CAPITAL ONE FINANCIAL CORP
For the period ended Sep 30, 2024. Filed Oct 31, 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.
Sep 30, 2024 · Filed Oct 31, 2024
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Credit Card Business Results
Credit Card Business
The primary sources of revenue for our Credit Card business are net interest income, net interchange income and fees collected from customers. Expenses primarily consist of the provision for credit losses, operating costs and marketing expenses.
Our Credit Card business generated net income from continuing operations of $1.4 billion and $2.4 billion in the third quarter and first nine months of 2024, respectively, and $1.3 billion and $2.7 billion in the third quarter and first nine months of 2023, respectively.
Table 9 summarizes the financial results of our Credit Card business and displays selected key metrics for the periods indicated.
Table 9: Credit Card Business Results
| Three Months Ended September 30, · Nine Months Ended September 30, | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in millions, except as noted) · 2024 · 2023 · Change · 2024 · 2023 · Change | ||||||||||||
| Selected income statement data: | ||||||||||||
| Net interest income | $5,743 | $5,114 | 12% | $16,309 | $14,498 | 12% | ||||||
| Non-interest income | 1,509 | 1,513 | — | 4,491 | 4,375 | 3 | ||||||
| Total net revenue(1) | 7,252 | 6,627 | 9 | 20,800 | 18,873 | 10 | ||||||
| Provision for credit losses | 2,084 | 1,953 | 7 | 7,888 | 6,298 | 25 | ||||||
| Non-interest expense | 3,367 | 3,015 | 12 | 9,730 | 9,073 | 7 | ||||||
| Income from continuing operations before income taxes | 1,801 | 1,659 | 9 | 3,182 | 3,502 | (9) | ||||||
| Income tax provision | 427 | 393 | 9 | 756 | 830 | (9) | ||||||
| Income from continuing operations, net of tax | $1,374 | $1,266 | 9 | $2,426 | $2,672 | (9) | ||||||
| Selected performance metrics: | ||||||||||||
| Average loans held for investment | $153,972 | $144,049 | 7 | $151,371 | $139,195 | 9 | ||||||
| Average yield on loans(2) | 19.66% | 19.02% | 64bps | 19.10% | 18.40% | 70bps | ||||||
| Total net revenue margin(3) | 18.82 | 18.40 | 42 | 18.28 | 18.08 | 20 | ||||||
| Net charge-offs | $2,154 | $1,592 | 35% | $6,619 | $4,489 | 47% | ||||||
| Net charge-off rate | 5.60% | 4.42% | 118bps | 5.83% | 4.30% | 153bps | ||||||
| Purchase volume | $166,203 | $158,640 | 5% | $481,517 | $458,235 | 5% | ||||||
| (Dollars in millions, except as noted) | September 30, 2024 | December 31, 2023 | Change | |||||||||
| Selected period-end data: | ||||||||||||
| Loans held for investment | $156,651 | $154,547 | 1% | |||||||||
| 30+ day performing delinquency rate | 4.53% | 4.61% | (8)bps | |||||||||
| 30+ day delinquency rate | 4.54 | 4.62 | (8) | |||||||||
| Nonperforming loan rate(4) | 0.01 | 0.01 | — | |||||||||
| Allowance for credit losses | $12,989 | $11,709 | 11% | |||||||||
| Allowance coverage ratio | 8.29% | 7.58% | 71bps | |||||||||
(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. Total net revenue was reduced by $624 million and $1.9 billion in the third quarter and first nine months of 2024, respectively, compared to $449 million and $1.3 billion in the third quarter and first nine months of 2023, respectively, for finance charges and fees charged-off as uncollectible.
(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)Within our credit card loan portfolio, only certain loans in our international card businesses are classified as nonperforming. See “Nonperforming Loans and Other Nonperforming Assets” for additional information.
| 24 | Capital One Financial Corporation (COF) |
Key factors affecting the results of our Credit Card business for the third quarter and first nine months of 2024 compared to the third quarter and first nine months of 2023, and changes in financial condition and credit performance between September 30, 2024 and December 31, 2023 include the following:
Net Interest Income: Net interest income increased by $629 million to $5.7 billion in the third quarter of 2024 and increased by $1.8 billion to $16.3 billion in the first nine months of 2024 primarily driven by higher average loan balances and margins, including the impacts of the elimination of revenue sharing provisions due to the Walmart Program Termination.
Non-Interest Income: Non-interest income remained substantially flat at $1.5 billion in the third quarter of 2024 compared to the third quarter of 2023. Non-interest income increased by $116 million to $4.5 billion in the first nine months of 2024 due to growth in our Credit Card business.
Provision for Credit Losses: Provision for credit losses increased by $131 million to $2.1 billion in the third quarter of 2024 driven by higher net charge-offs, including the impacts of the elimination of loss sharing provisions due to the Walmart Program Termination, partially offset by an allowance release compared to an allowance build in the third quarter of 2023. Provision for credit losses increased by $1.6 billion to $7.9 billion in the first nine months of 2024 primarily driven by higher net charge-offs, partially offset by a lower allowance build.
Non-Interest Expense: Non-interest expense increased by $352 million to $3.4 billion in the third quarter of 2024 and increased by $657 million to $9.7 billion in the first nine months of 2024 primarily driven by growth in our Credit Card business and increased marketing spend.
Period-end loans held for investment increased by $2.1 billion to $156.7 billion as of September 30, 2024 from December 31, 2023 primarily driven by growth across our portfolio.
Average loans held for investment increased by $9.9 billion to $154.0 billion in the third quarter of 2024 compared to the third quarter of 2023 and increased by $12.2 billion to $151.4 billion in the first nine months of 2024 compared to the first nine months of 2023 primarily driven by growth across our portfolio.
Net Charge-Off and Delinquency Metrics:
The net charge-off rate increased by 118 bps to 5.60% in the third quarter of 2024 compared to the third quarter of 2023 and increased by 153 bps to 5.83% in the first nine months of 2024 compared to the first nine months of 2023 primarily driven by higher principal charge-offs in our domestic credit card loan portfolio.
The 30+ day delinquency rate decreased by 8 bps to 4.54% as of September 30, 2024 from December 31, 2023 primarily driven by higher ending loan balances.
| 25 | Capital One Financial Corporation (COF) |
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