Sunday, January 27, 2013

Capital One Earnings Review: Performance Slows

Capital One reported QE December 2012 financial results on January 17

Capital One earnings per share of $1.41 was a -30% drop from the prior quarter ($2.01) but a sizable +60% jump from the prior year ($0.88). CEO Richard Fairbank is expected to report an improved financial performance next quarter.

Financial position and capital remain very strong. Risk management appears very good. Operating expenses and losses continue somewhat high historically in relation to gross revenues.

At QE 12-31-12 I have rated Capital One an "A-" on a scale of A+ to G-. This is no change in the rating from the prior QE 9-30-12. The median rating is "D" and the average rating at QE 9-30-12 was "C". Financial position strength is weighted more than financial performance. The QE 9-30-12 bank ratings review is here.

"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 Chief Executive Officer. "As a first step, we expect to return to a meaningful dividend in 2013, following the completion of the current CCAR process."

"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 Chief Financial Officer. "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."


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