CAPITAL ONE FINANCIAL CORP
For the period ended Jun 30, 2024. Filed Aug 1, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 1, 2024
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Domestic Card Business Results
Domestic Card Business
The Domestic Card business generated net income from continuing operations of $45 million and $963 million in the second quarter and first six months of 2024, respectively, and $828 million and $1.3 billion in the second quarter and first six months of 2023, respectively. In the second quarter and first six months of 2024 and 2023, the Domestic Card business accounted for greater than 90% of total net revenue of our Credit Card business.
Table 9.1 summarizes the financial results for our Domestic Card business and displays selected key metrics for the periods indicated.
Table 9.1: Domestic Card Business Results
| Three Months Ended June 30, · Six Months Ended June 30, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in millions, except as noted) · 2024 · 2023 · Change · 2024 · 2023 · Change | ||||||||||
| Selected income statement data: | ||||||||||
| Net interest income | $5,001 | $4,453 | 12% | $9,973 | $8,843 | 13% | ||||
| Non-interest income | 1,440 | 1,431 | 1 | 2,851 | 2,729 | 4 | ||||
| Total net revenue(1) | 6,441 | 5,884 | 9 | 12,824 | 11,572 | 11 | ||||
| Provision for credit losses | 3,435 | 1,995 | 72 | 5,592 | 4,169 | 34 | ||||
| Non-interest expense | 2,946 | 2,805 | 5 | 5,971 | 5,652 | 6 | ||||
| Income from continuing operations before income taxes | 60 | 1,084 | (94) | 1,261 | 1,751 | (28) | ||||
| Income tax provision | 15 | 256 | (94) | 298 | 413 | (28) | ||||
| Income from continuing operations, net of tax | $45 | $828 | (95) | $963 | $1,338 | (28) | ||||
| Selected performance metrics: | ||||||||||
| Average loans held for investment | $143,744 | $132,505 | 8 | $143,316 | $130,544 | 10 | ||||
| Average yield on loans(2) | 18.73% | 18.07% | 66bps | 18.75% | 17.98% | 77bps | ||||
| Total net revenue margin(3)(4) | 17.87 | 17.76 | 11 | 17.85 | 17.73 | 12 | ||||
| Net charge-offs | $2,173 | $1,451 | 50% | $4,293 | $2,750 | 56% | ||||
| Net charge-off rate(5) | 6.05% | 4.38% | 167bps | 5.99% | 4.21% | 178bps | ||||
| Purchase volume | $161,370 | $154,184 | 5% | $308,066 | $292,494 | 5% | ||||
| (Dollars in millions, except as noted) | June 30, 2024 | December 31, 2023 | Change | |||||||
| Selected period-end data: | ||||||||||
| Loans held for investment | $147,065 | $147,666 | — | |||||||
| 30+ day performing delinquency rate | 4.14% | 4.61% | (47)bps | |||||||
| Allowance for credit losses | $12,560 | $11,261 | 12% | |||||||
| Allowance coverage ratio(6) | 8.54% | 7.63% | 91bps | |||||||
(1)We recognize finance charges and fee income on open-ended loans in accordance with the contractual provisions of the credit arrangements and charge off any uncollectible amounts. Finance charges and fees charged off as uncollectible are reflected as a reduction in total net revenue.
(2)Average yield is calculated based on annualized interest income for the period divided by average loans during the period and does not include any allocations, such as funds transfer pricing.
(3)Total net revenue margin is calculated based on annualized total net revenue for the period divided by average loans during the period.
(4)The termination of our Walmart program agreement, effective May 21, 2024 (“Walmart Program Termination”), included the termination of our revenue sharing and loss sharing arrangements. The Walmart Program Termination increased revenue margin by 10 bps in the second quarter of 2024.
(5)The Walmart Program Termination increased the Domestic Card net charge-off rate by 19 bps in the second quarter of 2024.
(6)The Walmart Program Termination increased the Domestic Card allowance coverage ratio by 56 bps as of June 30, 2024.
Because our Domestic Card business accounts for the substantial majority of our Credit Card business, the key factors driving the results are similar to the key factors affecting our total Credit Card business. Net income for our Domestic Card business decreased in the second quarter of 2024 and in the first six months of 2024 compared to the second quarter of 2023 and in the first six months of 2023 primarily driven by:
| 25 | Capital One Financial Corporation (COF) |
Higher provision for credit losses in the second quarter of 2024 primarily driven by higher net charge-offs and a larger allowance build due to elimination of loss sharing provisions that occurred within the Walmart program agreement, and higher provision for credit losses in the first six months of 2024 primarily driven by higher net charge-offs.
Higher non-interest expense primarily driven by increased marketing spend.
These drivers were partially offset by:
Higher net interest income primarily driven by higher average loan balances.
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