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