FALLS CHURCH, Va. (October 16, 1997) --- Capital One Financial Corporation
(NYSE: COF) today announced third quarter 1997 earnings of $49.3 million,
or $.72 per share, versus earnings of $39.4 million, or $.58 per share,
for the second quarter of 1997 and $38.8 million, or $.58 per share, for
the comparable period in the prior year.
Third quarter revenue, defined as managed net interest income and non-interest
income, rose to $549 million versus $401 million for the comparable period
in the prior year. Revenues increased significantly due to continuing growth
of higher-yielding products, introductory rate repricings and the incremental
impact of securitization accounting. During the third quarter, the Company
added 868,000 net new consumer accounts, bringing the total to 10.7 million,
or a 32 percent annualized growth. Managed consumer loans increased by $736
million to $13.5 billion in outstanding receivables.
"Our earnings power is driven by a continual innovation of customized
products using our information-based strategy," said Richard D. Fairbank,
Capital One's Chairman and Chief Executive Officer. "We're able to
target, test and launch new products tailored to specific market niches."
The managed net interest margin increased to 9.05 percent in the third
quarter of 1997 from 8.30 percent in the second quarter of 1997 and 8.35
percent in the comparable period of 1996. This increase principally reflects
growth in the Company's higher-yielding loans, the impact of repricing $700
million in introductory rate credit card loans during the quarter and scheduled
increases in fees.
The managed net charge-off rate increased to 6.66 percent in the third
quarter of 1997, compared with 6.38 percent in the previous quarter. This
increase reflects the continued aging of the portfolio and the effect of
increases in industry losses. Delinquency rates (over 30 days) increased
slightly to 6.36 percent as of September 30, 1997, compared with 6.33 percent
as of June 30, 1997.
Managed non-interest income increased to $219 million in the third quarter
of 1997, up significantly from the $133 million earned in the comparable
period of the prior year. This increase reflects recent market level changes
to credit card fees, the continued shift in product mix and a $16 million
incremental impact on securitization income resulting from SFAS 125.
Marketing investment increased to a record $61 million in the third quarter
of 1997 from $45 million in the second quarter and $60 million in the comparable
period of the prior year. Other non-interest expenses (excluding solicitation)
were $165 million in the third quarter of 1997 versus $157 million in the
second quarter and $137 million in the comparable period of the prior year.
On a per account basis other non-interest expenses continued to decline.
"We are continuing to leverage our infrastructure, while becoming
one of the nation's fastest-growing consumer-product companies," said
Nigel W. Morris, Capital One's President and Chief Operating Officer. "At
the same time as we are leading the industry in account growth, our margins
continue to expand."
The allowance for loan losses increased $28.5 million to $147 million,
or 3.40 percent of on-balance sheet receivables as of September 30, 1997
from $118.5 million or 3.27 percent as of June 30, 1997. Capital ratios
were strong as of quarter-end at 14.89 percent of reported assets and 6.09
percent of managed assets.
Headquartered in Falls Church, Virginia, Capital One Financial Corporation
is a financial services company whose principal subsidiaries, Capital One
Bank, and Capital One, F.S.B., offer consumer lending products. Capital
One's subsidiaries collectively had 10.7 million customers and $13.5 billion
in managed loans outstanding as of September 30, 1997, and are among the
largest providers of MasterCard and Visa credit cards in the world.