Thursday, April 18, 2013

Capital One Financial Corp (COF) Q1 2013 Earnings

Capital One Financial Corp. (COF) reported Q1 2013 earnings after the market closed on April 18, 2013. Earnings per share were $1.79 beating analysts’ estimate of $1.60 per share and up 27% when compared to the Q4 2012 EPS of $1.41.

Net income increased to $1.1 billion from $843 million in the previous quarter and total revenue dropped 1% to $5.55 billion from $5.62 billion during the same time period. The main drivers of net income growth were primarily lower non-interest expenses and a reduction in credit expenses, which lead to lending margins improving modestly. Net interest margins improved 19 basis points to 6.71% from 6.52 the previous quarter. Each business segment delivered solid results, except for a decrease in revenue in the international card business and the balance sheet remained in a strong position with the tier 1 common capital ratio increasing to 11.8% as of March 31st 2013, up from 11.0% on December 31st, 2012. Provision for credit losses was $885 million for the quarter, which represents a decrease of $266 million that was driven by a $261 million release in allowance. Better than expected credit performance occurred in the quarter. The net charge off rate was 2.20% in Q1 2013, which is a decline of 6 basis points when compared to Q4 2012 of 2.26%.

A dividend increase to 30 cents a share from 5 cents a share was announced and due to strong capital generation management expects to begin a share repurchase program as early as Q4 2013. An agreement to sell the Best Buy private label portfolio was also announced and it expected to close in Q3 2013 for about $7 billion.

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