FALLS CHURCH, Va. (April 17, 1997) --- Capital One Financial Corporation
(NYSE: COF) today announced first quarter 1997 earnings of $42.5 million,
or $.63 per share, versus earnings of $40.3 million, or $.60 per share,
for the fourth quarter of 1996 and $38.0 million, or $.57 per share, for
the comparable period in the prior year.
"This quarter demonstrated the power of our information-based strategy
with continued growth in revenues and earnings in a period of continued
worsening consumer credit and significant competitive challenges,"
said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer.
"The combination of our unique strategy and our conservatism has allowed
us to continue to deliver record performance during a difficult period for
the credit card business."
During the first quarter of 1997, the Company added 537,000 net new accounts,
bringing total accounts to 9.1 million. Revenue, defined as managed net
interest income and non-interest income, rose to $468 million in the first
quarter of 1997 versus $437 million in the fourth quarter of 1996 and $309
million for the comparable period in the prior year, an increase of 52 percent.
For the quarter, Capital One's managed consumer loan balances declined,
as expected, by $197 million to $12.6 billion in outstanding receivables.
This decline reflected the impact of marketing lower credit line products
and the seasonal paydown of holiday spending.
The managed net interest margin increased to 8.83 percent in the first
quarter of 1997 versus 8.29 percent in the fourth quarter of 1996 and 8.03
percent in the comparable period of the prior year. This increase primarily
reflected a combination of loan repricings, the impacts of the slower growth
of low introductory-rate loans and the continued shift in the product mix
to higher-yielding products.
The managed net charge-off rate increased to 5.84 percent for the first
quarter of 1997 compared with 5.11 percent in the fourth quarter of 1996.
This increase was within expectations and is primarily related to the aging
of the existing portfolio and recent increases in industry losses. The managed
delinquency rate (over 30 days) increased modestly to 6.41 percent as of
March 31, 1997, compared with 6.24 percent as of December 31, 1996.
"In managing our business, we are guided by a culture of conservatism
that has served the Company well," said Nigel W. Morris, Capital One's
President and Chief Operating Officer. "Our business approach
including strong capital and reserves, among the industry's lowest average
credit limits, stringent credit underwriting and flexible products -- helps
us weather adverse credit developments, as evidenced in these first quarter
Solicitation (marketing) expense increased in the first quarter of 1997
to $54.1 million versus $52.2 million in the fourth quarter of 1996 and
$51.5 million in the comparable period of the prior year. Other non-interest
expenses (excluding solicitation expense) for the first quarter of 1997
were $159.5 million versus $148.4 million for the fourth quarter of 1996
and $104.9 million in the comparable period of the prior year.
The allowance for loan losses was maintained at $118.5 million, and increased
to 3.37 percent of on-balance sheet receivables as of March 31, 1997 from
2.73 percent as of December 31, 1996. Capital ratios were strong as of March
31, 1997 at 14.22 percent of reported assets and 5.86 percent of managed
Headquartered in Falls Church, Virginia, Capital One Financial Corporation
is a holding company whose principal subsidiaries, Capital One Bank and
Capital One, F.S.B., offer financial products and services to consumers.
Capital One's subsidiaries collectively had 9.1 million customers and $12.6
billion in managed loans outstanding as of March 31, 1997, and are among
the largest providers of MasterCard and Visa credit cards in the United