EmailCapital One (COF $51.81 -0.43) reported second quarter earnings of $1.97 per share, $0.27 better than the Capital IQ Consensus Estimate of $1.70.
Revenues rose 2.3% year/year to $3.99 billion versus the $4.02 billion
consensus.
The company's estimated Tier 1 common equity ratio rose to ~9.2% as of June 30,
2011, up 80 basis points from March 31, 2011. Period-end loan balances increased
$4.9 billion, or 4%, driven largely by the addition of the $3.7 billion Kohl's
portfolio in the Domestic Card Segment, as well as growth in both Auto Finance
and Commercial Banking. Ex-the addition of the Kohl's portfolio, period-end
loans in the Domestic Card Segment declined modestly in the quarter, as about
$200 million of growth in revolving card balances was more than offset by ~$500
million of expected run off of the Installment Loan portfolio, which is included
in the Domestic Card Segment.
Purchase volume increased in the quarter to $34.3 billion, from $27.8 billion in
the first quarter of 2011, owing to the addition of Kohl's, second quarter
seasonality and continued strong growth in purchase volume across the company's
Domestic Card Segment. While average loans in the quarter grew by $2.8 billion
to $127.9 billion, average earning assets grew a more modest $603 million as a
result of the expected decline in cash and investments due to the acquisition of
the Kohl's portfolio.
The company continues to believe that the upper end of the reasonably possible
future losses from representation and warranty claims beyond its current accrual
levels could be as high as $1.1 billion. Revenue margin for the second quarter
was 9.2%, down 24 bps quarter/quarter. While the net charge-off rate was down 75
bps quarter/quarter, the allowance coverage to loans ratio was only down 60 bps
to 3.48%.
