FALLS CHURCH, Va. (April 16, 1998) -- Capital One Financial Corporation (NYSE: COF)
today announced record first quarter 1998 earnings of $65.7 million, or $.96 per share
(diluted), versus earnings of $58.2 million, or $.86 per share (diluted), for the fourth
quarter of 1997 and $42.5 million, or $.63 per share (diluted), for the comparable period
in the prior year.
"This quarter's record results continue to demonstrate the power of our
information-based strategy," said Richard D. Fairbank, Capital One's Chairman
and Chief Executive Officer. "We now are targeting our 1998 earnings at $3.90 per
During the first quarter of 1998, the Company added 927,000 net new accounts, bringing
total accounts to 12.7 million. First quarter 1998 revenue, defined as managed net
interest income and non-interest income, rose to $637 million versus $592 million in the
fourth quarter of 1997 and $468 million for the comparable period in the prior year. For
the quarter, Capital One's managed consumer loan balances declined, as expected, by
$229 million to $14.0 billion. This modest decline was consistent with previous years and
primarily reflected seasonal paydown.
The managed net interest margin increased to 10.40 percent in the first quarter of 1998
versus 10.13 percent in the fourth quarter of 1997 prior to adjustments (9.24% as
adjusted). This increase principally reflected a continued shift to higher yielding
products. Fourth quarter 1997 adjustments recognize currently the uncollectible finance
charge and fee income and the charge-off of credit card loans at 180 days past-due. First
quarter 1998 managed net interest margin of 10.40 percent compares to 8.83 percent in the
same period of 1997.
The managed net charge-off rate increased only slightly to 6.04 percent for the first
quarter of 1998 versus 6.02 percent prior to the adjustment in charge-off policy in the
fourth quarter of 1997 (6.37% as adjusted) and 5.84 percent for the comparable period in
the prior year. The managed delinquency rate (30+ days) significantly decreased to 5.75
percent as of March 31, 1998, compared with 6.20 percent as of December 31, 1997.
"We continue to be very pleased with the credit quality performance of our
portfolio," said Nigel W. Morris, Capital One's President and Chief Operating
Officer. "Because of this stable credit picture and the success of our new product
innovations, we are bullish on our ability to continue to deliver superior results."
Marketing expense increased in the first quarter of 1998 to a record $75 million versus
$65 million in the fourth quarter of 1997 and $54 million in the comparable period of the
prior year. Other non-interest expenses (excluding marketing) for the first quarter of
1998 were $214 million versus $177 million for the fourth quarter of 1997 and $160 million
in the comparable period of the prior year. These non-interest expenses for the first
quarter of 1998 include approximately $32 million for the performance-based stock options
granted in December 1997. This expense reflected the 46% stock price increase during the
quarter. Excluding this expense, the Company's cost per account has remained stable.
The allowance for loan losses increased by $30 million during the first quarter to $213
million or 4.49 percent of on-balance sheet receivables as of March 31, 1998 from 3.76
percent as of December 31, 1997. Capital ratios were strong as of March 31, 1998 at 15.02
percent of reported assets and 6.59 percent of managed assets.
The Company cautions that its current expectations for earnings are forward-looking
statements and actual results could differ materially from current expectations due to a
number of factors, including the number of delinquent accounts and the dollar amount of
charge-offs actually experienced by the Company's credit card portfolio.
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
12.7 million customers and $14.0 billion in managed loans outstanding as of March 31,
1998, and are among the largest providers of MasterCard and Visa credit cards in the