* 1st-qtr EPS $1.79 vs est. $1.60
* Net revenue $5.55 bln vs est. $5.58 bln
* 1st-qtr net interest income jumps 34 percent
* Shares up 2 pct in after-market trading
By Ashutosh Pandey
April 18 Capital One Financial Corp's
first-quarter profit beat analysts' expectations as net interest
income jumped 34 percent, and the company said it would buy back
shares after closing the sale of its credit card accounts linked
to electronics retailer Best Buy Co Inc.
Capital One, one of the large U.S. credit card issuers, said
in February it would sell to Citigroup its $7 billion
portfolio of private label and co-branded credit card accounts
linked to electronics retailer Best Buy.
"We've started discussions with our regulators to seek
approval to begin share repurchases in 2013," Chief Executive
Richard Fairbank said on a post-earnings conference call with
Chief Financial Officer Gary Perlin said Capital One would
wait until the sale closes in the third quarter to begin stock
Capital One passed the Federal Reserve stress test last
month, and the Fed did not object to the company's capital plan.
It expects to raise its dividend to 30 cents per share from 5
cents per share beginning in May.
The company reiterated its 2013 operating expenses forecast
of $11 billion. "In 2014, we expect operating expense to improve
to about $10.4 billion," Fairbank said.
Shares of the company, which has a market value of about $31
billion, rose 2 percent after the bell. They had closed at
$52.79 on Thursday on the New York Stock Exchange.
The company's net income fell to $1.06 billion, or $1.79 per
share, in the quarter from $1.40 billion, or $2.72 per share a
year earlier, when the company recorded a $594 million gain
related to its purchase of ING's online banking business.
Excluding the gain, the company had earned $1.56 per share a
Total net revenue rose 12 percent to $5.55 billion.
Analysts on average had expected the lender to earn $1.60
per share on revenue of $5.58 billion, according to Thomson
Capital One's net charge off rate - the percentage of loans
written off as unrecoverable - fell marginally by 6 basis points
from the end of the fourth quarter.
The company, one of the large credit card issuers in the
United States, set aside $885 million to cover bad loans in the
first quarter, down 23 percent from the fourth quarter, largely
driven by a $261 million release in allowance.
"The largest component of the allowance release was in
domestic card, due to better-than-anticipated credit performance
in the quarter, including delinquencies," the company said in a
Capital One had the weakest-quality overall loan book, with
a 13.2 percent overall loss rate, in Federal Reserve's annual
stress tests of the 18 largest U.S. banks. That was attributable
to high loss rates on junior liens and home-equity loans, as
well as credit cards.
The McLean, Virginia-based lender, which has spent much of
the past decade transforming itself from a specialty credit card
issuer dependent on bond market funding into a bank that relies
on deposits, is now one of the top 10 U.S. banks by deposits,
and has over 1,000 bank branches.
Capital One shares have fallen about 14 percent in the last
three months, trailing the broader S&P 500 Index that has
gained 5 percent. The Thomson Reuters Consumer Financial
Services Index has risen about 3 percent.