Capital One Financial Corporation (NYSE:COF) Q4 2014 Earnings Conference Call - Final Transcript

Jan 22, 2015 • 05:00 pm ET

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Capital One Financial Corporation (NYSE:COF) Q4 2014 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

I would now like to turn the call over to Mr. Jeff Norris, Senior Vice President of Global Finance. Sir, you may begin.

Executive
Jeff Norris

Thanks very much. Welcome, everyone, to Capital One's fourth quarter 2014 earnings conference call. As usual we're webcasting live over the Internet. If you want to access the call on the Internet, please log on to Capital One's Web site at www.capitalone.com and follow the links from there. In addition to the press release and financials, we have included

Executive
Jeff Norris

a presentation summarizing our fourth quarter 2014 results. With me today are Mr. Richard Fairbank, Capital One's Chairman and Chief Executive Officer; Mr. Steve Crawford, Capital One's Chief Financial Officer. Rich and Steve will walk you through this presentation. To access a copy of the presentation and press release, please go to Capital One's Web site, click on investors, then click on quarterly earnings release (forward-looking statements)With that I'll turn the call over to Mr. Crawford. Steve?

Executive
Stephen Crawford

I'll begin tonight with slide 3. 2014 full-year results reflect solid underlying performance across all of our businesses. Consistent with our expectations provided at the beginning of the year, 2014 pre-provision earnings were $10.1 billion. Net income grew 7%, and earnings per share grew 10%. For the year, return on average tangible common equity was 15.8%. Our balance sheet remains strong with an ending common equity tier 1 capital ratio of 12.4%. And we reduced our common shares outstanding by 3%, reflecting our share buyback program that began in April.

For the fourth quarter, Capital One earned $999 million, or $1.73 per share. On a continuing operations basis, we earned $1.68 per share. Pre-provision earnings of $2.5 billion were down $125 million from the third quarter, as higher link quarter revenues were more than offset by higher marketing and operating expenses, largely driven by seasonal and growth related costs, and investments in our technology and regulatory agendas that we have highlighted for you over the past several quarters. Provision for credit losses increased on a link quarter basis, as higher charge-offs more than offset a smaller allowance build over the previous quarter.

As you can see on slide 4, reported NIM increased 12 basis points in the fourth quarter to 6.81%. Average interest earning assets were up quarter over quarter, driven by growth across our segments. Turning to slide 5, our common equity Tier 1 capital ratio on a Basel III standardized basis was 12.4%

Executive
Stephen Crawford

which reflects current phase-ins. On a standardized fully phased-in basis, we were at 11.4% in the fourth quarter. We reduced our net share count by 5 million shares in the quarter, primarily reflecting our share buyback actions. We expect to complete our previously announced $2.5 billion buyback program in the first quarter of 2015.

We formally entered parallel run for Basel III advanced approaches as of January 1, 2015, and we continue to estimate that our common equity Tier 1 capital ratio is above our target of 8%. Regarding the LCR, as of year end we estimate