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Capital One(COF) - 2024 Q2 - Quarterly Report
COFCapital One(COF)2024-08-01 20:24
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Revenue and Financial Performance - As of June 30, 2024, Capital One's total net revenues are primarily derived from lending to consumer and commercial customers, net of funding costs, with significant contributions from non-interest income such as interchange income[7]. - Total net revenue reached 9,506million,reflectinga59,506 million, reflecting a 5% growth compared to 9,012 million in the same period last year[11]. - Net income available to common stockholders decreased by 61% to 531million,downfrom531 million, down from 1,351 million in Q2 2023[11]. - Total net revenue for Q2 2024 was 9.5billion,upfrom9.5 billion, up from 9.0 billion in Q2 2023, while total net revenue for the first six months of 2024 was 18.9billioncomparedto18.9 billion compared to 17.9 billion in the same period of 2023[15]. - Net income for Q2 2024 was 597million(597 million (1.38 per diluted common share), a decrease of 834millioncomparedtoQ22023[15].−TotalnetrevenuefortheCreditCardbusinessincreasedto834 million compared to Q2 2023[15]. - Total net revenue for the Credit Card business increased to 6.8 billion in Q2 2024, up 9% from 6.2billioninQ22023[48].−Totalnetrevenuedecreasedby6.2 billion in Q2 2023[48]. - Total net revenue decreased by 9 million to 880millioninQ22024comparedtoQ22023[67].CreditLossesandRiskManagement−Provisionforcreditlossessurgedto880 million in Q2 2024 compared to Q2 2023[67]. Credit Losses and Risk Management - Provision for credit losses surged to 3,909 million, a significant increase of 57% from 2,490millioninQ22023[11].−Thenetcharge−offrateincreasedto3.362,490 million in Q2 2023[11]. - The net charge-off rate increased to 3.36%, up from 2.82% in the previous year, indicating a rise in credit losses[12]. - The allowance for credit losses increased by 9% to 16,649 million, compared to 15,296millionattheendof2023[13].−Provisionforcreditlossesincreasedby15,296 million at the end of 2023[13]. - Provision for credit losses increased by 1.4 billion to 3.9billioninQ22024,primarilyduetohighernetcharge−offsinDomesticCard[31].−Thenetcharge−offrateincreasedto6.003.9 billion in Q2 2024, primarily due to higher net charge-offs in Domestic Card[31]. - The net charge-off rate increased to 6.00% in Q2 2024, up 159 basis points from 4.41% in Q2 2023[50]. - The allowance for credit losses increased to 6,592 million for the six months ended June 30, 2024, up from 5,285millioninthesameperiodof2023,indicatingariseofabout24.85,285 million in the same period of 2023, indicating a rise of about 24.8%[182]. Assets and Liabilities - Total assets grew to 477,285 million, a 2% increase from 466,652million[12].−Totalliabilitiesincreasedby466,652 million[12]. - Total liabilities increased by 1.7 billion to 422.0billionasofJune30,2024,primarilyduetodepositgrowth[35].−Totalassetsreached422.0 billion as of June 30, 2024, primarily due to deposit growth[35]. - Total assets reached 476.1 billion as of June 30, 2024, compared to 464.5billionattheendof2023[24].−Totaldepositsincreasedby464.5 billion at the end of 2023[24]. - Total deposits increased by 3.0 billion to 351.4billionasofJune30,2024,drivenbythenationalconsumerbankingstrategy[39].CapitalandEquity−CommonequityTier1(CET1)capitalratioincreasedto13.2351.4 billion as of June 30, 2024, driven by the national consumer banking strategy[39]. Capital and Equity - Common equity Tier 1 (CET1) capital ratio increased to 13.2% as of June 30, 2024, from 12.9% as of December 31, 2023[15]. - The Company and the Bank exceeded the minimum capital requirements and were both classified as "well-capitalized" as of June 30, 2024[82]. - Stockholders' equity decreased by 108 million to 58.0billionasofJune30,2024,impactedbyaccumulatedothercomprehensivelossandstockdividends[35].−TheCompanyrepurchased58.0 billion as of June 30, 2024, impacted by accumulated other comprehensive loss and stock dividends[35]. - The Company repurchased 150 million of common stock in Q2 2024 and 253millioninthefirstsixmonthsof2024[88].MergersandAcquisitions−CapitalOnehasenteredintoamergeragreementwithDiscoverFinancialServices,whereeachshareofDiscoverwillbeconvertedinto1.0192sharesofCapitalOnecommonstock,subjecttoregulatoryapprovals[9].−Thecompanyisfocusedonenhancingitsmarketpositionthroughstrategicinvestmentsandpotentialmergers,includingthemergerwithDiscoverBank[160].−ThemergeragreementwithDiscoverFinancialServiceswasunanimouslyapprovedbybothcompanies′BoardsofDirectors,witheachshareofDiscovercommonstockconvertinginto1.0192sharesofCapitalOnecommonstock[187].RegulatoryandCompliance−TheConsumerFinancialProtectionBureau′sfinalrule,ifenacted,couldsignificantlylowerthesafeharboramountforpastduefees,potentiallyimpactingCapitalOne′srevenueandmarketdynamics[10].−TheBankwillberequiredtosubmitfullresolutionplanseverythreeyearsstartingOctober1,2024,aspertheFDIC′snewrule[149].−TheFederalReserveisexpectedtofinalizetheCompany′sstresscapitalbufferrequirementbyAugust31,2024[148].OperationalEfficiency−TheadjustedoperatingefficiencyratioforthethreemonthsendedJune30,2023,was40.31253 million in the first six months of 2024[88]. Mergers and Acquisitions - Capital One has entered into a merger agreement with Discover Financial Services, where each share of Discover will be converted into 1.0192 shares of Capital One common stock, subject to regulatory approvals[9]. - The company is focused on enhancing its market position through strategic investments and potential mergers, including the merger with Discover Bank[160]. - The merger agreement with Discover Financial Services was unanimously approved by both companies' Boards of Directors, with each share of Discover common stock converting into 1.0192 shares of Capital One common stock[187]. Regulatory and Compliance - The Consumer Financial Protection Bureau's final rule, if enacted, could significantly lower the safe harbor amount for past due fees, potentially impacting Capital One's revenue and market dynamics[10]. - The Bank will be required to submit full resolution plans every three years starting October 1, 2024, as per the FDIC's new rule[149]. - The Federal Reserve is expected to finalize the Company's stress capital buffer requirement by August 31, 2024[148]. Operational Efficiency - The adjusted operating efficiency ratio for the three months ended June 30, 2023, was 40.31%, compared to 43.36% for the same period in 2024, indicating improved operational efficiency[153]. - Non-interest expense rose to 4,946 million in Q2 2024, up 3.2% from 4,794millioninQ22023[176].ConsumerBankingandCreditQuality−Thetotalconsumerbankingsegmentreportedatotalof4,794 million in Q2 2023[176]. Consumer Banking and Credit Quality - The total consumer banking segment reported a total of 75,663 million as of June 30, 2024, compared to 75,437milliononDecember31,2023,reflectingamarginalincrease[100].−Theoverallcreditqualityoftheconsumerbankingportfolioismonitoredthroughborrowercreditscoresanddelinquencytrends,withafocusonmaintainingacceptablerisklevels[198].−Thedelinquencyratefordomesticcreditcardswas4.1475,437 million on December 31, 2023, reflecting a marginal increase[100]. - The overall credit quality of the consumer banking portfolio is monitored through borrower credit scores and delinquency trends, with a focus on maintaining acceptable risk levels[198]. - The delinquency rate for domestic credit cards was 4.14% as of June 30, 2024, slightly improved from 4.17% on December 31, 2023[109]. Investment and Securities - As of June 30, 2024, Capital One's total investment securities available for sale amounted to 79,250 million, with gross unrealized losses of 10,463million[188].−ThetotalamountoftreasurystockasofJune30,2024,was10,463 million[188]. - The total amount of treasury stock as of June 30, 2024, was 30,548 million, an increase from $30,136 million as of December 31, 2023[179].