Capital One Reports Second Quarter Earnings: Announces Record Account Growth and Quarterly Dividend
Capital One Reports Second Quarter Earnings: Announces Record Account Growth and Quarterly Dividend
Falls Church, VA (July 18, 1996) - Capital One Financial Corporation (NYSE: COF) today announced second quarter 1996 earnings of $38.2 million, or $.57 per share, versus earnings of $38.0 million, or $.57 per share, for the first quarter of 1996 and $29.6 million, or $.45 per share, for the comparable period in the prior year. Second quarter earnings are consistent with management's expectations and reflect continued success in meeting targeted year over year earnings growth of 20 percent.
During the second quarter, the company added a record 1.1 million net new credit card accounts, bringing the total to 7.8 million. Managed credit card loans increased by $1.1 billion to $11.2 billion in outstanding receivables.
"We are very pleased with our record account growth and strong growth in receivables," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "Our growth is the result of opportunistic origination and account management in the balance-transfer segment as well as the continued expansion of non-balance transfer card products and segments. We also continue to test the application of our information-based strategy to other products, both financial and non-financial, with positive results."
The managed net interest margin decreased to 7.94 percent in the second quarter of 1996 from 8.03 percent in the first quarter of 1996; this compares to 6.03 percent in the comparable period of 1995. This decrease principally reflects balance growth in introductory rate credit card products offset by the impact of repricing $500 million in introductory rate credit card loans during the quarter.
The managed net loan loss rates increased to 3.97 percent in the second quarter of 1996 compared with 3.53 percent in the previous quarter. The increase is primarily related to continued seasoning of the existing portfolio and the impact of overall weakening of consumer credit. Delinquency rates (over 30 days) increased modestly to 4.59 percent at June 30, 1996, compared with 4.51 percent in the first quarter of 1996.
"We're pleased with the credit performance of our portfolio relative to the industry," said Nigel W. Morris, Capital One's President and Chief Operating Officer. "Using sophisticated tools for credit management, we will continue to manage our portfolio prudently and keep a close watch on the overall consumer credit picture."
Non-interest expenses (excluding solicitation expense) were $116.6 million in the second quarter of 1996 versus $104.9 million in the first quarter of 1996 and $82.3 million in the comparable period of the prior year. Solicitation (marketing) expense of $42.7 million declined from $51.5 million in the first quarter, in line with management's expectations and an increase from $34.1 million in the comparable period of the prior year. This level represents the second largest quarterly marketing spend to date.
The allowance for loan losses was maintained at $74.0 million, or 2.88 percent of on-balance sheet receivables. Capital ratios were strong at quarter end at 11.70 percent of reported assets and 5.00 percent of managed assets.
The company also announced a quarterly dividend of $.08 per share payable August 20, 1996 to stockholders of record as of August 5, 1996. This is the Company's sixth consecutive quarterly dividend since its inception in early 1995. Dividends declared by the Company are eligible for direct reinvestment in the Company's common stock under its Dividend Reinvestment and Stock Purchase Plan, which became effective in January of this year.
Headquartered in Falls Church, Virginia, Capital One Financial Corporation is a financial services company whose principal subsidiary, Capital One Bank, offers credit card products as its primary business. Capital One Bank had 7.8 million credit card customers and $11.2 billion in managed loans outstanding at June 30, 1996, and is one of the largest providers of MasterCard and Visa credit cards in the United States.
During the second quarter, the company added a record 1.1 million net new credit card accounts, bringing the total to 7.8 million. Managed credit card loans increased by $1.1 billion to $11.2 billion in outstanding receivables.
"We are very pleased with our record account growth and strong growth in receivables," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "Our growth is the result of opportunistic origination and account management in the balance-transfer segment as well as the continued expansion of non-balance transfer card products and segments. We also continue to test the application of our information-based strategy to other products, both financial and non-financial, with positive results."
The managed net interest margin decreased to 7.94 percent in the second quarter of 1996 from 8.03 percent in the first quarter of 1996; this compares to 6.03 percent in the comparable period of 1995. This decrease principally reflects balance growth in introductory rate credit card products offset by the impact of repricing $500 million in introductory rate credit card loans during the quarter.
The managed net loan loss rates increased to 3.97 percent in the second quarter of 1996 compared with 3.53 percent in the previous quarter. The increase is primarily related to continued seasoning of the existing portfolio and the impact of overall weakening of consumer credit. Delinquency rates (over 30 days) increased modestly to 4.59 percent at June 30, 1996, compared with 4.51 percent in the first quarter of 1996.
"We're pleased with the credit performance of our portfolio relative to the industry," said Nigel W. Morris, Capital One's President and Chief Operating Officer. "Using sophisticated tools for credit management, we will continue to manage our portfolio prudently and keep a close watch on the overall consumer credit picture."
Non-interest expenses (excluding solicitation expense) were $116.6 million in the second quarter of 1996 versus $104.9 million in the first quarter of 1996 and $82.3 million in the comparable period of the prior year. Solicitation (marketing) expense of $42.7 million declined from $51.5 million in the first quarter, in line with management's expectations and an increase from $34.1 million in the comparable period of the prior year. This level represents the second largest quarterly marketing spend to date.
The allowance for loan losses was maintained at $74.0 million, or 2.88 percent of on-balance sheet receivables. Capital ratios were strong at quarter end at 11.70 percent of reported assets and 5.00 percent of managed assets.
The company also announced a quarterly dividend of $.08 per share payable August 20, 1996 to stockholders of record as of August 5, 1996. This is the Company's sixth consecutive quarterly dividend since its inception in early 1995. Dividends declared by the Company are eligible for direct reinvestment in the Company's common stock under its Dividend Reinvestment and Stock Purchase Plan, which became effective in January of this year.
Headquartered in Falls Church, Virginia, Capital One Financial Corporation is a financial services company whose principal subsidiary, Capital One Bank, offers credit card products as its primary business. Capital One Bank had 7.8 million credit card customers and $11.2 billion in managed loans outstanding at June 30, 1996, and is one of the largest providers of MasterCard and Visa credit cards in the United States.