Industries Banking/Finance

Capital One profit up for last year, down from third quarter

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Capital One Financial Corp. fourth-quarter and year-end results

THE TAKE: McLean-based Capital One Financial Corp. announced net income for 2012 of $3.5 billion, or $6.16 per diluted common share, compared with net income of $3.1 billion, or $6.80 per diluted common share, for 2011. Net income for the fourth quarter of 2012 was $843 million, or $1.41 per diluted common share, compared with net income of $1.2 billion, or $2.01 per diluted common share, for the third quarter of 2012, and net income of $407 million, or 88 cents per diluted common share, for the fourth quarter of 2011.

“Seasonal expense and margin trends led to a reduction in fourth quarter earnings compared to the previous quarter,” said Gary L. Perlin, Capital One’s CFO, in a statement. “With a few exceptions largely related to these seasonal patterns, fourth quarter 2012 results give us a good picture of what to expect in terms of pre-provision earnings in 2013, assuming little change in the external environment.”


Revenues: Total net revenue for the fourth quarter of 2012 was $5.6 billion, a decline of $158 million, or 3 percent, almost entirely driven by higher levels of estimated uncollectible finance charges and fees in the company’s Domestic Card business.

Net income: Profits decreased 28 percent in the fourth quarter driven by lower revenue and higher non-interest and credit expenses. 

Operating expenses: $2.9 billion in the fourth quarter, an increase of $133 million, or 5 percent.

Provision for credit losses: $1.2 billion in the quarter, up $137 million from the previous quarter.

THE COMPANY’S TAKE: Capital One expects average quarterly revenue levels in 2013 to be consistent with the fourth quarter of 2012, as a modest decline in earning assets will be offset by a steady to slightly higher net interest margin. Overall, the company expects non-interest expense to be, on average, just over $3.1 billion per quarter, reflecting a modest decline in quarterly expenses relative to seasonally elevated operating and marketing costs in the fourth quarter of 2012.

“Capital One remains well positioned to deliver sustained shareholder value through sure-footed execution, substantial capital generation, and disciplined capital allocation for the benefit of our shareholders,” said Richard D. Fairbank, Chairman and CEO in a statement. “As a first step, we expect to return to a meaningful dividend in 2013, following the completion of the current CCAR process.”

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