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Last Update: 20-Jan-12 10:02 ET
Capital One Down 7% Following Earnings results
Capital One (COF $45.46 -3.31) is trading lower after reporting a large miss after the close yesterday.
Late yesterday, the company reported fourth quarter earnings of $0.88 per share, $0.69 worse than the Capital IQ Consensus Estimate of $1.57; revenues $4.05 bln vs the $4.16 bln consensus. Domestic Card reported net income in fourth quarter of $395 million.
Total revenue grew 4.7% YoY in fourth quarter, driven by growth in loans, strong purchase volumes, and stable margins. Domestic Card net charge-off rate increased 15 bps in the quarter to 4.07%, consistent with expected seasonal patterns. Compared with the fourth quarter of 2010, the charge-off rate improved by 321 bps, resulting from the significant credit improvements experienced in 2011. Domestic Card loan balances grew $2.8 billion, or 5%, in fourth quarter driven by seasonal spending and balance building on a growing account base. Net interest margin declined 17 basis points in the quarter to 7.22%.
The margin benefited from a shift from cash to loans and a reduction in funding costs attributed to lower deposit rates. These benefits were more than offset by a decline in loan yields driven largely by one-time effects such as the absence of the FCFR release which benefited third quarter 2011 interest income. The company's estimated Tier 1 common equity ratio decreased 30 basis points from Sept 30, 2011, to 9.7% as of December 31, 2011, driven by strong loan growth at the end of the fourth quarter.
The Tier 1 common equity ratio increased 90 basis points from last year's rate of 8.8% at Dec 31, 2010. Using known Basel III definitions, our Tier 1 common equity ratio would have been ~10 basis points higher at December 31, 2011, or 9.8%.
Late yesterday, the company reported fourth quarter earnings of $0.88 per share, $0.69 worse than the Capital IQ Consensus Estimate of $1.57; revenues $4.05 bln vs the $4.16 bln consensus. Domestic Card reported net income in fourth quarter of $395 million.
Total revenue grew 4.7% YoY in fourth quarter, driven by growth in loans, strong purchase volumes, and stable margins. Domestic Card net charge-off rate increased 15 bps in the quarter to 4.07%, consistent with expected seasonal patterns. Compared with the fourth quarter of 2010, the charge-off rate improved by 321 bps, resulting from the significant credit improvements experienced in 2011. Domestic Card loan balances grew $2.8 billion, or 5%, in fourth quarter driven by seasonal spending and balance building on a growing account base. Net interest margin declined 17 basis points in the quarter to 7.22%.
The margin benefited from a shift from cash to loans and a reduction in funding costs attributed to lower deposit rates. These benefits were more than offset by a decline in loan yields driven largely by one-time effects such as the absence of the FCFR release which benefited third quarter 2011 interest income. The company's estimated Tier 1 common equity ratio decreased 30 basis points from Sept 30, 2011, to 9.7% as of December 31, 2011, driven by strong loan growth at the end of the fourth quarter.
The Tier 1 common equity ratio increased 90 basis points from last year's rate of 8.8% at Dec 31, 2010. Using known Basel III definitions, our Tier 1 common equity ratio would have been ~10 basis points higher at December 31, 2011, or 9.8%.
