Capital One Reports Record First Quarter Earnings
Earnings Per Share Rise 26% Over Year Ago Period
Capital One Financial Corporation (NYSE: COF) today announced its 19th consecutive quarter of record earnings, driven by a 38 percent year-over-year increase in total revenues, and another quarter of superior credit performance. The company also announced that it is launching a $500 million publicly marketed mandatory convertible transaction.Earnings for the first quarter of 2002 were $188.0 million, or $0.83 per share, versus earnings of $143.6 million, or $0.66 per share, for the comparable period in the prior year. Earnings in the fourth quarter of 2001 were $177.7 million, or $.80 per share.
"Capital One achieved its 19th consecutive quarter of record earnings despite our increase in marketing expense to a record $354 million -- an accomplishment that demonstrates our ability to both deliver results today and invest in our future. As a result, we remain confident we will achieve our 20 percent earnings per share growth target in 2002," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "I'm equally pleased that once again our stringent risk management practices enabled us to achieve superior credit performance -- with a charge-off rate of 4.00 percent."
First quarter 2002 revenue, defined as managed net interest income and non-interest income, rose to $2.1 billion versus $1.9 billion in the fourth quarter of 2001. In the first quarter, Capital One added 2.8 million net new accounts, bringing total accounts to 46.6 million. The company's managed consumer loan balances increased by $3.3 billion in the first quarter to $48.6 billion.
"Each quarter, our earnings performance solidifies our position as an industry powerhouse -- which is remarkable given the recent economic uncertainty," said Nigel W. Morris, Capital One's President and Chief Operating Officer. "Capital One's broad-based growth, coupled with our improved brand recognition, continues to fuel our success. A rapidly growing number of customers world-wide are turning to Capital One for financial products and solutions."
The managed net charge-off rate decreased to 4.00 percent for the first quarter of 2002 compared with 4.42 percent for the fourth quarter of 2001. The managed delinquency rate (30+ days) decreased to 4.80 percent as of March 31, 2002, compared with 4.95 percent as of December 31, 2001. The company also further strengthened its balance sheet by increasing the allowance for loan losses by $150 million.
The company's managed net interest margin increased to 8.87 percent in the first quarter of 2002 from 8.68 percent in the fourth quarter of 2001 primarily because of a decrease in the company's cost of funds.
Marketing expense for the first quarter of 2002 increased $52.4 million to $353.5 million from $301.2 million in the fourth quarter of 2001, and increased $122.3 million over the $231.2 million spent in the comparable period of the prior year. Other non-interest expenses (excluding marketing) for the first quarter of 2002 were $806.4 million versus $773.4 million for the fourth quarter of 2001 and $687.0 million in the comparable period of the prior year. Annualized operating expenses per account decreased to $71 for the first quarter of 2002 from $74 in the prior quarter.
The company cautioned that its current expectations for 2002 earnings and future growth are forward looking statements and actual results could differ materially from current expectations due to a number of factors, including: competition in the credit card industry; the actual account and balance growth achieved by the company; the company's ability to access the capital markets at attractive rates and terms to fund its operations and future growth; and general economic conditions affecting consumer income and spending, which may affect consumer bankruptcies, defaults and charge-offs. A discussion of these and other factors can be found in Capital One's annual and other reports filed with the Securities and Exchange Commission, including, but not limited to, Capital One's report on Form 10-K for the year ended December 31, 2001.
Headquartered in Falls Church, Virginia, Capital One Financial Corporation (http://www.capitalone.com ) is a holding company whose principal subsidiaries, Capital One Bank and Capital One, F.S.B., offer consumer lending products. Capital One's subsidiaries collectively had 46.6 million accounts and $48.6 billion in managed loans outstanding as of March 31, 2002. Capital One, a Fortune 500 company, is one of the largest providers of MasterCard and Visa credit cards in the world. Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 500 index.
Note: This release, financial information and a live Webcast of today's 5:00 p.m. (EDT) analyst conference call is accessible on the Internet on Capital One's home page (http://www.capitalone.com ). Choose "About Capital One" to access the Investor Center to view and download the earnings press release and other financial information.
CAPITAL ONE FINANCIAL CORPORATION (COF) Financial & Statistical Summary 2002 2001 (in millions, except per share data and as noted) Q1 Q4 Earnings (Managed Basis) Net Interest Income $1,120.9 $982.9 Non-Interest Income 959.9 941.5 Total Revenue 2,080.7 1,924.5 Provision for Loan Losses 617.6 563.3 Marketing Expenses 353.5 301.2 Operating Expenses 806.4 773.4 Income Before Taxes 303.3 286.6 Tax Rate 38.0% 38.0% Net Income $188.0 $177.7 Common Share Statistics Basic EPS $0.86 $0.83 Diluted EPS $0.83 $0.80 Dividends Per Share $0.03 $0.03 Book Value Per Share (period end) $16.69 $15.33 Stock Price Per Share (period end) $63.85 $53.95 Total Market Capitalization (period end) $14,079.3 $11,695.2 Shares Outstanding (period end) 220.5 216.8 Shares Used to Compute Basic EPS 217.5 214.7 Shares Used to Compute Diluted EPS 226.6 223.4 Managed Loan Statistics (period avg.) Average Loans $46,688 $41,352 Average Earning Assets $50,538 $45,295 Average Assets $54,258 $48,906 Average Equity $3,572 $3,223 Net Interest Margin 8.87% 8.68% Risk Adjusted Margin(1) 12.78% 12.96% Return on Average Assets (ROA) 1.39% 1.45% Return on Average Equity (ROE) 21.06% 22.05% Net Charge-Off Rate 4.00% 4.42% Net Charge-Offs $466.7 $456.9 Cost Per Account (in dollars) $71.33 $73.69 Managed Loan Statistics (period end) Reported Loans $24,428 $20,921 Securitized Loans 24,136 24,343 Total Loans $48,564 $45,264 Delinquency Rate (30+ days) 4.80% 4.95% Number of Accounts (000's) 46,623 43,815 Total Assets $55,381 $52,506 Capital, Including Preferred Interests $3,778.4 $3,422.2 Capital to Managed Assets Ratio 6.82% 6.52% (1) Risk adjusted margin is total revenue less net charge-offs as a percentage of average earning assets. (2) Includes one-time charges of $38.8 million. CAPITAL ONE FINANCIAL CORPORATION (COF) Financial & Statistical Summary 2001 2001 (in millions, except per share data and as noted) Q3 Q2 Earnings (Managed Basis) Net Interest Income $926.7 $823.7 Non-Interest Income 852.5 796.3 Total Revenue 1,779.2 1,620.0 Provision for Loan Losses 437.6 379.1 Marketing Expenses 281.9 268.7 Operating Expenses 793.0 (2) 721.6 Income Before Taxes 266.7 250.5 Tax Rate 38.0% 38.0% Net Income $165.3 $155.3 Common Share Statistics Basic EPS $0.78 $0.74 Diluted EPS $0.75 $0.70 Dividends Per Share $0.03 $0.03 Book Value Per Share (period end) $14.14 $13.02 Stock Price Per Share (period end) $46.03 $60.15 Total Market Capitalization (period end) $9,710.1 $12,666.5 Shares Outstanding (period end) 211.0 210.6 Shares Used to Compute Basic EPS 210.8 209.1 Shares Used to Compute Diluted EPS 219.9 221.2 Managed Loan Statistics (period avg.) Average Loans $37,017 $33,440 Average Earning Assets $39,994 $36,180 Average Assets $43,363 $38,820 Average Equity $2,935 $2,608 Net Interest Margin 9.27% 9.11% Risk Adjusted Margin(1) 14.17% 14.23% Return on Average Assets (ROA) 1.53% 1.60% Return on Average Equity (ROE) 22.53% 23.83% Net Charge-Off Rate 3.92% 3.98% Net Charge-Offs $362.7 $332.8 Cost Per Account (in dollars) $81.03 $77.38 Managed Loan Statistics (period end) Reported Loans $17,480 $16,327 Securitized Loans 21,009 18,956 Total Loans $38,489 $35,283 Delinquency Rate (30+ days) 5.20% 4.92% Number of Accounts (000's) 40,145 38,146 Total Assets $44,497 $40,587 Capital, Including Preferred Interests $3,081.9 $2,840.1 Capital to Managed Assets Ratio 6.93% 7.00% (1) Risk adjusted margin is total revenue less net charge-offs as a percentage of average earning assets. (2) Includes one-time charges of $38.8 million. CAPITAL ONE FINANCIAL CORPORATION (COF) Financial & Statistical Summary 2001 (in millions, except per share data and as noted) Q1 Earnings (Managed Basis) Net Interest Income $759.3 Non-Interest Income 747.1 Total Revenue 1,506.4 Provision for Loan Losses 356.5 Marketing Expenses 231.2 Operating Expenses 687.0 Income Before Taxes 231.6 Tax Rate 38.0% Net Income $143.6 Common Share Statistics Basic EPS $0.70 Diluted EPS $0.66 Dividends Per Share $0.03 Book Value Per Share (period end) $11.81 Stock Price Per Share (period end) $55.50 Total Market Capitalization (period end) $11,509.1 Shares Outstanding (period end) 207.4 Shares Used to Compute Basic EPS 204.8 Shares Used to Compute Diluted EPS 217.8 Managed Loan Statistics (period avg.) Average Loans $30,505 Average Earning Assets $32,983 Average Assets $35,303 Average Equity $2,347 Net Interest Margin 9.21% Risk Adjusted Margin(1) 14.80% Return on Average Assets (ROA) 1.63% Return on Average Equity (ROE) 24.47% Net Charge-Off Rate 3.75% Net Charge-Offs $285.9 Cost Per Account (in dollars) $78.26 Managed Loan Statistics (period end) Reported Loans $15,572 Securitized Loans 15,979 Total Loans $31,551 Delinquency Rate (30+ days) 4.72% Number of Accounts (000's) 36,462 Total Assets $36,749 Capital, Including Preferred Interests $2,547.7 Capital to Managed Assets Ratio 6.93% (1) Risk adjusted margin is total revenue less net charge-offs as a percentage of average earning assets. (2) Includes one-time charges of $38.8 million. CAPITAL ONE FINANCIAL CORPORATION Consolidated Balance Sheets (in thousands)(unaudited) March 31 2002 Assets: Cash and due from banks $350,738 Federal funds sold and resale agreements 13,260 Interest-bearing deposits at other banks 105,063 Cash and cash equivalents 469,061 Securities available for sale 3,175,366 Consumer loans 24,427,642 Less: Allowance for loan losses (990,000) Net loans 23,437,642 Accounts receivable from securitizations 2,218,472 Premises and equipment, net 789,572 Interest receivable 148,547 Other 1,026,051 Total assets $31,264,711 Liabilities: Interest-bearing deposits $14,633,871 Senior notes 5,422,896 Other borrowings 4,879,427 Interest payable 173,659 Other 2,475,226 Total liabilities 27,585,079 Stockholders' Equity: Common stock 2,214 Paid-in capital, net 1,532,034 Retained earnings and cumulative other comprehensive income 2,180,336 Less: Treasury stock, at cost (34,952) Total stockholders' equity 3,679,632 Total liabilities and stockholders' equity $31,264,711 CAPITAL ONE FINANCIAL CORPORATION Consolidated Balance Sheets (in thousands)(unaudited) December 31 2001 Assets: Cash and due from banks $355,680 Federal funds sold and resale agreements 19,802 Interest-bearing deposits at other banks 331,756 Cash and cash equivalents 707,238 Securities available for sale 3,115,891 Consumer loans 20,921,014 Less: Allowance for loan losses (840,000) Net loans 20,081,014 Accounts receivable from securitizations 2,452,548 Premises and equipment, net 759,683 Interest receivable 105,459 Other 962,214 Total assets $28,184,047 Liabilities: Interest-bearing deposits $12,838,968 Senior notes 5,335,229 Other borrowings 3,995,528 Interest payable 188,160 Other 2,502,684 Total liabilities 24,860,569 Stockholders' Equity: Common stock 2,177 Paid-in capital, net 1,350,108 Retained earnings and cumulative other comprehensive income 2,006,163 Less: Treasury stock, at cost (34,970) Total stockholders' equity 3,323,478 Total liabilities and stockholders' equity $28,184,047 CAPITAL ONE FINANCIAL CORPORATION Consolidated Balance Sheets (in thousands)(unaudited) March 31 2001 Assets: Cash and due from banks $49,842 Federal funds sold and resale agreements 247,676 Interest-bearing deposits at other banks 492,390 Cash and cash equivalents 789,908 Securities available for sale 2,112,180 Consumer loans 15,571,754 Less: Allowance for loan losses (597,000) Net loans 14,974,754 Accounts receivable from securitizations 1,492,818 Premises and equipment, net 709,207 Interest receivable 108,944 Other 614,194 Total assets $20,802,005 Liabilities: Interest-bearing deposits $9,390,524 Senior notes 5,040,761 Other borrowings 1,845,509 Interest payable 135,863 Other 1,940,103 Total liabilities 18,352,760 Stockholders' Equity: Common stock 2,086 Paid-in capital, net 974,503 Retained earnings and cumulative other comprehensive income 1,519,855 Less: Treasury stock, at cost (47,199) Total stockholders' equity 2,449,245 Total liabilities and stockholders' equity $20,802,005 CAPITAL ONE FINANCIAL CORPORATION Consolidated Statements of Income (in thousands, except per share data)(unaudited) Three Months Ended March 31 December 31 2002 2001 Interest Income: Consumer loans, including fees $836,955 $736,677 Securities available for sale 42,344 38,980 Other 27,931 28,961 Total interest income 907,230 804,618 Interest Expense: Deposits 178,163 176,619 Other borrowings 51,056 42,084 Senior notes 93,904 96,135 Total interest expense 323,123 314,838 Net interest income 584,107 489,780 Provision for loan losses 347,212 305,889 Net interest income after provision for loan losses 236,895 183,891 Non-Interest Income: Servicing and securitizations 626,147 635,848 Service charges and other customer-related fees 502,007 426,832 Interchange 98,096 114,571 Total non-interest income 1,226,250 1,177,251 Non-Interest Expense: Salaries and associate benefits 380,735 374,793 Marketing 353,536 301,160 Communications and data processing 92,193 86,810 Supplies and equipment 84,507 84,430 Occupancy 33,381 42,172 Other 215,543 185,202 Total non-interest expense 1,159,895 1,074,567 Income before income taxes 303,250 286,575 Income taxes 115,235 108,894 Net Income $188,015 $177,681 Basic earnings per share $0.86 $0.83 Diluted earnings per share $0.83 $0.80 Dividends paid per share $0.03 $0.03 CAPITAL ONE FINANCIAL CORPORATION Consolidated Statements of Income (in thousands, except per share data)(unaudited) Three Months Ended March 31 2001 Interest Income: Consumer loans, including fees $617,889 Securities available for sale 28,234 Other 3,750 Total interest income 649,873 Interest Expense: Deposits 146,961 Other borrowings 43,900 Senior notes 83,293 Total interest expense 274,154 Net interest income 375,719 Provision for loan losses 250,614 Net interest income after provision for loan losses 125,105 Non-Interest Income: Servicing and securitizations 553,537 Service charges and other customer-related fees 396,388 Interchange 74,851 Total non-interest income 1,024,776 Non-Interest Expense: Salaries and associate benefits 325,716 Marketing 231,200 Communications and data processing 75,292 Supplies and equipment 73,603 Occupancy 31,302 Other 181,134 Total non-interest expense 918,247 Income before income taxes 231,634 Income taxes 88,021 Net income $143,613 Basic earnings per share $0.70 Diluted earnings per share $0.66 Dividends paid per share $0.03 CAPITAL ONE FINANCIAL CORPORATION Statements of Average Balances, Income and Expense, Yields and Rates (dollars in thousands)(unaudited) Managed (1) Quarter Ended 3/31/02 Average Income/ Yield/ Balance Expense Rate Earning assets: Consumer loans $46,687,578 $1,672,655 14.33% Securities available for sale 3,367,786 42,344 5.03 Other 482,290 2,358 1.96 Total earning assets $50,537,654 $1,717,357 13.59 Interest-bearing liabilities: Deposits $13,505,586 $178,163 5.28% Other borrowings 4,925,669 51,056 4.15 Senior notes 5,429,992 93,904 6.92 Securitization liability 24,262,546 273,366 4.51 Total interest-bearing liabilities $48,123,793 $596,489 4.96% Net interest spread 8.63% Interest income to average earning assets 13.59% Interest expense to average earning assets 4.72 Net interest margin 8.87% (1) The information in this table reflects the adjustment to add back the effect of securitized loans. CAPITAL ONE FINANCIAL CORPORATION Statements of Average Balances, Income and Expense, Yields and Rates (dollars in thousands)(unaudited) Managed (1) Quarter Ended 12/31/01 Average Income/ Yield/ Balance Expense Rate Earning assets: Consumer loans $41,352,084 $1,532,978 14.83% Securities available for sale 3,187,417 38,980 4.89 Other 755,573 4,620 2.45 Total earning assets $45,295,074 $1,576,578 13.92% Interest-bearing liabilities: Deposits $12,237,144 $176,619 5.77% Other borrowings 3,495,732 42,084 4.82 Senior notes 5,388,881 96,135 7.14 Securitization liability 21,926,552 278,797 5.09 Total interest-bearing liabilities $43,048,309 $593,635 5.52% Net interest spread 8.40% Interest income to average earning assets 13.92% Interest expense to average earning assets 5.24 Net interest margin 8.68% (1) The information in this table reflects the adjustment to add back the effect of securitized loans. CAPITAL ONE FINANCIAL CORPORATION Statements of Average Balances, Income and Expense, Yields and Rates (dollars in thousands)(unaudited) Managed (1) Quarter Ended 3/31/01 Average Income/ Yield/ Balance Expense Rate Earning assets: Consumer loans $30,505,450 $1,235,002 16.19% Securities available for sale 1,913,357 28,234 5.90 Other 564,592 3,750 2.66 Total earning assets $32,983,399 $1,266,986 15.37% Interest-bearing liabilities: Deposits $8,996,414 $146,961 6.53% Other borrowings 2,442,200 43,900 7.19 Senior notes 4,678,452 83,293 7.12 Securitization liability 14,948,262 233,524 6.25 Total interest-bearing liabilities $31,065,328 $507,678 6.54% Net interest spread 8.83% Interest income to average earning assets 15.37% Interest expense to average earning assets 6.16 Net interest margin 9.21% (1) The information in this table reflects the adjustment to add back the effect of securitized loans. 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