|Capital One Reports First Quarter Earnings|
|Falls Church, VA (April 16, 1996) - Capital One Financial Corporation (NYSE: COF) today announced first quarter 1996 earnings of $38.0 million, or $.57 per share, versus earnings of $37.8 million, or $.57 per share, for the fourth quarter of 1995 and $25.1 million, or $.38 per share, for the comparable period in the prior year. First quarter earnings reflect an improvement in the managed net interest margin offset in part by an increase in marketing investment and, as expected, higher credit losses.
During the first quarter of 1996, the company added 512,000 net new accounts, bringing the account total to 6.7 million. For the quarter, Capital One's managed credit card loan portfolio declined by $329 million to $10.1 billion in outstanding receivables, consistent with the company's shift in product mix toward lower balance products.
"This quarter produced clear evidence that our strategy of focusing on new account growth is working very well," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "During the quarter, we maintained very strong earnings while investing significantly in new marketing, including our ongoing diversification beyond balance transfer. This strategy positions us very well for continued earnings growth and return on equity in excess of 20 percent."
Managed net interest margin increased to 8.03 percent in the first quarter of 1996 versus 6.49 percent in the fourth quarter of 1995 and 6.45 percent in the comparable period of the prior year. This increase primarily reflects the impact of repricing more than $2 billion of introductory rate credit card loans during the quarter.
Managed net loan loss rates increased to 3.53 percent for the first quarter of 1996 compared with 2.58 percent in the fourth quarter of 1995. This increase was within expectations and is primarily related to continued seasoning of the existing portfolio, slower new loan growth and recent increases in industry losses. Delinquency rates (over 30 days) increased modestly to 4.51 percent at March 31, 1996, compared with 4.20 percent at year-end and are up only slightly when this quarter's decline in managed loans is considered.
"We are very pleased with our financial performance including account repricings, which led to a 140 basis point increase in our net interest margin," said Nigel W. Morris, Capital One's President and Chief Operating Officer. "At the same time, we continue to build the platform for a changing product mix and sustainable earnings growth."
Solicitation (marketing) expense increased significantly in the first quarter of 1996 to $51.5 million versus $37.3 million in the fourth quarter of 1995 and $41.1 million in the comparable period of the prior year. Other non-interest expenses (excluding solicitation expense) were $104.9 million versus $98.5 million in the fourth quarter of 1995 and $79.3 million in the comparable period of the prior year, and were in line with account growth. The allowance for loan losses was increased to $74.0 million, or 3.09 percent of on-balance sheet receivables. Capital ratios were strong at quarter end at 14.50 percent of reported assets and 5.31 percent of managed assets.
Headquartered in Falls Church, Virginia, Capital One Financial Corporation is a financial services company that offers credit card products through its wholly-owned subsidiary, Capital One Bank, as its primary business. Capital One Bank had 6.7 million credit card customers and $10.1 billion in managed loans outstanding at March 31, 1996, and is one of the largest providers of MasterCard and Visa credit cards in the United States.