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Capital One Reports Second Quarter 2020 Net Loss of $918 million, or $2.21 per share

July 21, 2020 at 4:05 PM EDT
Excluding adjusting items, Second Quarter 2020 Net Loss of $1.61 per share(1)

MCLEAN, Va., July 21, 2020 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced net loss for the second quarter of 2020 of $918 million, or $2.21 per diluted common share, compared with net loss of $1.3 billion, or $3.10 per diluted common share in the first quarter of 2020, and with net income of $1.6 billion, or $3.24 per diluted common share in the second quarter of 2019. Excluding adjusting items, net loss for the second quarter of 2020 was $1.61 per diluted common share(1).

"Our investments to transform our technology and how we work, and our efforts to drive the company to digital are powering our response to the pandemic," said Richard D. Fairbank, Founder, Chairman and Chief Executive Officer. "We remain well positioned to weather the downturn, emerge with strength, and deliver shareholder value over the long-term."

Adjusting items in the second quarter of 2020, 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

Legal reserve builds

$

265


$

0.58


Cybersecurity Incident expenses, net of insurance

11


0.02


All comparisons below are for the second quarter of 2020 compared with the first quarter of 2020 unless otherwise noted.

Second Quarter 2020 Income Statement Summary:

  • Total net revenue decreased 10 percent to $6.6 billion.
  • Total non-interest expense increased 1 percent to $3.8 billion:
    • 44 percent decrease in marketing.
    • 8 percent increase in operating expenses.
  • Pre-provision earnings decreased 21 percent to $2.8 billion(2).
  • Provision for credit losses decreased 22 percent to $4.2 billion:
    • Net charge-offs of $1.5 billion.
    • $2.7 billion reserve build.
  • Net interest margin of 5.78 percent, decreased 100 basis points.
  • Efficiency ratio of 57.50 percent.
    • Efficiency ratio excluding adjusting items of 53.29 percent(1).
  • Operating efficiency ratio of 53.34 percent.
    • Operating efficiency ratio excluding adjusting items of 49.13 percent(1).

Second Quarter 2020 Balance Sheet Summary:

  • Common equity Tier 1 capital ratio under Basel III Standardized Approach of 12.4 percent at June 30, 2020.
  • Period-end loans held for investment in the quarter decreased $11.5 billion, or 4 percent, to $251.5 billion.
    • Credit Card period-end loans decreased $10.5 billion, or 9 percent, to $107.3 billion.
      • Domestic Card period-end loans decreased $10.2 billion, or 9 percent, to $99.4 billion.
    • Consumer Banking period-end loans increased $2.7 billion, or 4 percent, to $66.7 billion
      • Auto period-end loans increased $2.0 billion, or 3 percent, to $63.3 billion.
    • Commercial Banking period-end loans decreased $3.7 billion, or 5 percent, to $77.5 billion.
  • Average loans held for investment in the quarter decreased $9.5 billion, or 4 percent, to $253.4 billion.
    • Credit Card average loans decreased $14.0 billion, or 11 percent, to $108.7 billion
      • Domestic Card average loans decreased $12.7 billion, or 11 percent, to $101.0 billion.
    • Consumer Banking average loans increased $1.2 billion, or 2 percent, to $64.9 billion.
      • Auto average loans increased $793 million, or 1 percent, to $61.8 billion.
    • Commercial Banking average loans increased $3.3 billion, or 4 percent, to $79.8 billion.
  • Period-end total deposits increased $34.5 billion, or 13 percent, to $304.2 billion, while average deposits increased $23.7 billion, or 9 percent, to $288.3 billion.
  • Interest-bearing deposits rate paid decreased 27 basis points to 0.94 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 July 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 August 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, 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 $304.2 billion in deposits and $421.3 billion in total assets as of  June 30, 2020. 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)

Second Quarter 2020

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 Credit Losses and Reserve for Unfunded Lending Commitments Activity

12

Business Segment Results



Table 9:

Financial Summary—Business Segment Results

14


Table 10:

Financial & Statistical Summary—Credit Card Business

15


Table 11:

Financial & Statistical Summary—Consumer Banking Business

17


Table 12:

Financial & Statistical Summary—Commercial Banking Business

18


Table 13:

Financial & Statistical Summary—Other and Total

19

Other



Table 14:

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

20


Table 15:

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

21

__________



(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 June 30, 2020 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














2020 Q2 vs.


Six Months Ended June 30,

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


2020


2020


2019


2019


2019


2020


2019






2020 vs.


Q2


Q1


Q4


Q3


Q2


Q1


Q2


2020


2019


2019

Income Statement





















Net interest income


$

5,460



$

6,025



$

6,066



$

5,737



$

5,746



(9)

%


(5)

%


$

11,485



$

11,537




Non-interest income


1,096



1,224



1,361



1,222



1,378



(10)



(20)



2,320



2,670



(13)

%

Total net revenue(1)


6,556



7,249



7,427



6,959



7,124



(10)



(8)



13,805



14,207



(3)


Provision for credit losses


4,246



5,423



1,818



1,383



1,342



(22)



**



9,669



3,035



**


Non-interest expense:





















Marketing


273



491



710



501



546



(44)



(50)



764



1,063



(28)


Operating expense


3,497



3,238



3,451



3,371



3,233



8



8



6,735



6,387



5


Total non-interest expense


3,770



3,729



4,161



3,872



3,779



1





7,499



7,450



1


Income (loss) from continuing operations before income taxes


(1,460)



(1,903)



1,448



1,704



2,003



(23)



**



(3,363)



3,722



**


Income tax provision (benefit)


(543)



(563)



270



375



387



(4)



**



(1,106)



696



**


Income (loss) from continuing operations, net of tax


(917)



(1,340)



1,178



1,329



1,616



(32)



**



(2,257)



3,026



**


Income (loss) from discontinued operations, net of tax


(1)





(2)



4



9



**



**



(1)



11



**


Net income (loss)


(918)



(1,340)



1,176



1,333



1,625



(31)



**



(2,258)



3,037



**


Dividends and undistributed earnings allocated to participating securities(2)


(1)



(3)



(7)



(10)



(12)



(67)



(92)



(4)



(24)



(83)


Preferred stock dividends


(90)



(55)



(97)



(53)



(80)



64



13



(145)



(132)



10


Issuance cost for redeemed preferred stock(3)




(22)



(31)







**





(22)





**


Net income (loss) available to common stockholders


$

(1,009)



$

(1,420)



$

1,041



$

1,270



$

1,533



(29)



**



$

(2,429)



$

2,881



**


Common Share Statistics





















Basic earnings per common share:(2)





















Net income (loss) from continuing operations


$

(2.21)



$

(3.10)



$

2.26



$

2.70



$

3.24



(29)

%


**



$

(5.31)



$

6.11



**


Income from discontinued operations








0.01



0.02





**





0.02



**


Net income (loss) per basic common share


$

(2.21)



$

(3.10)



$

2.26



$

2.71



$

3.26



(29)



**



$

(5.31)



$

6.13



**


Diluted earnings per common share:(2)





















Net income (loss) from continuing operations


$

(2.21)



$

(3.10)



$

2.25



$

2.68



$

3.22



(29)



**



$

(5.31)



$

6.08



**


Income from discontinued operations








0.01



0.02





**





0.02



**


Net income (loss) per diluted common share


$

(2.21)



$

(3.10)



$

2.25



$

2.69



$

3.24



(29)



**



$

(5.31)



$

6.10



**


Weighted-average common shares outstanding (in millions):





















Basic


456.7



457.6



460.9



469.5



470.8





(3)

%


457.1



470.1



(3)

%

Diluted


456.7



457.6



463.4



471.8



473.0





(3)



457.1



472.3



(3)


Common shares outstanding (period-end, in millions)


456.3



455.3



456.6



465.7



470.3





(3)



456.3



470.3



(3)


Dividends declared and paid per common share


$

0.40



$

0.40



$

0.40



$

0.40



$

0.40







$

0.80



$

0.80




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


78.82



80.68



83.72



80.46



77.65



(2)



2



78.82



77.65



2












































































2020 Q2 vs.


Six Months Ended June 30,

(Dollars in millions)


2020


2020


2019


2019


2019


2020


2019






2020 vs.


Q2


Q1


Q4


Q3


Q2


Q1


Q2


2020


2019


2019

Balance Sheet (Period-End)





















Loans held for investment


$

251,512



$

262,990



$

265,809



$

249,355



$

244,460



(4)

%


3

%


$

251,512



$

244,460



3

%

Interest-earning assets


389,829



364,472



355,202



344,643



339,160



7



15



389,829



339,160



15


Total assets


421,296



396,878



390,365



378,810



373,619



6



13



421,296



373,619



13


Interest-bearing deposits


275,183



245,142



239,209



234,084



231,161



12



19



275,183



231,161



19


Total deposits


304,238



269,689



262,697



257,148



254,535



13



20



304,238



254,535



20


Borrowings


44,900



55,681



55,697



50,149



49,233



(19)



(9)



44,900



49,233



(9)


Common equity


50,835



51,620



53,157



52,412



51,406



(2)



(1)



50,835



51,406



(1)


Total stockholders' equity


56,045



56,830



58,011



58,235



55,767



(1)





56,045



55,767




Balance Sheet (Average Balances)





















Loans held for investment


$

253,358



$

262,889



$

258,870



$

246,147



$

242,653



(4)

%


4

%


$

258,124



$

242,307



7

%

Interest-earning assets


378,145



355,347



349,150



340,949



338,026



6



12



366,746



337,913



9


Total assets


411,075



390,380



383,162



374,905



371,095



5



11



400,845



370,746



8


Interest-bearing deposits


261,256



241,115



236,250



232,063



230,452



8



13



251,185



229,020



10


Total deposits


288,344



264,653



260,040



255,082



253,634



9



14



276,498



252,528



9


Borrowings


49,827



51,795



51,442



49,413



49,982



(4)





50,810



51,510



(1)


Common equity


52,413



53,186



52,641



52,566



50,209



(1)



4



52,799



49,289



7


Total stockholders' equity


57,623



58,568



58,148



57,245



54,570



(2)



6



58,096



53,650



8


               

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 2: Selected Metrics—Consolidated














2020 Q2 vs.


Six Months Ended June 30,

(Dollars in millions, except as noted)


2020


2020


2019


2019


2019


2020


2019






2020 vs.


Q2


Q1


Q4


Q3


Q2


Q1


Q2


2020


2019


2019

Performance Metrics





















Net interest income growth (period over period)


(9)

%


(1)

%


6

%




(1)

%


**



**





2

%


**


Non-interest income growth (period over period)


(10)



(10)



11



(11)

%


7



**



**



(13)

%


(6)



**


Total net revenue growth (period over period)


(10)



(2)



7



(2)



1



**



**



(3)



1



**


Total net revenue margin(5)


6.93



8.16



8.51



8.16



8.43



(123)

bps


(150)

bps


7.53



8.41



(88)

bps

Net interest margin(6)


5.78



6.78



6.95



6.73



6.80



(100)



(102)



6.26



6.83



(57)


Return on average assets


(0.89)



(1.37)



1.23



1.42



1.74



48



**



(1.13)



1.63



**


Return on average tangible assets(7)


(0.93)



(1.43)



1.28



1.48



1.82



50



**



(1.17)



1.70



**


Return on average common equity(8)


(7.69)



(10.68)



7.93



9.63



12.14



299



**



(9.20)



11.65



**


Return on average tangible common equity(9)


(10.74)



(14.85)



11.07



13.45



17.26



4

%


**



(12.81)



16.70



**


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


5.95



5.67



6.43



6.29



6.23



28

bps


(28)



5.81



6.15



(34)


Efficiency ratio(10)


57.50



51.44



56.03



55.64



53.05



6

%


4

%


54.32



52.44



2

%

Operating efficiency ratio(11)


53.34



44.67



46.47



48.44



45.38



9



8



48.79



44.96



4


Effective income tax rate for continuing operations


37.2



29.6



18.6



22.0



19.3



8



18



32.9



18.7



14


Employees (period-end, in thousands)


53.1



52.1



51.9



52.1



50.7



2



5



53.1



50.7



5


Credit Quality Metrics





















Allowance for credit losses


$

16,832



$

14,073



$

7,208



$

7,037



$

7,133



20

%


136

%


$

16,832



$

7,133



136

%

Allowance coverage ratio


6.69

%


5.35

%


2.71

%


2.82

%


2.92

%


134

bps


377

bps


6.69

%


2.92

%


377

bps

Net charge-offs


$

1,505



$

1,791



$

1,683



$

1,462



$

1,508



(16)

%




$

3,296



$

3,107



6

%

Net charge-off rate(12)


2.38

%


2.72

%


2.60

%


2.38

%


2.48

%


(34)

bps


(10)

bps


2.55

%


2.56

%


(1)

bps

30+ day performing delinquency rate(13)


2.09



2.95



3.51



3.28



3.15



(86)



(106)



2.09



3.15



(106)


30+ day delinquency rate(13)


2.30



3.16



3.74



3.51



3.35



(86)



(105)



2.30



3.35



(105)


Capital Ratios(14)





















Common equity Tier 1 capital


12.4

%


12.0

%


12.2

%


12.5

%


12.3

%


40

bps


10

bps


12.4

%


12.3

%


10

bps

Tier 1 capital


14.2



13.7



13.7



14.4



13.8



50



40



14.2



13.8



40


Total capital


16.7



16.1



16.1



16.8



16.2



60



50



16.7



16.2



50


Tier 1 leverage


10.3



11.0



11.7



11.9



11.4



(70)



(110)



10.3



11.4



(110)


Tangible common equity ("TCE")(15)


8.8



9.6



10.2



10.3



10.2



(80)



(140)



8.8



10.2



(140)



 

 

CAPITAL ONE FINANCIAL CORPORATION (COF)

Table 3: Consolidated Statements of Income














2020 Q2 vs.


Six Months Ended June 30,



2020


2020


2019


2019


2019


2020


2019






2020 vs.

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


Q2


Q1


Q4


Q3


Q2


Q1


Q2


2020


2019


2019

Interest income:





















Loans, including loans held for sale


$

5,820



$

6,542



$

6,682



$

6,429



$

6,383



(11)

%


(9)

%


$

12,362



$

12,751



(3)

%

Investment securities


482



530



544



583



629



(9)



(23)



1,012



1,284



(21)


Other


16



37



44



63



64



(57)



(75)



53



133



(60)


Total interest income


6,318



7,109



7,270



7,075



7,076



(11)



(11)



13,427



14,168



(5)


Interest expense:





















Deposits


611



731



832



901



870



(16)



(30)



1,342



1,687



(20)


Securitized debt obligations


56



99



118



123



139



(43)



(60)



155



282



(45)


Senior and subordinated notes


180



239



236



299



310



(25)



(42)



419



624



(33)


Other borrowings


11



15



18



15



11



(27)





26



38



(32)


Total interest expense


858



1,084



1,204



1,338



1,330



(21)



(35)



1,942



2,631



(26)


Net interest income


5,460



6,025



6,066



5,737



5,746



(9)



(5)



11,485



11,537




Provision for credit losses


4,246



5,423



1,818



1,383



1,342



(22)



**



9,669



3,035



**


Net interest income after provision for credit losses


1,214



602



4,248



4,354



4,404



102



(72)



1,816



8,502



(79)


Non-interest income:





















Interchange fees, net


672



752



811



790



820



(11)



(18)



1,424



1,578



(10)


Service charges and other customer-related fees


258



327



342



283



352



(21)



(27)



585



705



(17)


Net securities gains (losses)






(18)



5



15





**





39



**


Other


166



145



226



144



191



14



(13)



311



348



(11)


Total non-interest income


1,096



1,224



1,361



1,222



1,378



(10)



(20)



2,320



2,670



(13)


Non-interest expense:





















Salaries and associate benefits


1,704



1,627



1,652



1,605



1,558



5



9



3,331



3,131



6


Occupancy and equipment


523



517



565



519



521



1





1,040



1,014



3


Marketing


273



491



710



501



546



(44)



(50)



764



1,063



(28)


Professional services


304



287



318



314



314



6



(3)



591



605



(2)


Communications and data processing


308



302



346



312



329



2



(6)



610



632



(3)


Amortization of intangibles


16



22



28



25



29



(27)



(45)



38



59



(36)


Other(16)


642



483



542



596



482



33



33



1,125



946



19


Total non-interest expense


3,770



3,729



4,161



3,872



3,779



1





7,499



7,450



1


Income (loss) from continuing operations before income taxes


(1,460)



(1,903)



1,448



1,704



2,003



(23)



**



(3,363)



3,722



**


Income tax provision (benefit)


(543)



(563)



270



375



387



(4)



**



(1,106)



696



**


Income (loss) from continuing operations, net of tax


(917)



(1,340)



1,178



1,329



1,616



(32)



**



(2,257)



3,026



**


Income (loss) from discontinued operations, net of tax