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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