Capital One Reports Record Earnings for 2002; Earnings Per Share Increased 35% Year Over Year
FALLS CHURCH, Va., Jan. 16 /PRNewswire-FirstCall/ -- Capital One Financial Corporation (NYSE: COF) today announced 35 percent earnings per share growth for 2002, driven by a 38 percent increase in year over year revenue and a relatively modest 13 percent increase in operating and marketing expense.
Earnings were $899.6 million, or $3.93 per share, in 2002 compared with earnings of $642.0 million, or $2.91 per share, in 2001. For the fourth quarter of 2002, earnings were $239.7 million, or $1.05 per share, compared with earnings of $177.7 million, or $.80 per share, for the fourth quarter 2001.
"We are pleased with the changes made to the recently issued FFIEC guidelines on credit card account management and loss allowance practices. We believe that our current practices comply with the guidelines and that these new guidelines should not have a material impact on our financial performance," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "Additionally, based on the performance of our portfolio, we reaffirm our previous guidance on charge-offs in 2003, with a slightly improved outlook."
Capital One's managed loan balances increased by 32 percent, to $59.7 billion at December 31, 2002, from $45.3 billion at December 31, 2001. For the year, Capital One added 3.6 million net new accounts, bringing its total accounts to 47.4 million, making it one of the world's largest consumer financial services franchises.
The managed net charge-off rate increased to 6.21 percent in the fourth quarter of 2002 from 4.96 percent in the previous quarter. The managed delinquency rate (30+ days) increased to 5.60 percent at December 31, 2002, compared with 5.36 percent at September 30, 2002. The increases in the charge-off rate and the delinquency rate were consistent with previous indications, and reflected the seasoning of subprime loans added to the portfolio in the fourth quarter of 2001 and early 2002, and the slower growth in the portfolio in the fourth quarter of 2002. The company now expects its managed charge-off rate to increase to the mid-to-high six percent range in the first quarter of 2003 and remain in this range in the second quarter of 2003. In the second half of 2003 the company now expects the charge-off rate to decline to the low-to-mid six percent range.
"Capital One's 2002 earnings performance was achieved while increasing its allowance for loan losses by $880.0 million and spending approximately the same amount on marketing as last year," said Nigel W. Morris, Capital One's President and Chief Operating Officer. "We expect to grow earnings per share by 15 percent in 2003 as we shift upmarket and increase our marketing to take advantage of attractive opportunities."
Capital One's managed net revenue margin decreased to 16.11 percent, from 17.49 percent in the previous quarter. This decline primarily reflected the company's previously announced strategy of shifting its new business mix further upmarket, which resulted in lower revenue on new business. The quarter-over-quarter revenue margin decline also reflected the absence of a one-time revenue boost in the third quarter due to the reclassification of recoveries in the financial statements. Also, Capital One recorded a $33.4 million write-down on some of its interest-only (I/O) strip assets. This expense was more than offset by $66.7 million in gains on sales of securities from its liquidity portfolio.
Marketing expenses increased to $210.8 million in the fourth quarter of 2002 from $185.8 million in the previous quarter, as Capital One increased its marketing to the prime and superprime business lines. Operating expenses per account decreased to $76.22 in the fourth quarter from $79.79 in the previous quarter, due to the absence of one-time operating expenses incurred in the third quarter of 2002.
The company also announced it sold approximately $500.0 million of superprime auto loans in the fourth quarter of 2002 and entered into an agreement to sell up to $900.0 million of subprime auto loans in 2003.
The company cautioned that its current expectations for future earnings, and future charge-off rate expectations, are forward looking statements and actual results could differ materially from current expectations due to a number of factors, including: competition in the credit card industry; the actual account and balance growth achieved by the company; the company's ability to access the capital markets at attractive rates and terms to fund its operations and future growth; changes in regulation; and general economic conditions affecting consumer income and spending, which may affect consumer bankruptcies, defaults and charge-offs. A discussion of these and other factors can be found in Capital One's annual and other reports filed with the Securities and Exchange Commission, including, but not limited to, Capital One's report on Form 10-K for the year ended December 31, 2001.
Headquartered in Falls Church, Virginia, Capital One Financial Corporation (http://www.capitalone.com) is a holding company whose principal subsidiaries, Capital One Bank and Capital One, F.S.B., offer consumer lending products. Capital One's subsidiaries collectively had 47.4 million accounts and $59.7 billion in managed loans outstanding as of December 31, 2002. Capital One, a Fortune 500 company, is one of the largest providers of MasterCard and Visa credit cards in the world. Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 500 index.
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CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
2002 2002 2002
(in millions, except per share data
and as noted) Q4 Q3 Q2
Earnings (Managed Basis)
Net Interest Income $1,442.2 $1,435.3 $1,234.3
Non-Interest Income 1,086.9 1,189.1 1,145.0
Total Revenue 2,529.1 2,624.4 2,379.3
Provision for Loan Losses 1,021.5 1,055.9 881.9
Marketing Expenses 210.8 185.8 320.4
Operating Expenses 910.2 965.2 (2) 833.2
Income Before Taxes 386.6 417.5 343.7
Tax Rate 38.0 % 38.0 % 38.0 %
Net Income $239.7 $258.8 $213.1
Common Share Statistics
Basic EPS $1.08 $1.17 $0.97
Diluted EPS $1.05 $1.13 $0.92
Dividends Per Share $0.03 $0.03 $0.03
Book Value Per Share (period end) $20.44 $19.55 $18.13
Stock Price Per Share (period end) $29.72 $34.92 $61.05
Total Market Capitalization (period
end) $6,722.5 $7,744.2 $13,512.9
Shares Outstanding (period end) 226.2 221.8 221.3
Shares Used to Compute Basic EPS 221.8 220.6 220.0
Shares Used to Compute Diluted EPS 228.2 228.4 231.7
Managed Loan Statistics (period
avg.)
Average Loans $57,669 $55,350 $51,343
Average Earning Assets $62,789 $60,016 $55,559
Average Assets $67,037 $64,193 $59,989
Average Equity $4,568 $4,418 $4,021
Net Interest Margin 9.19 % 9.57 % 8.89 %
Revenue Margin 16.11 % 17.49 % 17.13 %
Risk Adjusted Margin (1) 10.41 % 12.92 % 12.53 %
Return on Average Assets (ROA) 1.43 % 1.61 % 1.42 %
Return on Average Equity (ROE) 20.99 % 23.43 % 21.20 %
Net Charge-Off Rate 6.21 % 4.96 % 4.98 %
Net Charge-Offs $895.5 $685.7 $639.4
Cost Per Account (in dollars) $76.22 $79.79 $69.99
Managed Loan Statistics (period end)
Reported Loans $27,854 $28,104 $24,965
Off-Balance Sheet Loans 31,893 28,779 28,243
Managed Loans $59,747 $56,883 $53,208
Delinquency Rate (30+ days) 5.60 % 5.36 % 4.54 %
Number of Accounts (000's) 47,369 48,163 48,612
Total Assets $69,205 $65,614 $62,022
Capital (3) $5,440.4 $5,149.6 $4,823.6
Capital to Managed Assets Ratio 7.86 % 7.85 % 7.78 %
(1) Risk adjusted margin is total revenue less net charge-offs as a
percentage of average earning assets.
(2) Includes $110.0 million of one-time charges in Q3 2002.
(3) Includes preferred interests and mandatory convertible securities.
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUMMARY
2002 2001
(in millions, except per share data
and as noted) Q1 Q4
Earnings (Managed Basis)
Net Interest Income $1,172.5 $1,021.7
Non-Interest Income 990.2 963.4
Total Revenue 2,162.7 1,985.1
Provision for Loan Losses 699.5 624.0
Marketing Expenses 353.5 301.2
Operating Expenses 806.4 773.4
Income Before Taxes 303.3 286.6
Tax Rate 38.0 % 38.0 %
Net Income $188.0 $177.7
Common Share Statistics
Basic EPS $0.86 $0.83
Diluted EPS $0.83 $0.80
Dividends Per Share $0.03 $0.03
Book Value Per Share (period end) $16.69 $15.33
Stock Price Per Share (period end) $63.85 $53.95
Total Market Capitalization (period
end) $14,079.3 $11,695.2
Shares Outstanding (period end) 220.5 216.8
Shares Used to Compute Basic EPS 217.5 214.7
Shares Used to Compute Diluted EPS 226.6 223.4
Managed Loan Statistics (period avg.)
Average Loans $46,688 $41,352
Average Earning Assets $50,538 $45,295
Average Assets $54,258 $48,906
Average Equity $3,572 $3,223
Net Interest Margin 9.28 % 9.02 %
Revenue Margin 17.12 % 17.53 %
Risk Adjusted Margin (1) 12.78 % 12.96 %
Return on Average Assets (ROA) 1.39 % 1.45 %
Return on Average Equity (ROE) 21.06 % 22.05 %
Net Charge-Off Rate 4.70 % 5.01 %
Net Charge-Offs $548.6 $517.5
Cost Per Account (in dollars) $71.33 $73.69
Managed Loan Statistics (period end)
Reported Loans $24,428 $20,921
Off-Balance Sheet Loans 24,136 24,343
Managed Loans $48,564 $45,264
Delinquency Rate (30+ days) 4.80 % 4.95 %
Number of Accounts (000's) 46,623 43,815
Total Assets $55,381 $52,506
Capital (3) $3,778.4 $3,422.2
Capital to Managed Assets Ratio 6.82 % 6.52 %
(1) Risk adjusted margin is total revenue less net charge-offs as a
percentage of average earning assets.
(2) Includes $110.0 million of one-time charges in Q3 2002.
(3) Includes preferred interests and mandatory convertible securities.
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUPPLEMENT
2002 2002 2002
(in millions, except per share data
and as noted) Q4 Q3 Q2
Revenue & Expense Statistics
Net interest income growth
(annualized) 2 % 65 % 21 %
Non interest income growth
(annualized) (34)% 15 % 63 %
Revenue growth (annualized) (15)% 41 % 40 %
Revenue margin (average loans) 17.54 % 18.97 % 18.54 %
Risk adjusted margin (average loans) 11.33 % 14.01 % 13.55 %
Ops cost as a % of revenues 35.99 % 36.78 % 35.02 %
Ops cost as a % of average loans
(annualized) 6.31 % 6.98 % 6.49 %
Per Account Statistics
Net interest income per account
(annualized) $120.77 $118.65 $103.69
Non interest income per account
(annualized) $91.02 $98.30 $96.18
Revenue per account (annualized) $211.79 $216.95 $199.87
Net income per account (annualized) $20.07 $21.39 $17.90
Ops cost per account (annualized) $76.22 $79.79 $69.99
Credit Quality Statistics
Allowance as a % of reported loans 6.18 % 5.68 % 4.95 %
Allowance as a % of reported charge-
offs (annualized) 102.94 % 131.21 % 103.29 %
Provision as a % of managed charge-
offs 114.07 % 153.99 % 137.92 %
Growth Statistics
Average accounts (000's) 47,766 48,388 47,618
Net new accounts per quarter (000's) (794) (449) 1,989
% account growth Q over Q
(annualized) (7)% (4)% 17 %
% account growth Y over Y 8 % 20 % 27 %
Net new loans $2,864 $3,675 $4,644
% loan growth Q over Q (annualized) 20 % 28 % 38 %
% loan growth Y over Y 32 % 48 % 51 %
Balance Sheet Measures
% off-balance sheet securitizations 53 % 51 % 53 %
% at introductory rate 10 % 11 % 12 %
CAPITAL ONE FINANCIAL CORPORATION (COF)
FINANCIAL & STATISTICAL SUPPLEMENT
2002 2001
(in millions, except per share data
and as noted) Q1 Q4
Revenue & Expense Statistics
Net interest income growth
(annualized) 59 % 25 %
Non interest income growth
(annualized) 11 % 42 %
Revenue growth (annualized) 36 % 33 %
Revenue margin (average loans) 18.53 % 19.20 %
Risk adjusted margin (average loans) 13.83 % 14.20 %
Ops cost as a % of revenues 37.28 % 38.96 %
Ops cost as a % of average loans
(annualized) 6.91 % 7.48 %
Per Account Statistics
Net interest income per account
(annualized) $103.72 $97.35
Non interest income per account
(annualized) $87.59 $91.79
Revenue per account (annualized) $191.31 $189.15
Net income per account (annualized) $16.63 $16.93
Ops cost per account (annualized) $71.33 $73.69
Credit Quality Statistics
Allowance as a % of reported loans 4.05 % 4.02 %
Allowance as a % of reported charge-
offs (annualized) 103.69 % 90.05 %
Provision as a % of managed charge-
offs 127.51 % 120.57 %
Growth Statistics
Average accounts (000's) 45,219 41,980
Net new accounts per quarter (000's) 2,808 3,670
% account growth Q over Q
(annualized) 26 % 37 %
% account growth Y over Y 28 % 30 %
Net new loans $3,300 $6,775
% loan growth Q over Q (annualized) 29 % 70 %
% loan growth Y over Y 54 % 53 %
Balance Sheet Measures
% off-balance sheet securitizations 50 % 54 %
% at introductory rate 13 % 12 %
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Balance Sheets
(in thousands)(unaudited)
December 31 September 30 December 31
2002 2002 2001
Assets:
Cash and due from banks $277,509 $316,010 $355,680
Federal funds sold and resale
agreements 373,828 304,782 19,802
Interest-bearing deposits at other
banks 267,441 112,248 331,756
Cash and cash equivalents 918,778 733,040 707,238
Securities available for sale 4,423,677 4,290,441 3,115,891
Consumer loans 27,853,652 28,104,186 20,921,014
Less: Allowance for loan losses (1,720,000) (1,595,000) (840,000)
Net loans 26,133,652 26,509,186 20,081,014
Accounts receivable from
securitizations 3,096,827 2,584,528 2,452,548
Premises and equipment, net 770,326 789,726 759,683
Interest receivable 217,512 182,300 105,459
Other 1,821,608 1,820,749 962,214
Total assets $37,382,380 $36,909,970 $28,184,047
Liabilities:
Interest-bearing deposits $17,325,965 $16,885,553 $12,838,968
Senior notes 5,565,615 5,561,489 5,335,229
Other borrowings 6,365,075 6,638,560 3,995,528
Interest payable 236,081 214,220 188,160
Other 3,266,473 3,274,637 2,502,684
Total liabilities 32,759,209 32,574,459 24,860,569
Stockholders' Equity:
Common stock 2,271 2,227 2,177
Paid-in capital, net 1,704,470 1,636,738 1,350,108
Retained earnings and cumulative
other comprehensive income 2,951,382 2,731,498 2,006,163
Less: Treasury stock, at cost (34,952) (34,952) (34,970)
Total stockholders' equity 4,623,171 4,335,511 3,323,478
Total liabilities and
stockholders' equity $37,382,380 $36,909,970 $28,184,047
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in thousands, except per share data)(unaudited)
Three Months Ended
December 31 September 30 December 31
2002 2002 2001
Interest Income:
Consumer loans, including fees $1,031,675 $1,022,810 $758,665
Securities available for sale 50,283 45,965 38,980
Other 31,706 39,304 28,961
Total interest income 1,113,664 1,108,079 826,606
Interest Expense:
Deposits 215,144 215,470 176,619
Senior notes 108,474 110,464 96,135
Other Borrowings 59,014 59,716 42,084
Total interest expense 382,632 385,650 314,838
Net interest income 731,032 722,429 511,768
Provision for loan losses 543,758 674,111 339,641
Net interest income after provision for
loan losses 187,274 48,318 172,127
Non-Interest Income:
Servicing and securitizations 645,740 815,267 635,848
Service charges and other customer-
related fees 475,384 535,732 398,343
Interchange 94,095 118,203 114,571
Other 105,103 50,976 40,253
Total non-interest income 1,320,322 1,520,178 1,189,015
Non-Interest Expense:
Salaries and associate benefits 380,600 417,189 374,793
Marketing 210,847 185,795 301,160
Communications and data processing 106,149 106,128 86,810
Supplies and equipment 95,963 88,639 84,430
Occupancy 46,933 86,942 42,172
Other 280,528 266,327 185,202
Total non-interest expense 1,121,020 1,151,020 1,074,567
Income before income taxes 386,576 417,476 286,575
Income taxes 146,899 158,641 108,894
Net income $239,677 $258,835 $177,681
Basic earnings per share $1.08 $1.17 $0.83
Diluted earnings per share $1.05 $1.13 $0.80
Dividends paid per share $0.03 $0.03 $0.03
CAPITAL ONE FINANCIAL CORPORATION
Consolidated Statements of Income
(in thousands, except per share data)(unaudited)
Year Ended
December 31 December 31
2002 2001
Interest Income:
Consumer loans, including fees $3,868,664 $2,729,519
Securities available for sale 184,407 138,188
Other 127,695 53,442
Total interest income 4,180,766 2,921,149
Interest Expense:
Deposits 811,889 640,470
Senior notes 422,529 357,495
Other Borrowings 227,236 173,042
Total interest expense 1,461,654 1,171,007
Net interest income 2,719,112 1,750,142
Provision for loan losses 2,149,328 1,120,457
Net interest income after provision
for loan losses 569,784 629,685
Non-Interest Income:
Servicing and securitizations 2,805,501 2,441,144
Service charges and other customer-
related fees 1,937,735 1,536,338
Interchange 447,747 379,797
Other 275,853 106,483
Total non-interest income 5,466,836 4,463,762
Non-Interest Expense:
Salaries and associate benefits 1,557,887 1,392,072
Marketing 1,070,624 1,082,979
Communications and data processing 406,071 327,743
Supplies and equipment 357,953 310,310
Occupancy 205,531 136,974
Other 987,515 807,949
Total non-interest expense 4,585,581 4,058,027
Income before income taxes 1,451,039 1,035,420
Income taxes 551,395 393,455
Net income $899,644 $641,965
Basic earnings per share $4.09 $3.06
Diluted earnings per share $3.93 $2.91
Dividends paid per share $0.11 $0.11
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands)(unaudited)
Managed (1) Quarter Ended 12/31/02
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Consumer loans $57,669,078 $2,085,069 14.46%
Securities available for sale 4,571,735 50,283 4.40%
Other 548,443 5,470 3.99%
Total earning assets $62,789,256 $2,140,822 13.64%
Interest-bearing liabilities:
Deposits $17,076,822 $215,144 5.04%
Senior notes 5,563,574 108,474 7.80%
Other borrowings 6,332,192 59,014 3.73%
Securitization liability 29,840,224 315,968 4.24%
Total interest-bearing liabilities $58,812,812 $698,600 4.75%
Net interest spread 8.89%
Interest income to average earning
assets 13.64%
Interest expense to average earning
assets 4.45%
Net interest margin 9.19%
(1) The information in this table reflects the adjustment to add back the
effect of securitized loans.
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands)(unaudited)
Managed (1) Quarter Ended 9/30/02
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Consumer loans $55,350,137 $2,081,399 15.04%
Securities available for sale 3,877,119 45,965 4.74%
Other 788,347 5,122 2.60%
Total earning assets $60,015,603 $2,132,486 14.21%
Interest-bearing liabilities:
Deposits $16,519,572 $215,470 5.22%
Senior notes 5,718,548 110,464 7.73%
Other borrowings 5,631,470 59,716 4.24%
Securitization liability 28,740,188 311,562 4.34%
Total interest-bearing liabilities $56,609,778 $697,212 4.93%
Net interest spread 9.28%
Interest income to average earning
assets 14.21%
Interest expense to average earning
assets 4.64%
Net interest margin 9.57%
(1) The information in this table reflects the adjustment to add back the
effect of securitized loans.
CAPITAL ONE FINANCIAL CORPORATION
Statements of Average Balances, Income and Expense, Yields and Rates
(dollars in thousands)(unaudited)
Managed (1) Quarter Ended 12/31/01
Average Income/ Yield/
Balance Expense Rate
Earning assets:
Consumer loans $41,352,084 $1,571,752 15.20%
Securities available for sale 3,187,417 38,980 4.89%
Other 755,573 4,620 2.45%
Total earning assets $45,295,074 $1,615,352 14.27%
Interest-bearing liabilities:
Deposits $12,237,144 $176,619 5.77%
Senior notes 3,495,732 42,084 4.82%
Other borrowings 5,388,881 96,135 7.14%
Securitization liability 21,926,552 278,797 5.09%
Total interest-bearing liabilities $43,048,309 $593,635 5.52%
Net interest spread 8.75%
Interest income to average earning
assets 14.27%
Interest expense to average earning
assets 5.25%
Net interest margin 9.02%
(1) The information in this table reflects the adjustment to add back the
effect of securitized loans. SOURCE Capital One Financial Corporation
-0- 01/16/2003
CONTACT: Paul Paquin, V.P., Investor Relations, +1-703-205-1039, or Tatiana Stead, Dir., Corporate Media, +1-703-205-1070, both of Capital One Financial Corporation