Capital One Reports Fourth Quarter 2016 Net Income of $791 million, or $1.45 per share

MCLEAN, Va., Jan. 24, 2017 /PRNewswire/ --  Capital One Financial Corporation (NYSE: COF) today announced net income for the fourth quarter of 2016 of $791 million, or $1.45 per diluted common share, compared to the third quarter of 2016 with net income of $1.0 billion, or $1.90 per diluted common share, and the fourth quarter of 2015 with net income of $920 million, or $1.58 per diluted common share.

"In 2016, Capital One posted a second consecutive year of double-digit growth in domestic card loans and purchase volume, as well as strong growth in auto and commercial loans," said Richard D. Fairbank, Chairman and Chief Executive Officer. "Assuming no substantial change in the broader credit and economic cycles, our strong growth over the last two years and actions to reduce share count put us in a position to deliver solid EPS growth in 2017."

All comparisons below are for the fourth quarter of 2016 compared with the third quarter of 2016 unless otherwise noted.

Fourth Quarter 2016 Income Statement Summary:

  • Total net revenue increased 2 percent to $6.6 billion.
  • Total non-interest expense increased 9 percent to $3.7 billion:
    • 46 percent increase in marketing.
    • 4 percent increase in operating expenses.
  • Pre-provision earnings decreased 7 percent to $2.9 billion.
  • Provision for credit losses increased 10 percent to $1.8 billion:
    • Net charge-offs of $1.5 billion.
    • $263 million reserve build.
  • Net interest margin of 6.85 percent, up 6 basis points.
  • Efficiency ratio of 56.03 percent:
    • Efficiency ratio excluding the U.K. PPI Reserve build of $44 million and acquired intangible and software assets impairment charge of $28 million was 55.12 percent(1).

Fourth Quarter 2016 Balance Sheet Summary:

  • Common equity Tier 1 capital ratio under Basel III Standardized Approach of 10.1 percent at December 31, 2016.
  • Period-end loans held for investment in the quarter increased $7.6 billion, or 3 percent, to $245.6 billion.
    • Domestic Card period-end loans increased $6.2 billion, or 7 percent, to $97.1 billion.
    • Consumer Banking period-end loans increased $769 million, or 1 percent, to $73.1 billion:
      • Auto period-end loans increased $1.6 billion, or 3 percent, to $47.9 billion.
      • Home loans period-end loans decreased $864 million, or 4 percent, to $21.6 billion, driven by planned run-off of acquired portfolios.
    • Commercial Banking period-end loans increased $459 million, or 1 percent, to $66.9 billion.
  • Average loans held for investment in the quarter increased $4.2 billion, or 2 percent, to $240.0 billion.
    • Domestic Card average loans increased $2.9 billion, or 3 percent, to $92.6 billion.
    • Consumer Banking average loans increased $932 million, or 1 percent, to $72.7 billion:
      • Auto average loans increased $1.8 billion, or 4 percent, to $47.1 billion.
      • Home loans average loans decreased $868 million, or 4 percent, to $22.0 billion, driven by planned run-off of acquired portfolios.
    • Commercial Banking average loans increased $481 million, or 1 percent, to $66.5 billion.
  • Period-end total deposits increased $10.8 billion, or 5 percent, to $236.8 billion, while average deposits increased $10.0 billion, or 4 percent, to $232.2 billion.
  • Interest-bearing deposits rate paid increased 2 basis points to 0.64 percent.

Fourth Quarter 2016 Notable Items:










Pre-Tax

Diluted EPS

(Dollars in millions, except per share data)

Impact

Impact

Build in the U.K. Payment Protection Insurance customer refund reserve ("U.K. PPI Reserve")

$

44


$

0.09


Impairment charge associated with certain acquired intangible and software assets

28


0.04


Allowance build in our Auto business regarding the treatment of certain bankrupt accounts

62


0.08


All comparisons below are for the full year of 2016 compared with the full year of 2015 unless otherwise noted.

2016 Full Year Income Statement Summary:

  • Total net revenue increased 9 percent to $25.5 billion.
  • Total non-interest expense increased 4 percent to $13.6 billion:
    • 4 percent increase in marketing.              
    • 5 percent increase in operating expenses, including approximately $160 million in bank optimization charges.
  • Pre-provision earnings increased 15 percent to $11.9 billion.
  • Provision for credit losses increased 42 percent to $6.5 billion.
  • Efficiency ratio of 53.17 percent:
  • Efficiency ratio excluding $161 million from builds in the U.K. PPI Reserve, the $28 million impairment charge associated with certain acquired intangible and software assets and the $24 million gain related to the exchange of our ownership interest in Visa Europe with Visa Inc., was 52.68 percent(1).

(1) The efficiency ratio excluding adjusting items is a non-GAAP measure that we believe helps investors and users of our financial information understand the effect of the adjusting items on our selected reported results and provides an alternate measurement of our performance. See Table 15 in Exhibit 99.2 for a reconciliation of our selected reported results to this non-GAAP measure. 

Earnings Conference Call Webcast Information

The company will hold an earnings conference call on January 24, 2017 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). Choose "About Us," then 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 7, 2017 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, 2015.

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 $236.8 billion in deposits and $357.0 billion in total assets as of December 31, 2016. 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

Fourth Quarter 2016(1)(2)

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

10


Table 7:

Loan Information and Performance Statistics

11


Table 8:

Allowance for Loan and Lease Losses and Reserve for Unfunded Lending Commitments Activity

13

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


Table 14:

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

20

Other



Table 15:

Reconciliation of Non-GAAP Measures and Calculation of Regulatory Capital 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 Annual Report on Form 10-K for the period ended December 31, 2016 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 accounting principles generally accepted 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






































2016 Q4 vs


Year Ended December 31,

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


2016


2016


2016


2016


2015


2016


2015






2016 vs


Q4


Q3


Q2


Q1


Q4


Q3


Q4


2016


2015


2015

Income Statement





















Net interest income


$

5,447



$

5,277



$

5,093



$

5,056



$

4,961



3

%


10

%


$

20,873



$

18,834



11

%

Non-interest income


1,119



1,184



1,161



1,164



1,233



(5)



(9)



4,628



4,579



1


Total net revenue(1)


6,566



6,461



6,254



6,220



6,194



2



6



25,501



23,413



9


Provision for credit losses


1,752



1,588



1,592



1,527



1,380



10



27



6,459



4,536



42


Non-interest expense:





















Marketing


575



393



415



428



564



46



2



1,811



1,744



4


Amortization of intangibles


101



89



95



101



103



13



(2)



386



430



(10)


Operating expenses


3,003



2,879



2,785



2,694



2,813



4



7



11,361



10,822



5


Total non-interest expense


3,679



3,361



3,295



3,223



3,480



9



6



13,558



12,996



4


Income from continuing operations before income taxes


1,135



1,512



1,367



1,470



1,334



(25)



(15)



5,484



5,881



(7)


Income tax provision


342



496



424



452



426



(31)



(20)



1,714



1,869



(8)


Income from continuing operations, net of tax


793



1,016



943



1,018



908



(22)



(13)



3,770



4,012



(6)


Income (loss) from discontinued operations, net of tax(2)


(2)



(11)



(1)



(5)



12



(82)



**


(19)



38



**

Net income


791



1,005



942



1,013



920



(21)



(14)



3,751



4,050



(7)


Dividends and undistributed earnings allocated to participating securities(3)


(6)



(6)



(6)



(6)



(4)





50



(24)



(20)



20


Preferred stock dividends


(75)



(37)



(65)



(37)



(68)



103



10



(214)



(158)



35


Net income available to common stockholders


$

710



$

962



$

871



$

970



$

848



(26)



(16)



$

3,513



$

3,872



(9)


Common Share Statistics





















Basic earnings per common share:(3)





















Net income from continuing operations


$

1.47



$

1.94



$

1.70



$

1.86



$

1.58



(24)

%


(7)

%


$

7.00



$

7.08



(1)

%

Income (loss) from discontinued operations




(0.02)





(0.01)



0.02



**


**


(0.04)



0.07



**

Net income per basic common share


$

1.47



$

1.92



$

1.70



$

1.85



$

1.60



(23)



(8)



$

6.96



$

7.15



(3)


Diluted earnings per common share:(3)





















Net income from continuing operations


$

1.45



$

1.92



$

1.69



$

1.85



$

1.56



(24)



(7)



$

6.93



$

7.00



(1)


Income (loss) from discontinued operations




(0.02)





(0.01)



0.02



**


**


(0.04)



0.07



**

Net income per diluted common share


$

1.45



$

1.90



$

1.69



$

1.84



$

1.58



(24)



(8)



$

6.89



$

7.07



(3)


Weighted-average common shares outstanding (in millions):





















Basic


483.5



501.1



511.7



523.5



530.8



(4)



(9)



504.9



541.8



(7)


Diluted


489.2



505.9



516.5



528.0



536.3



(3)



(9)



509.8



548.0



(7)


Common shares outstanding (period-end, in millions)


480.2



489.2



505.9



514.5



527.3



(2)



(9)



480.2



527.3



(9)


Dividends paid per common share


$

0.40



$

0.40



$

0.40



$

0.40



$

0.40







$

1.60



$

1.50



7


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


57.76



59.00



57.84



55.94



53.65



(2)



8



57.76



53.65



8





























2016 Q4 vs


Year Ended December 31,

(Dollars in millions)


2016


2016


2016


2016


2015


2016


2015






2016 vs


Q4


Q3


Q2


Q1


Q4


Q3


Q4


2016


2015


2015

Balance Sheet (Period-End)





















Loans held for investment(5)


$

245,586



$

238,019



$

234,603



$

227,613



$

229,851



3

%


7

%


$

245,586



$

229,851



7

%

Interest-earning assets


321,807



313,431



307,163



298,348



302,007



3



7



321,807



302,007



7


Total assets


357,033



345,061



339,117



330,346



334,048



3



7



357,033



334,048



7


Interest-bearing deposits


211,266



200,416



195,635



196,597



191,874



5



10



211,266



191,874



10


Total deposits


236,768



225,981



221,059



221,779



217,721



5



9



236,768



217,721



9


Borrowings


60,460



59,820



59,181



50,497



59,115



1



2



60,460



59,115



2


Common equity


43,154



44,336



44,813



44,411



43,990



(3)



(2)



43,154



43,990



(2)


Total stockholders' equity


47,514



48,213



48,108



47,707



47,284



(1)





47,514



47,284




Balance Sheet (Average Balances)





















Loans held for investment(5)


$

240,027



$

235,843



$

230,379



$

226,736



$

220,052



2

%


9

%


$

233,272



$

210,745



11

%

Interest-earning assets


317,853



310,987



302,764



299,456



292,054



2



9



307,796



282,581



9


Total assets


350,225



343,153



334,479



331,919



323,354



2



8



339,974



313,474



8


Interest-bearing deposits


206,464



196,913



195,641



194,125



189,885



5



9



198,304



185,677



7


Total deposits


232,204



222,251



221,146



219,180



215,899



4



8



223,714



210,989



6


Borrowings


58,624



60,708



54,359



53,761



48,850



(3)



20



56,878



45,420



25


Common equity


43,921



45,314



45,640



45,782



45,418



(3)



(3)



45,162



45,072




Total stockholders' equity


47,972



49,033



48,934



49,078



48,712



(2)



(2)



48,753



47,713



2


 

               


CAPITAL ONE FINANCIAL CORPORATION (COF)













Table 2: Selected Metrics—Consolidated








































2016 Q4 vs


Year Ended December 31,

(Dollars in millions except as noted)


2016


2016


2016


2016


2015


2016


2015






2016 vs


Q4


Q3


Q2


Q1


Q4


Q3


Q4


2016


2015


2015

Performance Metrics





















Net interest income growth (period over period)


3

%


4

%


1

%


2

%


4

%


**


**


11

%


6

%


**

Non-interest income growth (period over period)


(5)



2





(6)



8



**


**


1



2



**

Total net revenue growth (period over period)


2



3



1





5



**


**


9



5



**

Total net revenue margin(6)


8.26



8.31



8.26



8.31



8.48



(5)

bps


(22)

bps


8.29



8.29




Net interest margin(7)


6.85



6.79



6.73



6.75



6.79



6



6



6.78



6.66



12

bps

Return on average assets


0.91



1.18



1.13



1.23



1.12



(27)



(21)



1.11



1.28



(17)


Return on average tangible assets(8)


0.95



1.24



1.18



1.29



1.18



(29)



(23)



1.16



1.35



(19)


Return on average common equity(9)


6.48



8.59



7.64



8.52



7.36



(211)



(88)



7.82



8.51



(69)


Return on average tangible common equity(10)


10.00



13.06



11.61



12.94



11.11



(306)



(111)



11.93



12.87



(94)


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


6.13



5.70



5.72



5.69



6.33



43



(20)



5.81



6.17



(36)


Efficiency ratio(11)


56.03



52.02



52.69



51.82



56.18



401



(15)



53.17



55.51



(234)


Effective income tax rate for continuing operations


30.1



32.8



31.0



30.7



31.9



(270)



(180)



31.3



31.8



(50)


Employees (in thousands), period-end


47.3



46.5



46.1



45.8



45.4



2

%


4

%


47.3



45.4



4

%

Credit Quality Metrics





















Allowance for loan and lease losses


$

6,503



$

6,258



$

5,881



$

5,416



$

5,130



4

%


27

%


$

6,503



$

5,130



27

%

Allowance as a percentage of loans held for investment


2.65

%


2.63

%


2.51

%


2.38

%


2.23

%


2

bps


42

bps


2.65

%


2.23

%


42

bps

Net charge-offs


$

1,489



$

1,240



$

1,155



$

1,178



$

1,078



20

%


38

%


$

5,062



$

3,695



37

%

Net charge-off rate(12)


2.48

%


2.10

%


2.01

%


2.08

%


1.96

%


38

bps


52

bps


2.17

%


1.75

%


42

bps

30+ day performing delinquency rate


2.93



2.71



2.47



2.33



2.69



22



24



2.93



2.69



24


30+ day delinquency rate


3.27



3.04



2.79



2.64



3.00



23



27



3.27



3.00



27


Capital Ratios(13)





















Common equity Tier 1 capital


10.1

%


10.6

%


10.9

%


11.1

%


11.1

%


(50)

bps


(100)

bps


10.1

%


11.1

%


(100)

bps

Tier 1 capital


11.6



12.0



12.2



12.4



12.4



(40)



(80)



11.6



12.4



(80)


Total capital


14.3



14.7



14.4



14.6



14.6



(40)



(30)



14.3



14.6



(30)


Tier 1 leverage


9.9



10.1



10.2



10.2



10.6



(20)



(70)



9.9



10.6



(70)


Tangible common equity ("TCE")(14)


8.1



8.8



9.0



9.1



8.9



(70)



(80)



8.1



8.9



(80)


 

 

 

CAPITAL ONE FINANCIAL CORPORATION (COF)







Table 3: Consolidated Statements of Income
















Three Months Ended


2016 Q4 vs


Year Ended December 31,



2016


2016


2015


2016


2015






2016 vs

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


Q4


Q3


Q4


Q3


Q4


2016


2015


2015

Interest income:

















Loans, including loans held for sale


$

5,587



$

5,383



$

4,961



4

%


13

%


$

21,203



$

18,785



13

%

Investment securities


393



386



401



2



(2)



1,599



1,575



2


Other


29



25



22



16



32



89



99



(10)


Total interest income


6,009



5,794



5,384



4



12



22,891



20,459



12


Interest expense:

















Deposits


332



306



277



8



20



1,213



1,091



11


Securitized debt obligations


65



56



43



16



51



216



151



43


Senior and subordinated notes


138



121



89



14



55



476



330



44


Other borrowings


27



34



14



(21)



93



113



53



113


Total interest expense


562



517



423



9



33



2,018



1,625



24


Net interest income


5,447



5,277



4,961



3



10



20,873



18,834



11


Provision for credit losses


1,752



1,588



1,380



10



27



6,459



4,536



42


Net interest income after provision for credit losses


3,695



3,689



3,581





3



14,414



14,298



1


Non-interest income:(15)(16)

















Service charges and other customer-related fees


412



417



463



(1)



(11)



1,646



1,856



(11)


Interchange fees, net


624



603



625



3





2,452



2,264



8


Net securities gains (losses)


(4)



1



(9)



**


(56)



(11)



(32)



(66)


Other


87



163



154



(47)



(44)



541



491



10


Total non-interest income


1,119



1,184



1,233



(5)



(9)



4,628



4,579



1


Non-interest expense:(15)(16)

















Salaries and associate benefits


1,336



1,317



1,215



1



10



5,202



4,975



5


Occupancy and equipment


522



499



511



5



2



1,944



1,829



6


Marketing


575



393



564



46



2



1,811



1,744



4


Professional services


312



257



307



21



2



1,075



1,120



(4)


Communications and data processing


297



291



289



2



3



1,169



1,055



11


Amortization of intangibles


101



89



103



13



(2)



386



430



(10)


Other


536



515



491



4



9



1,971



1,843



7


Total non-interest expense


3,679



3,361



3,480



9



6



13,558



12,996



4


Income from continuing operations before income taxes


1,135



1,512



1,334



(25)



(15)



5,484



5,881



(7)


Income tax provision


342



496



426



(31)



(20)



1,714



1,869



(8)


Income from continuing operations, net of tax


793



1,016



908



(22)



(13)



3,770



4,012



(6)


Income (loss) from discontinued operations, net of tax(2)


(2)



(11)



12



(82)



**


(19)



38



**

Net income


791



1,005



920



(21)



(14)



3,751



4,050



(7)


Dividends and undistributed earnings allocated to participating securities(3)


(6)



(6)



(4)





50



(24)



(20)



20


Preferred stock dividends


(75)



(37)



(68)



103



10



(214)



(158)



35


Net income available to common stockholders


$

710



$

962



$

848



(26)



(16)



$

3,513



$

3,872



(9)





















Three Months Ended


2016 Q4 vs


Year Ended December 31,



2016


2016


2015


2016


2015






2016 vs

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


Q4


Q3


Q4


Q3


Q4


2016


2015


2015

Basic earnings per common share:(3)

















Net income from continuing operations


$

1.47



$

1.94



$

1.58



(24)

%


(7)

%


$

7.00



$

7.08



(1)

%

Income (loss) from discontinued operations




(0.02)



0.02



**


**


(0.04)



0.07



**

Net income per basic common share


$

1.47



$

1.92



$

1.60



(23)



(8)



$

6.96



$

7.15



(3)


Diluted earnings per common share:(3)

















Net income from continuing operations


$

1.45



$

1.92



$

1.56



(24)



(7)



$

6.93



$

7.00



(1)


Income (loss) from discontinued operations




(0.02)



0.02



**


**


(0.04)



0.07



**

Net income per diluted common share


$

1.45



$

1.90



$

1.58



(24)



(8)



$

6.89



$

7.07



(3)


Weighted-average common shares outstanding (in millions):

















Basic common shares


483.5



501.1



530.8



(4)



(9)



504.9



541.8



(7)


Diluted common shares


489.2



505.9



536.3



(3)



(9)



509.8



548.0



(7)


Dividends paid per common share


$

0.40



$

0.40



$

0.40







$

1.60



$

1.50



7


 


 

 

CAPITAL ONE FINANCIAL CORPORATION (COF)










Table 4: Consolidated Balance Sheets




































2016 Q4 vs



2016


2016


2016


2016


2015


2016


2015

(Dollars in millions)


Q4


Q3


Q2


Q1


Q4


Q3


Q4

Assets:















Cash and cash equivalents:















Cash and due from banks