Capital One Reports Second Quarter 2020 Net Loss of $918 million, or $2.21 per share

Rhea-AI Summary

Capital One Financial Corporation (NYSE: COF) reported a net loss of $918 million for Q2 2020, translating to $2.21 per diluted share, a significant improvement compared to a $1.3 billion loss in Q1 2020. Total net revenue dropped by 10% to $6.6 billion, while total non-interest expenses rose by 1% to $3.8 billion. Provision for credit losses decreased by 22% to $4.2 billion. Despite a challenging environment, the company positioned itself to adapt through digital investments. Period-end deposits increased by 13% to $304.2 billion, indicating strong consumer trust.

Positive

• Period-end total deposits increased by 13% to $304.2 billion.
• Provision for credit losses decreased by 22% to $4.2 billion.
• Digital investments may position the company for future growth.

Negative

• Net loss of $918 million recorded in Q2 2020.
• Total net revenue decreased by 10% to $6.6 billion.
• Average loans held for investment decreased by 4% to $253.4 billion.

MCLEAN, Va., July 21, 2020 /PRNewswire/ -- Capital One Financial Corporation (NYSE: COF) today announced net loss for the second quarter of 2020 of $918 million, or $2.21 per diluted common share, compared with net loss of $1.3 billion, or $3.10 per diluted common share in the first quarter of 2020, and with net income of $1.6 billion, or $3.24 per diluted common share in the second quarter of 2019. Excluding adjusting items, net loss for the second quarter of 2020 was $1.61 per diluted common share⁽¹⁾.

100%; TEXT-ALIGN: left" dir="ltr">

"Our investments to transform our technology and how we work, and our efforts to drive the company to digital are powering our response to the pandemic," said Richard D. Fairbank, Founder, Chairman and Chief Executive Officer. "We remain well positioned to weather the downturn, emerge with strength, and deliver shareholder value over the long-term."

Adjusting items in the second quarter of 2020, which are excluded from diluted earnings per share (EPS), efficiency ratio and operating efficiency ratio metrics (see Table 15 in our Financial Supplement for additional information):

	Pre-Tax	Diluted EPS
(Dollars in millions, except per share data)	Impact	Impact
Legal reserve builds	$	265		$	0.58
Cybersecurity Incident expenses, net of insurance	11		0.02

All comparisons below are for the second quarter of 2020 compared with the first quarter of 2020 unless otherwise noted.

Second Quarter 2020 Income Statement Summary:

• Total net revenue decreased 10 percent to $6.6 billion.
• Total non-interest expense increased 1 percent to $3.8 billion:
• 44 percent decrease in marketing.
• 8 percent increase in operating expenses.
• Pre-provision earnings decreased 21 percent to $2.8 billion⁽²⁾.
• Provision for credit losses decreased 22 percent to $4.2 billion:
• Net charge-offs of $1.5 billion.
• $2.7 billion reserve build.
• Net interest margin of 5.78 percent, decreased 100 basis points.
• Efficiency ratio of 57.50 percent.
• Efficiency ratio excluding adjusting items of 53.29 percent⁽¹⁾.
• Operating efficiency ratio of 53.34 percent.
• Operating efficiency ratio excluding adjusting items of 49.13 percent⁽¹⁾.

Second Quarter 2020 Balance Sheet Summary:

• Common equity Tier 1 capital ratio under Basel III Standardized Approach of 12.4 percent at June 30, 2020.
• Period-end loans held for investment in the quarter decreased $11.5 billion, or 4 percent, to $251.5 billion.
• Credit Card period-end loans decreased $10.5 billion, or 9 percent, to $107.3 billion.
• Domestic Card period-end loans decreased $10.2 billion, or 9 percent, to $99.4 billion.
• Consumer Banking period-end loans increased $2.7 billion, or 4 percent, to $66.7 billion
• Auto period-end loans increased $2.0 billion, or 3 percent, to $63.3 billion.
• Commercial Banking period-end loans decreased $3.7 billion, or 5 percent, to $77.5 billion.
• Average loans held for investment in the quarter decreased $9.5 billion, or 4 percent, to $253.4 billion.
• Credit Card average loans decreased $14.0 billion, or 11 percent, to $108.7 billion
• Domestic Card average loans decreased $12.7 billion, or 11 percent, to $101.0 billion.
• Consumer Banking average loans increased $1.2 billion, or 2 percent, to $64.9 billion.
• Auto average loans increased $793 million, or 1 percent, to $61.8 billion.
• Commercial Banking average loans increased $3.3 billion, or 4 percent, to $79.8 billion.
• Period-end total deposits increased $34.5 billion, or 13 percent, to $304.2 billion, while average deposits increased $23.7 billion, or 9 percent, to $288.3 billion.
• Interest-bearing deposits rate paid decreased 27 basis points to 0.94 percent.

(1)

Amounts excluding adjusting items are non-GAAP measures that we believe help investors and users of our financial information understand the effect of adjusting items on our selected reported results and provide alternate measurements of our performance, both in the current period and across periods. See Table 15 in Exhibit 99.2 for a reconciliation of our selected reported results to these non-GAAP measures.

(2)

Pre-provision earnings is calculated based on the sum of net interest income and non-interest income, less non-interest expense for the period.

Earnings Conference Call Webcast Information

The company will hold an earnings conference call on July 21, 2020 at 5:00 PM Eastern Time. The conference call will be accessible through live webcast. Interested investors and other individuals can access the webcast via the company's home page (www.capitalone.com). Under "About," choose "Investors" to access the Investor Center and view and/or download the earnings press release, the financial supplement, including a reconciliation of non-GAAP financial measures, and the earnings release presentation. The replay of the webcast will be archived on the company's website through August 4, 2020 at 5:00 PM Eastern Time.

Forward-Looking Statements

Certain statements in this release may constitute forward-looking statements, which involve a number of risks and uncertainties. Capital One cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information due to a number of factors, including those listed from time to time in reports that Capital One files with the Securities and Exchange Commission, including, but not limited to, the Annual Report on Form 10-K for the year ended December 31, 2019.

About Capital One

Capital One Financial Corporation (www.capitalone.com) is a financial holding company whose subsidiaries, which include Capital One, N.A., and Capital One Bank (USA), N.A., had $304.2 billion in deposits and $421.3 billion in total assets as of  June 30, 2020. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients through a variety of channels. Capital One, N.A. has branches located primarily in New York, Louisiana, Texas, Maryland, Virginia, New Jersey and the District of Columbia. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index.

 

Exhibit 99.2
Capital One Financial Corporation
Financial Supplement(1)(2)
Second Quarter 2020
Table of Contents
Capital One Financial Corporation Consolidated Results	Page
	Table 1:	Financial Summary—Consolidated	1
	Table 2:	Selected Metrics—Consolidated	3
	Table 3:	Consolidated Statements of Income	4
	Table 4:	Consolidated Balance Sheets	6
	Table 5:	Notes to Financial Summary, Selected Metrics and Consolidated Financial Statements (Tables 1—4)	8
	Table 6:	Average Balances, Net Interest Income and Net Interest Margin	9
	Table 7:	Loan Information and Performance Statistics	10
	Table 8:	Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity	12
Business Segment Results
	Table 9:	Financial Summary—Business Segment Results	14
	Table 10:	Financial & Statistical Summary—Credit Card Business	15
	Table 11:	Financial & Statistical Summary—Consumer Banking Business	17
	Table 12:	Financial & Statistical Summary—Commercial Banking Business	18
	Table 13:	Financial & Statistical Summary—Other and Total	19
Other
	Table 14:	Notes to Loan, Allowance and Business Segment Disclosures (Tables 7—13)	20
	Table 15:	Calculation of Regulatory Capital Measures and Reconciliation of Non-GAAP Measures	21
__________
(1)	The information contained in this Financial Supplement is preliminary and based on data available at the time of the earnings presentation. Investors should refer to our Quarterly Report on Form 10-Q for the period ended June 30, 2020 once it is filed with the Securities and Exchange Commission.
(2)	This Financial Supplement includes non-GAAP measures. We believe these non-GAAP measures are useful to investors and users of our financial information as they provide an alternate measurement of our performance and assist in assessing our capital adequacy and the level of return generated. These non-GAAP measures should not be viewed as a substitute for reported results determined in accordance with generally accepted accounting principles in the U.S. ("GAAP"), nor are they necessarily comparable to non-GAAP measures that may be presented by other companies.

            

 

CAPITAL ONE FINANCIAL CORPORATION (COF)
Table 1: Financial Summary—Consolidated
												2020 Q2 vs.		Six Months Ended June 30,
(Dollars in millions, except per share data and as noted)		2020		2020		2019		2019		2019		2020		2019						2020 vs.
	Q2		Q1		Q4		Q3		Q2		Q1		Q2		2020		2019		2019
Income Statement
Net interest income		$	5,460			$	6,025			$	6,066			$	5,737			$	5,746			(9)	%		(5)	%		$	11,485			$	11,537			—
Non-interest income		1,096			1,224			1,361			1,222			1,378			(10)			(20)			2,320			2,670			(13)	%
Total net revenue(1)		6,556			7,249			7,427			6,959			7,124			(10)			(8)			13,805			14,207			(3)
Provision for credit losses		4,246			5,423			1,818			1,383			1,342			(22)			**			9,669			3,035			**
Non-interest expense:
Marketing		273			491			710			501			546			(44)			(50)			764			1,063			(28)
Operating expense		3,497			3,238			3,451			3,371			3,233			8			8			6,735			6,387			5
Total non-interest expense		3,770			3,729			4,161			3,872			3,779			1			—			7,499			7,450			1
Income (loss) from continuing operations before income taxes		(1,460)			(1,903)			1,448			1,704			2,003			(23)			**			(3,363)			3,722			**
Income tax provision (benefit)		(543)			(563)			270			375			387			(4)			**			(1,106)			696			**

FAQ

What was the net loss reported by Capital One (COF) for Q2 2020?

Capital One reported a net loss of $918 million for Q2 2020.

How did Capital One's total net revenue change in Q2 2020 compared to Q1 2020?

Total net revenue decreased by 10% to $6.6 billion in Q2 2020 compared to Q1 2020.

What increase in deposits did Capital One (COF) see in the second quarter of 2020?

Capital One saw a 13% increase in period-end total deposits, rising to $304.2 billion.

What was the provision for credit losses reported by Capital One (COF) for Q2 2020?

The provision for credit losses was $4.2 billion, a decrease of 22% from the previous quarter.

How much did Capital One's net interest margin decrease in Q2 2020?

The net interest margin decreased by 100 basis points to 5.78% in Q2 2020.