. "Our domestic card business delivered strong year-over-year growth in purchase volume and branded card loans, and our consumer banking business posted strong year-over-year growth in auto originations and retail deposits."

Adjusting items in the third quarter of 2019, which are excluded from diluted earnings per share (EPS), efficiency ratio and operating efficiency ratio metrics (see Table 15 in our Financial Supplement for additional information):

Pre-Tax

Diluted EPS

(Dollars in millions, except per share data)

Impact

Impact

U.K. Payment Protection Insurance customer refund reserve build ("U.K. PPI Reserve")

$

212

$

0.45

Walmart launch and related integration expenses

84

0.14

Cybersecurity Incident expenses, net of insurance

22

0.04

All comparisons below are for the third quarter of 2019 compared with the second quarter of 2019 unless otherwise noted.

Third Quarter 2019 Income Statement Summary:

  • Total net revenue decreased 2 percent to $7.0 billion.
  • Total non-interest expense increased 2 percent to $3.9 billion:
    • 8 percent decrease in marketing.

(1) Amounts excluding adjusting items are non-GAAP measures that we believe help investors and users of our financial information understand the effect of adjusting items on our selected reported results and provide alternate measurements of our performance, both in the current period and across periods. See Table 15 in Exhibit 99.2 for a reconciliation of our selected reported results to these non-GAAP measures.

    • 4 percent increase in operating expenses.
  • Pre-provision earnings decreased 8 percent to $3.1 billion(2).
  • Provision for credit losses increased 3 percent to $1.4 billion:
    • Net charge-offs of $1.5 billion.
    • $79 million reserve release.
  • Net interest margin of 6.73 percent, decreased 7 basis points.
  • Efficiency ratio of 55.64 percent.
    • Efficiency ratio excluding adjusting items of 52.04 percent(1).
  • Operating efficiency ratio of 48.44 percent.
    • Operating efficiency ratio excluding adjusting items of 44.98 percent(1).

Third Quarter 2019 Balance Sheet Summary:

  • Common equity Tier 1 capital ratio under Basel III Standardized Approach of 12.5 percent at September 30, 2019.
  • Period-end loans held for investment in the quarter increased $4.9 billion, or 2 percent, to $249.4 billion.
    • Credit Card period-end loans increased $1.5 billion, or 1 percent, to $113.7 billion.
      • Domestic Card period-end loans increased $1.7 billion, or 2 percent, to $104.7 billion.
    • Consumer Banking period-end loans increased $1.7 billion, or 3 percent, to $62.0 billion.
      • Auto period-end loans increased $1.7 billion, or 3 percent, to $59.3 billion.
    • Commercial Banking period-end loans increased $1.7 billion, or 2 percent, to $73.7 billion.
  • Average loans held for investment in the quarter increased $3.5 billion, or 1 percent, to $246.1 billion.
    • Credit Card average loans increased $1.6 billion, or 1 percent, to $112.4 billion.
      • Domestic Card average loans increased $1.5 billion, or 1 percent, to $103.4 billion.
    • Consumer Banking average loans increased $1.4 billion, or 2 percent, to $61.3 billion.
      • Auto average loans increased $1.4 billion, or 3 percent, to $58.5 billion.
    • Commercial Banking average loans increased $510 million, or 1 percent, to $72.5 billion.
  • Period-end total deposits increased $2.6 billion, or 1 percent, to $257.1 billion, while average deposits increased $1.4 billion, or 1 percent, to $255.1 billion.
  • Interest-bearing deposits rate paid increased 4 basis points to 1.55 percent.

(1) Amounts excluding adjusting items are non-GAAP measures that we believe help investors and users of our financial information understand the effect of adjusting items on our selected reported results and provide alternate measurements of our performance, both in the current period and across periods. See Table 15 in Exhibit 99.2 for a reconciliation of our selected reported results to these non-GAAP measures.

(2) Pre-provision earnings is calculated based on the sum of net interest income and non-interest income, less non-interest expense for the period.

Earnings Conference Call Webcast Information

The company will hold an earnings conference call on October 24, 2019 at 5:00 PM Eastern 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). Under "About," choose "Investors" to access the Investor Center and view and/or download the earnings press release, the financial supplement, including a reconciliation of non-GAAP financial measures, and the earnings release presentation. The replay of the webcast will be archived on the company's website through November 7, 2019 at 5:00 PM Eastern Time.

Forward-Looking Statements

Certain statements in this release may constitute 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, 2018.

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 $257.1 billion in deposits and $378.8 billion in total assets as of September 30, 2019. 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 branches located primarily in New York, Louisiana, Texas, Maryland, Virginia, New Jersey 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(1)(2)

Third Quarter 2019

Table of Contents

Capital One Financial Corporation Consolidated Results

Page

Table 1:

Financial Summary—Consolidated

1

Table 2:

Selected Metrics—Consolidated

3

Table 3:

Consolidated Statements of Income

4

Table 4:

Consolidated Balance Sheets

6

Table 5:

Notes to Financial Summary, Selected Metrics and Consolidated Financial Statements (Tables 1—4)

8

Table 6:

Average Balances, Net Interest Income and Net Interest Margin

9

Table 7:

Loan Information and Performance Statistics

10

Table 8:

Allowance for Loan and Lease Losses and Reserve for Unfunded Lending Commitments Activity

12

Business Segment Results

Table 9:

Financial Summary—Business Segment Results

13

Table 10:

Financial & Statistical Summary—Credit Card Business

14

Table 11:

Financial & Statistical Summary—Consumer Banking Business

16

Table 12:

Financial & Statistical Summary—Commercial Banking Business

17

Table 13:

Financial & Statistical Summary—Other and Total

18

Other

Table 14:

Notes to Loan, Allowance and Business Segment Disclosures (Tables 7—13)

19

Table 15:

Calculation of Regulatory Capital Measures and Reconciliation of Non-GAAP Measures

20

__________

(1)

The information contained in this Financial Supplement is preliminary and based on data available at the time of the earnings

presentation. Investors should refer to our Quarterly Report on Form 10-Q for the period ended September 30, 2019 once

it is filed with the Securities and Exchange Commission.

(2)

This Financial Supplement includes non-GAAP measures. We believe these non-GAAP measures are useful to

investors and users of our financial information as they provide an alternate measurement of our performance and

assist in assessing our capital adequacy and the level of return generated. These non-GAAP measures should not

be viewed as a substitute for reported results determined in accordance with generally accepted accounting

principles in the U.S. ("GAAP"), nor are they necessarily comparable to non-GAAP measures that may be presented

by other companies.

 

 


CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 1: Financial Summary—Consolidated













2019 Q3 vs.

Nine Months Ended September 30,

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

2019

2019

2019

2018

2018

2019

2018




2019 vs.

Q3

Q2

Q1

Q4

Q3

Q2

Q3

2019

2018

2018

Income Statement



















Net interest income

$

5,737

$

5,746

$

5,791

$

5,820

$

5,786

—

(1)

%

$

17,274

$

17,055

1

%

Non-interest income

1,222

1,378

1,292

1,193

1,176

(11)

%

4

3,892

4,008

(3)

Total net revenue(1)

6,959

7,124

7,083

7,013

6,962

(2)

—

21,166

21,063

—

Provision for credit losses

1,383

1,342

1,693

1,638

1,268

3

9

4,418

4,218

5

Non-interest expense:



















Marketing

501

546

517

831

504

(8)

(1)

1,564

1,343

16

Operating expense

3,371

3,233

3,154

3,301

3,269

4

3

9,758

9,427

4

Total non-interest expense

3,872

3,779

3,671

4,132

3,773

2

3

11,322

10,770

5

Income from continuing operations before income taxes

1,704

2,003

1,719

1,243

1,921

(15)

(11)

5,426

6,075

(11)

Income tax provision (benefit)

375

387

309

(21)

420

(3)

(11)

1,071

1,314

(18)

Income from continuing operations, net of tax

1,329

1,616

1,410

1,264

1,501

(18)

(11)

4,355

4,761

(9)

Income (loss) from discontinued operations, net of tax

4

9

2

(3)

1

(56)

**

15

(7)

**

Net income

1,333

1,625

1,412

1,261

1,502

(18)

(11)

4,370

4,754

(8)

Dividends and undistributed earnings allocated to participating securities(2)

(10)

(12)

(12)

(9)

(9)

(17)

11

(34)

(32)

6

Preferred stock dividends

(53)

(80)

(52)

(80)

(53)

(34)

—

(185)

(185)

—

Net income available to common stockholders

$

1,270

$

1,533

$

1,348

$

1,172

$

1,440

(17)

(12)

$

4,151

$

4,537

(9)

Common Share Statistics



















Basic earnings per common share:(2)



















Net income from continuing operations

$

2.70

$

3.24

$

2.87

$

2.50

$

3.01

(17)

%

(10)

%

$

8.80

$

9.40

(6)

%

Income (loss) from discontinued operations

0.01

0.02

—

(0.01)

—

(50)

**

0.03

(0.01)

**

Net income per basic common share

$

2.71

$

3.26

$

2.87

$

2.49

$

3.01

(17)

(10)

$

8.83

$

9.39

(6)

Diluted earnings per common share:(2)



















Net income from continuing operations

$

2.68

$

3.22

$

2.86

$

2.49

$

2.99

(17)

(10)

$

8.76

$

9.33

(6)

Income (loss) from discontinued operations

0.01

0.02

—

(0.01)

—

(50)

**

0.03

(0.01)

**

Net income per diluted common share

$

2.69

$

3.24

$

2.86

$

2.48

$

2.99

(17)

(10)

$

8.79

$

9.32

(6)

Weighted-average common shares outstanding (in millions):



















Basic

469.5

470.8

469.4

470.0

477.8

—

(2)

469.9

483.2

(3)

Diluted

471.8

473.0

471.6

472.7

480.9

—

(2)

472.1

486.7

(3)

Common shares outstanding (period-end, in millions)

465.7

470.3

469.6

467.7

473.7

(1)

(2)

465.7

473.7

(2)

Dividends declared and paid per common share

$

0.40

$

0.40

$

0.40

$

0.40

$

0.40

—

—

$

1.20

$

1.20

—

Tangible book value per common share (period-end)(3)

80.46

77.65

72.86

69.20

66.15

4

22

80.46

66.15

22










































































2019 Q3 vs.

Nine Months Ended September 30,

(Dollars in millions)

2019

2019

2019

2018

2018

2019

2018




2019 vs.

Q3

Q2

Q1

Q4

Q3

Q2

Q3

2019

2018

2018

Balance Sheet (Period-End)



















Loans held for investment

$

249,355

$

244,460

$

240,273

$

245,899

$

238,761

2

%

4

%

$

249,355

$

238,761

4

%

Interest-earning assets

344,643

339,160

340,071

341,293

331,293

2

4

344,643

331,293

4

Total assets

378,810

373,619

373,191

372,538

362,909

1

4

378,810

362,909

4

Interest-bearing deposits

234,084

231,161

230,199

226,281

222,356

1

5

234,084

222,356

5

Total deposits

257,148

254,535

255,107

249,764

247,195

1

4

257,148

247,195

4

Borrowings

50,149

49,233

50,358

58,905

52,205

2

(4)

50,149

52,205

(4)

Common equity

52,412

51,406

49,120

47,307

46,277

2

13

52,412

46,277

13

Total stockholders' equity

58,235

55,767

53,481

51,668

50,638

4

15

58,235

50,638

15

Balance Sheet (Average Balances)



















Loans held for investment

$

246,147

$

242,653

$

241,959

$

241,371

$

236,766

1

%

4

%

$

243,602

$

242,369

1

%

Interest-earning assets

340,949

338,026

337,793

334,714

330,272

1

3

338,936

331,318

2

Total assets

374,905

371,095

370,394

365,243

360,937

1

4

372,148

362,293

3

Interest-bearing deposits

232,063

230,452

227,572

222,827

221,431

1

5

230,045

221,400

4

Total deposits

255,082

253,634

251,410

247,663

246,720

1

3

253,389

246,932

3

Borrowings

49,413

49,982

53,055

53,994

51,684

(1)

(4)

50,804

52,858

(4)

Common equity

52,566

50,209

48,359

46,753

46,407

5

13

50,393

45,521

11

Total stockholders' equity

57,245

54,570

52,720

51,114

50,768

5

13

54,861

49,882

10

 

 

               


CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 2: Selected Metrics—Consolidated













2019 Q3 vs.

Nine Months Ended September 30,

(Dollars in millions, except as noted)

2019

2019

2019

2018

2018

2019

2018




2019 vs.

Q3

Q2

Q1

Q4

Q3

Q2

Q3

2019

2018

2018

Performance Metrics



















Net interest income growth (period over period)

—

(1)

%

—

1

%

4

%

**

**

1

%

2

%

**

Non-interest income growth (period over period)

(11)

%

7

8

%

1

(28)

**

**

(3)

12

**

Total net revenue growth (period over period)

(2)

1

1

1

(3)

**

**

—

4

**

Total net revenue margin(4)

8.16

8.43

8.39

8.38

8.43

(27)

bps

(27)

bps

8.33

8.48

(15)

bps

Net interest margin(5)

6.73

6.80

6.86

6.96

7.01

(7)

(28)

6.80

6.86

(6)

Return on average assets

1.42

1.74

1.52

1.38

1.66

(32)

(24)

1.56

1.75

(19)

Return on average tangible assets(6)

1.48

1.82

1.59

1.44

1.74

(34)

(26)

1.63

1.83

(20)

Return on average common equity(7)

9.63

12.14

11.13

10.05

12.40

(251)

(277)

10.94

13.31

(237)

Return on average tangible common equity(8)

13.45

17.26

16.11

14.78

18.32

(381)

(487)

15.54

19.88

(434)

Non-interest expense as a percentage of average loans held for investment

6.29

6.23

6.07

6.85

6.37

6

(8)

6.20

5.92

28

Efficiency ratio(9)

55.64

53.05

51.83

58.92

54.19

259

145

53.49

51.13

236

Operating efficiency ratio(10)

48.44

45.38

44.53

47.07

46.95

306

149

46.10

44.76

134

Effective income tax rate for continuing operations

22.0

19.3

18.0

(1.7)

21.9

270

10

19.7

21.6

(190)

Employees (period-end, in thousands)

52.1

50.7

48.8

47.6

47.6

3

%

9

%

52.1

47.6

9

%

Credit Quality Metrics



















Allowance for loan and lease losses

$

7,037

$

7,133

$

7,313

$

7,220

$

7,219

(1)

%

(3)

%

$

7,037

$

7,219

(3)

%

Allowance as a percentage of loans held for investment

2.82

%

2.92

%

3.04

%

2.94

%

3.02

%

(10)

bps

(20)

bps

2.82

%

3.02

%

(20)

bps

Net charge-offs

$

1,462

$

1,508

$

1,599

$

1,610

$

1,425

(3)

%

3

%

$

4,569

$

4,502

1

%

Net charge-off rate(11)

2.38

%

2.48

%

2.64

%

2.67

%

2.41

%

(10)

bps

(3)

bps

2.50

%

2.48

%

2

bps

30+ day performing delinquency rate

3.28

3.15

3.23

3.62

3.28

13

—

3.28

3.28

—

30+ day delinquency rate

3.51

3.35

3.40

3.84

3.48

16

3

3.51

3.48

3

Capital Ratios(12)



















Common equity Tier 1 capital

12.5

%

12.3

%

11.9

%

11.2

%

11.2

%

20

bps

130

bps

12.5

%

11.2

%

130

bps

Tier 1 capital

14.4

13.8

13.4

12.7

12.8

60

160

14.4

12.8

160

Total capital

16.8

16.2

15.8

15.1

15.2

60

160

16.8

15.2

160

Tier 1 leverage

11.9

11.4

11.0

10.7

10.6

50

130

11.9

10.6

130

Tangible common equity ("TCE")(13)

10.3

10.2

9.6

9.1

9.0

10

130

10.3

9.0

130

 

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 3: Consolidated Statements of Income













2019 Q3 vs.

Nine Months Ended September 30,


2019

2019

2019

2018

2018

2019

2018




2019 vs.

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

Q3

Q2

Q1

Q4

Q3

Q2

Q3

2019

2018

2018

Interest income:



















Loans, including loans held for sale

$

6,429

$

6,383

$

6,368

$

6,358

$

6,247

1

%

3

%

$

19,180

$

18,370

4

%

Investment securities

583

629

655

627

593

(7)

(2)

1,867

1,584

18

Other

63

64

69

63

55

(2)

15

196

174

13

Total interest income

7,075

7,076

7,092

7,048

6,895

—

3

21,243

20,128

6

Interest expense:



















Deposits

901

870

817

756

681

4

32

2,588

1,842

40

Securitized debt obligations

123

139

143

138

127

(12)

(3)

405

358

13

Senior and subordinated notes

299

310

314

297

288

(4)

4

923

828

11

Other borrowings

15

11

27

37

13

36

15

53

45

18

Total interest expense

1,338

1,330

1,301

1,228

1,109

1

21

3,969

3,073

29

Net interest income

5,737

5,746

5,791

5,820

5,786

—

(1)

17,274

17,055

1

Provision for credit losses

1,383

1,342

1,693

1,638

1,268

3

9

4,418

4,218

5

Net interest income after provision for credit losses

4,354

4,404

4,098

4,182

4,518

(1)

(4)

12,856

12,837

—

Non-interest income:



















Interchange fees, net

790

820

758

743

714

(4)

11

2,368

2,080

14

Service charges and other customer-related fees

283

352

353

352

410

(20)

(31)

988

1,233

(20)

Net securities gains (losses)

5

15

24

(20)

(196)

(67)

**

44

(189)

**

Other

144

191

157

118

248

(25)

(42)

492

884

(44)

Total non-interest income

1,222

1,378

1,292

1,193

1,176

(11)

4

3,892

4,008

(3)

Non-interest expense:



















Salaries and associate benefits

1,605

1,558

1,573

1,345

1,432

3

12

4,736

4,382

8

Occupancy and equipment

519

521

493

610

515

—

1

1,533

1,508

2

Marketing

501

546

517

831

504

(8)

(1)

1,564

1,343

16

Professional services

314

314

291

426

275

—

14

919

719

28

Communications and data processing

312

329

303

326

311

(5)

—

944

934

1

Amortization of intangibles

25

29

30

43

44

(14)

(43)

84

131

(36)

Other(14)

596

482

464

551

692

24

(14)

1,542

1,753

(12)

Total non-interest expense

3,872

3,779

3,671

4,132

3,773

2

3

11,322

10,770

5

Income from continuing operations before income taxes

1,704

2,003

1,719

1,243

1,921

(15)

(11)

5,426

6,075

(11)

Income tax provision (benefit)

375

387

309

(21)

420

(3)

(11)

1,071

1,314

(18)

Income from continuing operations, net of tax

1,329

1,616

1,410

1,264

1,501

(18)

(11)

4,355

4,761

(9)

Income (loss) from discontinued operations, net of tax

4

9

2

(3)

1

(56)

**

15

(7)

**

Net income

1,333

1,625

1,412

1,261

1,502

(18)

(11)

4,370

4,754