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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