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Capital One Financial (COF) Advances After Stronger-Than-Expected Q1

 April 19, 2012 06:28 PM
 

Capital One Financial Corp. (NYSE:COF), a diversified financial services holding company, reported an increase in first quarter earnings helped by the bargain purchase gain related to the ING Direct acquisition. Earnings and revenue exceeded Street's expectations, sending its shares up 1.56% in aftermarket.

Earnings for the quarter were $1.4 billion or $2.72 per share, up from $1.0 billion or $2.21 per share last year. Without the impact of a bargain purchase gain related to the ING Direct acquisition, earnings for the latest quarter would have been $809 million or $1.56 per share.

Revenue grew to $4.94 billion from $4.08 billion. Analysts had expected a profit of $1.39 per share on revenue of $4.37 billion.

Net interest margin declined 102 basis points to 6.20%, as a result of the on-boarding of ING Direct's lower yielding assets and temporarily high cash balances.

Revenue from credit card declined 4.7%, due to a one-time reserve addition in the first quarter. Credit performance improved in the quarter. Domestic Card net charge-off rate decreased 15 basis points to 3.92%, and delinquencies declined 41 basis points to 3.25%, consistent with expected seasonal patterns.

Domestic Card loan balances declined seasonally in the quarter by $3.4 billion to $53.2 billion. Compared to last year, loans grew 5.1%, while purchase volume grew 25.6%.

Consumer Banking deposits were $176.0 billion at the end of the quarter, an increase of $87.5 billion which includes $84.4 billion of deposits from the acquisition of ING Direct. Deposit interest expense decreased 11 basis points in the quarter.

Commercial Banking delivered another quarter of solid profitability and steady loan growth, with total revenue rising by $69 million to $516 million.

The company's estimated Tier 1 common ratio increased 220 basis points from December 31, 2011, to 11.9% as of March 31, 2012, driven by strong retained earnings growth and capital actions related to the financing of its two acquisitions. 

Capital One expects to close the acquisition of HSBC's US card portfolio in the second quarter of 2012, and expects that the acquisition will have a significant impact on reported results, especially in 2012, due to the purchase accounting effects, integration expenses and partial year impacts of the acquisition.

COF closed Thursday's regular session down 0.61% at $53.93. The stock has been trading between $35.94 and $57.49 for the past 52 weeks.


Rich
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