|Capital One Reports Record Earnings: Earnings Per Share Increased 41 Percent in 1998|
|(January 19, 1999) - Capital One Financial Corporation (NYSE: COF) today announced record earnings for 1998. Earnings were $275.2 million, or $3.96 per share, in 1998 compared with earnings of $189.4 million, or $2.80 per share, in 1997. For the fourth quarter of 1998, earnings were $72.7 million, or $1.04 per share, versus earnings of $70.0 million, or $1.00 per share, for the third quarter of 1998 and $58.2 million, or $.86 per share, for the comparable period in the prior year. Earnings per share amounts are reported on a diluted basis.
"We are pleased to report we have achieved our earnings growth targets for the fourth consecutive year and increased earnings in excess of 40 percent in 1998 while making record investments in our business," said Richard D. Fairbank, Capital One's Chairman and Chief Executive Officer. "And, we are reaffirming our $5.10 earnings per share target for 1999, as our Information-Based Strategy continues to deliver extraordinary results."
For the year, the Company increased managed receivables by $3.2 billion, or 22 percent, and added 5.0 million net new accounts, a 42 percent increase over 1997. During the fourth quarter, Capital One increased its managed portfolio by $1.1 billion to $17.4 billion in outstanding receivables and added 1.8 million net new accounts, bringing the total number of accounts to 16.7 million. Revenue for the year, defined as managed net interest income and non-interest income, approximated $2.8 billion, a 33 percent increase from revenues of $2.1 billion in 1997. For the fourth quarter, total revenue rose to $771 million versus $705 million in the third quarter and $592 million for the comparable period in the prior year.
"The power of our Information-Based Strategy and positive trends in credit quality – coupled with the expertise and dedication of our associates – enabled us to grow at a record rate in 1998," said Nigel W. Morris, Capital One's President and Chief Operating Officer. "We look forward to continued growth as we expand product offerings in both domestic and international markets."
Managed net interest income for 1998 increased by 31 percent to $1.7 billion from $1.3 billion in 1997. In the fourth quarter, managed net interest income increased to $443 million from $441 million in the third quarter and $362 million in the fourth quarter of 1997. The managed net interest margin for 1998 increased by 109 basis points to 9.95 percent from 8.86 percent in 1997. In the fourth quarter, the managed net interest margin decreased to 9.48 percent from 10.15 percent in the third quarter and increased from 9.24 percent for the comparable period of 1997. The fourth quarter decline in margin reflects the impact of lower yielding "superprime" lending and management's desire to maintain higher levels of liquidity.
Managed non-interest income for 1998 increased by 38 percent to $1.1 billion from $776 million in 1997. In the fourth quarter, managed non-interest income increased to $328 million from $265 million in the third quarter and $230 million for the comparable quarter of 1997. This growth continues to reflect increased fees, including annual membership, interchange, overlimit and other fees.
The managed delinquency rate as of December 31, 1998 decreased to 4.70 percent versus 4.90 percent as of September 30, 1998 and 6.20 percent as of December 31, 1997. In the fourth quarter, the managed net charge-off rate was 4.51 percent, a decrease of 52 basis points from 5.03 percent in the third quarter of 1998.
Marketing investment for 1998 increased to a record $446 million, up 98 percent from $225 million in 1997. Fourth quarter marketing expense of $159 million represents the largest quarterly marketing level to date. This amount compares to $126 million in the third quarter of 1998 and $65 million in the comparable period of the prior year. Other non-interest expenses (excluding marketing) were $1.0 billion in 1998, up 56 percent from $659 million in 1997. Other non-interest expenses for the fourth quarter of 1998 were $309 million versus $257 million in the third quarter and $177 million in the comparable period of the prior year. Operating expenses continue to reflect increased investment in staff levels associated with our growing account base and the impact of expansion and diversification into new businesses and markets.
The allowance for loan losses was unchanged at $231 million or 3.75 percent of on-balance sheet receivables as of December 31, 1998, compared with 4.08 percent as of September 30, 1998. Capital ratios were strong as of December 31, 1998 at 14.53 percent of reported assets and 6.64 percent of managed assets.
Headquartered in Falls Church, Virginia, Capital One Financial Corporation (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 16.7 million customers and $17.4 billion in managed loans outstanding as of December 31, 1998, and are among 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.