Capital One Financial Corp.’s (COF) fourth quarter 2012 earnings of $1.41 per share significantly lagged the Zacks Consensus Estimate of $1.62. However, this was nearly 60% above the prior-year quarter earnings of 88 cents.
For 2012, Capital One reported earnings of $6.16 per share. This was below the Zacks Consensus Estimate of $6.43 and prior-year earnings of $6.80.
The quarterly results improved on a year-over-year basis. Growth in top line was partially offset by rise in operating expenses. Further, strong profitability as well as capital ratios and improving asset quality were the highlights of the quarter.
Net income from continuing operations for the fourth quarter came in at $848 million or $1.42 per share compared with $411 million or 89 cents per share in the year-ago quarter. In 2012, it stood at $3.73 billion or $6.54 per share versus $3.25 billion or $7.03 per share in 2011.
Performance in Detail
Capital One’s net revenues for the reported quarter stood at $5.62 billion, jumping 38.9% year over year. Yet, revenues were below the Zacks Consensus Estimate of $5.78 billion.
Net revenues for 2012 were $21.40 billion, surging 31.4% from $16.28 billion in 2011. Also, revenues were above the Zacks Consensus Estimate of $20.86 billion.
Net interest income for the quarter grew 42.3% from the previous-year quarter to $4.53 billion. However, net interest margin decreased 70 basis points (bps) year over year to 6.52%.
Non-interest income surged 26.3% from $868 million in the prior-year quarter to $1.10 billion in the reported quarter. The increase was mainly driven by higher service charges and other customer-related fees as well as rise in interchange fees.
Capital One’s operating expenses rose 24.3% from the prior-year quarter to $3.26 billion. The increase was largely attributable to higher salaries and associate benefits costs and merger-related expenses, partially offset by lower marketing expenses.
The managed efficiency ratio deteriorated to 57.88% from 64.64% in the prior-year quarter. The rise in efficiency ratio indicates decline in profitability.
Capital One’s credit quality showed improvement during the reported quarter. Net charge-off rate declined 43 bps from 2.69% in the prior-year quarter to 2.26%.
Similarly, the 30-plus day performing delinquency rate decreased 65 bps year over year to 2.