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Capital One Reports Fourth Quarter 2019 Net Income of $1.2 billion, or $2.25 per share

Excluding adjusting items, Fourth Quarter 2019 Net Income of $2.49 per share(1)

MCLEAN, Va., Jan. 21, 2020 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced net income for the fourth quarter of 2019 of $1.2 billion, or $2.25 per diluted common share, compared with net income of $1.3 billion, or $2.69 per diluted common share in the third quarter of 2019, and with net income of $1.3 billion, or $2.48 per diluted common share in the fourth quarter of 2018. Excluding adjusting items, net income for the fourth quarter of 2019 was $2.49 per diluted common share(1).

"In the fourth quarter and for the full year 2019, Capital One continued to post solid results as we invest to grow and to drive our digital transformation," said Richard D. Fairbank, Founder, Chairman and Chief Executive Officer. "As the many benefits from our technology transformation continue and increase, we are well positioned to succeed in a rapidly changing marketplace."

Adjusting items in the fourth 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

Initial allowance build on acquired Walmart portfolio

$

84


$

0.13


Walmart launch and related integration expenses

48


0.08


Cybersecurity Incident expenses, net of insurance

16


0.03


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

Fourth Quarter 2019 Income Statement Summary:

  • Total net revenue increased 7 percent to $7.4 billion.
  • Total non-interest expense increased 7 percent to $4.2 billion:
    • 42 percent increase in marketing.
    • 2 percent increase in operating expenses.
  • Pre-provision earnings increased 6 percent to $3.3 billion(2).
  • Provision for credit losses increased 31 percent to $1.8 billion:
    • Net charge-offs of $1.7 billion.
    • $135 million reserve build.
  • Net interest margin of 6.95 percent, increased 22 basis points.
  • Efficiency ratio of 56.03 percent.
    • Efficiency ratio excluding adjusting items of 55.16 percent(1).
  • Operating efficiency ratio of 46.47 percent.
    • Operating efficiency ratio excluding adjusting items of 45.60 percent(1).

Fourth Quarter 2019 Balance Sheet Summary:

  • Common equity Tier 1 capital ratio under Basel III Standardized Approach of 12.2 percent at December 31, 2019.
  • Period-end loans held for investment in the quarter increased $16.5 billion, or 7 percent, to $265.8 billion.
    • Credit Card period-end loans increased $14.6 billion, or 13 percent, to $128.2 billion.
      • Domestic Card period-end loans increased $13.9 billion, or 13 percent, to $118.6 billion.
    • Consumer Banking period-end loans increased $1.1 billion, or 2 percent, to $63.1 billion.
      • Auto period-end loans increased $1.1 billion, or 2 percent, to $60.4 billion.
    • Commercial Banking period-end loans increased $849 million, or 1 percent, to $74.5 billion.
  • Average loans held for investment in the quarter increased $12.7 billion, or 5 percent, to $258.9 billion.
    • Credit Card average loans increased $9.7 billion, or 9 percent, to $122.1 billion.
      • Domestic Card average loans increased $9.5 billion, or 9 percent, to $113.0 billion.
    • Consumer Banking average loans increased $1.3 billion, or 2 percent, to $62.6 billion.
      • Auto average loans increased $1.4 billion, or 2 percent, to $59.9 billion.
    • Commercial Banking average loans increased $1.7 billion, or 2 percent, to $74.2 billion.
  • Period-end total deposits increased $5.5 billion, or 2 percent, to $262.7 billion, while average deposits increased $5.0 billion, or 2 percent, to $260.0 billion.
  • Interest-bearing deposits rate paid decreased 14 basis points to 1.41 percent.

All comparisons below are for the full year of 2019 compared with the full year of 2018 unless otherwise noted.

2019 Full Year Income Statement Summary:

  • Total net revenue increased 2 percent to $28.6 billion.
  • Total non-interest expense increased 4 percent to $15.5 billion:
    • 5 percent increase in marketing.
    • 4 percent increase in operating expenses.
  • Pre-provision earnings remained flat at $13.1 billion(2).
  • Provision for credit losses increased 6 percent to $6.2 billion.
  • Efficiency ratio of 54.15 percent.
    • Efficiency ratio excluding adjusting items was 52.67 percent(1).
  • Operating efficiency ratio of 46.20 percent.
    • Operating efficiency ratio excluding adjusting items was 44.76 percent(1).

Earnings Conference Call Webcast Information

The company will hold an earnings conference call on January 21, 2020 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 February 4, 2020 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 and the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019.

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 $262.7 billion in deposits and $390.4 billion in total assets as of  December 31, 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.

(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.

 

 

Exhibit 99.2


Capital One Financial Corporation


Financial Supplement(1)(2)


Fourth 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 Annual Report on Form 10-K for the period ended December 31, 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 Q4 vs.


Year Ended December 31,

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


2019


2019


2019


2019


2018


2019


2018






2019 vs.


Q4


Q3


Q2


Q1


Q4


Q3


Q4


2019


2018


2018

Income Statement





















Net interest income


$

6,066



$

5,737



$

5,746



$

5,791



$

5,820



6

%


4

%


$

23,340



$

22,875



2

%

Non-interest income


1,361



1,222



1,378



1,292



1,193



11



14



5,253



5,201



1


Total net revenue(1)


7,427



6,959



7,124



7,083



7,013



7



6



28,593



28,076



2


Provision for credit losses


1,818



1,383



1,342



1,693



1,638



31



11



6,236



5,856



6


Non-interest expense:





















Marketing


710



501



546



517



831



42



(15)



2,274



2,174



5


Operating expense


3,451



3,371



3,233



3,154



3,301



2



5



13,209



12,728



4


Total non-interest expense


4,161



3,872



3,779



3,671



4,132



7



1



15,483



14,902



4


Income from continuing operations before income taxes


1,448



1,704



2,003



1,719



1,243



(15)



16



6,874



7,318



(6)


Income tax provision (benefit)


270



375



387



309



(21)



(28)



**



1,341



1,293



4


Income from continuing operations, net of tax


1,178



1,329



1,616



1,410



1,264



(11)



(7)



5,533



6,025



(8)


Income (loss) from discontinued operations, net of tax


(2)



4



9



2



(3)



**



(33)



13



(10)



**


Net income


1,176



1,333



1,625



1,412



1,261



(12)



(7)



5,546



6,015



(8)


Dividends and undistributed earnings allocated to participating securities(2)


(7)



(10)



(12)



(12)



(9)



(30)



(22)



(41)



(40)



3


Preferred stock dividends


(97)



(53)



(80)



(52)



(80)



83



21



(282)



(265)



6


Issuance cost for redeemed preferred stock(3)


(31)











**



**



(31)





**


Net income available to common stockholders


$

1,041



$

1,270



$

1,533



$

1,348



$

1,172



(18)



(11)



$

5,192



$

5,710



(9)


Common Share Statistics





















Basic earnings per common share:(2)





















Net income from continuing operations


$

2.26



$

2.70



$

3.24



$

2.87



$

2.50



(16)

%


(10)

%


$

11.07



$

11.92



(7)

%

Income (loss) from discontinued operations




0.01



0.02





(0.01)



**



**



0.03



(0.02)



**


Net income per basic common share


$

2.26



$

2.71



$

3.26



$

2.87



$

2.49



(17)



(9)



$

11.10



$

11.90



(7)


Diluted earnings per common share:(2)





















Net income from continuing operations


$

2.25



$

2.68



$

3.22



$

2.86



$

2.49



(16)



(10)



$

11.02



$

11.84



(7)


Income (loss) from discontinued operations




0.01



0.02





(0.01)



**



**



0.03



(0.02)



**


Net income per diluted common share


$

2.25



$

2.69



$

3.24



$

2.86



$

2.48



(16)



(9)



$

11.05



$

11.82



(7)


Weighted-average common shares outstanding (in millions):





















Basic


460.9



469.5



470.8



469.4



470.0



(2)



(2)



467.6



479.9



(3)


Diluted


463.4



471.8



473.0



471.6



472.7



(2)



(2)



469.9



483.1



(3)


Common shares outstanding (period-end, in millions)


456.6



465.7



470.3



469.6



467.7



(2)



(2)



456.6



467.7



(2)


Dividends declared and paid per common share


$

0.40



$

0.40



$

0.40



$

0.40



$

0.40







$

1.60



$

1.60




Tangible book value per common share (period-end)(4)


83.72



80.46



77.65



72.86



69.20



4



21



83.72



69.20



21













































2019 Q4 vs.


Year Ended December 31,

(Dollars in millions)


2019


2019


2019


2019


2018


2019


2018






2019 vs.


Q4


Q3


Q2


Q1


Q4


Q3


Q4


2019


2018


2018

Balance Sheet (Period-End)





















Loans held for investment


$

265,809



$

249,355



$

244,460



$

240,273



$

245,899



7

%


8

%


$

265,809



$

245,899



8

%

Interest-earning assets


355,202



344,643



339,160



340,071



341,293



3



4



355,202



341,293



4


Total assets


390,365



378,810



373,619



373,191



372,538



3



5



390,365



372,538



5


Interest-bearing deposits


239,209



234,084



231,161



230,199



226,281



2



6



239,209



226,281



6


Total deposits


262,697



257,148



254,535



255,107



249,764



2



5



262,697



249,764



5


Borrowings


55,697



50,149



49,233



50,358



58,905



11



(5)



55,697



58,905



(5)


Common equity


53,157



52,412



51,406



49,120



47,307



1



12



53,157



47,307



12


Total stockholders' equity


58,011



58,235



55,767



53,481



51,668





12



58,011



51,668



12


Balance Sheet (Average Balances)





















Loans held for investment


$

258,870



$

246,147



$

242,653



$

241,959



$

241,371



5

%


7

%


$

247,450



$

242,118



2

%

Interest-earning assets


349,150



340,949



338,026



337,793



334,714



2



4



341,510



332,738



3


Total assets


383,162



374,905



371,095



370,394



365,243



2



5



374,924



363,036



3


Interest-bearing deposits


236,250



232,063



230,452



227,572



222,827



2



6



231,609



221,760



4


Total deposits


260,040



255,082



253,634



251,410



247,663



2



5



255,065



247,117



3


Borrowings


51,442



49,413



49,982



53,055



53,994



4



(5)



50,965



53,144



(4)


Common equity


52,641



52,566



50,209



48,359



46,753





13



50,960



45,831



11


Total stockholders' equity


58,148



57,245



54,570



52,720



51,114



2



14



55,690



50,192



11


               

 


CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 2: Selected Metrics—Consolidated














2019 Q4 vs.


Year Ended December 31,

(Dollars in millions, except as noted)


2019


2019


2019


2019


2018


2019


2018






2019 vs.


Q4


Q3


Q2


Q1


Q4


Q3


Q4


2019


2018


2018

Performance Metrics





















Net interest income growth (period over period)


6

%




(1)

%




1

%


**



**



2

%


2

%


**


Non-interest income growth (period over period)


11



(11)

%


7



8

%


1



**



**



1



9



**


Total net revenue growth (period over period)


7



(2)



1



1



1



**



**



2



3



**


Total net revenue margin(5)


8.51



8.16



8.43



8.39



8.38



35

bps


13

bps


8.37



8.44



(7)

bps

Net interest margin(6)


6.95



6.73



6.80



6.86



6.96



22



(1)



6.83



6.87



(4)


Return on average assets


1.23



1.42



1.74



1.52



1.38



(19)



(15)



1.48



1.66



(18)


Return on average tangible assets(7)


1.28



1.48



1.82



1.59



1.44



(20)



(16)



1.54



1.73



(19)


Return on average common equity(8)


7.93



9.63



12.14



11.13



10.05



(170)



(212)



10.16



12.48



(232)


Return on average tangible common equity(9)


11.07



13.45



17.26



16.11



14.78



(238)



(371)



14.37



18.56



(419)


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


6.43



6.29



6.23



6.07



6.85



14



(42)



6.26



6.15



11


Efficiency ratio(10)


56.03



55.64



53.05



51.83



58.92



39



(289)



54.15



53.08



107


Operating efficiency ratio(11)


46.47



48.44



45.38



44.53



47.07



(197)



(60)



46.20



45.33



87


Effective income tax rate for continuing operations


18.6



22.0



19.3



18.0



(1.7)



(340)



**



19.5



17.7



180


Employees (period-end, in thousands)


51.9



52.1



50.7



48.8



47.6





9

%


51.9



47.6



9

%

Credit Quality Metrics





















Allowance for loan and lease losses


$

7,208



$

7,037



$

7,133



$

7,313



$

7,220



2

%




$

7,208



$

7,220




Allowance as a percentage of loans held for investment


2.71

%


2.82

%


2.92

%


3.04

%


2.94

%


(11)

bps


(23)

bps


2.71

%


2.94

%


(23)

bps

Net charge-offs


$

1,683



$

1,462



$

1,508



$

1,599



$

1,610



15

%


5

%


$

6,252



$

6,112



2

%

Net charge-off rate(12)


2.60

%


2.38

%


2.48

%


2.64

%


2.67

%


22

bps


(7)

bps


2.53

%


2.52

%


1

bps

30+ day performing delinquency rate


3.51



3.28



3.15



3.23



3.62



23



(11)



3.51



3.62



(11)


30+ day delinquency rate


3.74



3.51



3.35



3.40



3.84



23



(10)



3.74



3.84



(10)


Capital Ratios(13)





















Common equity Tier 1 capital


12.2

%


12.5

%


12.3

%


11.9

%


11.2

%


(30)

bps


100

bps


12.2

%


11.2

%


100

bps

Tier 1 capital


13.7



14.4



13.8



13.4



12.7



(70)



100



13.7



12.7



100


Total capital


16.1



16.8



16.2



15.8



15.1



(70)



100



16.1



15.1



100


Tier 1 leverage


11.7



11.9



11.4



11.0



10.7



(20)



100



11.7



10.7



100


Tangible common equity ("TCE")(14)


10.2



10.3



10.2



9.6



9.1



(10)



110



10.2



9.1



110


 

 


CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 3: Consolidated Statements of Income














2019 Q4 vs.


Year Ended December 31,



2019


2019


2019


2019


2018


2019


2018






2019 vs.

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


Q4


Q3


Q2


Q1


Q4


Q3


Q4


2019


2018


2018

Interest income:





















Loans, including loans held for sale


$

6,682



$

6,429



$

6,383



$

6,368



$

6,358



4

%


5

%


$

25,862



$

24,728



5

%

Investment securities


544



583



629



655



627



(7)



(13)



2,411



2,211



9


Other


44



63



64



69



63



(30)



(30)



240



237



1


Total interest income


7,270



7,075



7,076



7,092



7,048



3



3



28,513



27,176



5


Interest expense:





















Deposits


832



901



870



817



756



(8)



10



3,420



2,598



32


Securitized debt obligations


118



123



139



143



138



(4)



(14)



523



496



5


Senior and subordinated notes


236



299



310



314



297



(21)



(21)



1,159



1,125



3


Other borrowings


18



15



11



27



37



20



(51)



71



82



(13)


Total interest expense


1,204



1,338



1,330



1,301



1,228



(10)



(2)



5,173



4,301



20


Net interest income


6,066



5,737



5,746



5,791



5,820



6



4



23,340



22,875



2


Provision for credit losses


1,818



1,383



1,342



1,693



1,638



31



11



6,236



5,856



6


Net interest income after provision for credit losses


4,248



4,354



4,404



4,098



4,182



(2)



2



17,104



17,019




Non-interest income:





















Interchange fees, net


811



790



820



758



743



3



9



3,179



2,823



13


Service charges and other customer-related fees


342



283



352



353



352



21



(3)



1,330



1,585



(16)


Net securities gains (losses)


(18)



5



15



24



(20)



**



(10)



26



(209)



**


Other


226



144



191



157



118



57



92



718



1,002



(28)


Total non-interest income


1,361



1,222



1,378



1,292



1,193



11



14



5,253



5,201



1


Non-interest expense:





















Salaries and associate benefits


1,652



1,605



1,558



1,573



1,345



3



23



6,388



5,727



12


Occupancy and equipment


565



519



521



493



610



9



(7)



2,098



2,118



(1)


Marketing


710



501



546



517



831



42



(15)



2,274



2,174



5


Professional services


318



314



314



291



426



1



(25)



1,237



1,145



8


Communications and data processing


346



312



329



303



326



11



6



1,290



1,260



2


Amortization of intangibles


28



25



29



30



43



12



(35)



112



174



(36)


Other(15)


542



596



482



464



551



(9)



(2)



2,084



2,304



(10)


Total non-interest expense


4,161



3,872



3,779



3,671



4,132



7



1



15,483



14,902



4


Income from continuing operations before income taxes


1,448



1,704



2,003



1,719



1,243



(15)



16



6,874



7,318



(6)


Income tax provision (benefit)


270



375



387



309



(21)



(28)



     **



1,341



1,293



4


Income from continuing operations, net of tax


1,178



1,329



1,616



1,410



1,264



(11)



(7)



5,533



6,025



(8)


Income (loss) from discontinued operations, net of tax


(2)



4



9



2



(3)



     **