Capital One Financial Corporation (NYSE:COF) Q2 2019 Earnings Conference Call Transcript

Jul 18, 2019 • 05:00 pm ET

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Capital One Financial Corporation (NYSE:COF) Q2 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Welcome to the Capital One Second Quarter 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. [Operator Instructions] Thank you. I would now like to turn the call over to Mr. Jeff Norris, Senior Vice President of Finance. Sir, you may begin.

Executive
Jeff Norris

Thanks very much, Leanne, and welcome everyone to Capital One's second quarter 2019 earnings conference call. As usual, we are webcasting live over the Internet. To access the call on the Internet, please log on to Capital One's website at capitalone.com and follow the links from there. In addition to the press release and financials, we've included a presentation summarizing our first quarter 2019 results.

With me this evening are Mr. Richard Fairbank, Capital One's Chairman and Chief Executive Officer; and Mr. Scott Blackley, Capital One's Chief Financial Officer. Rich and Scott will walk you through the presentation. To access a copy of the presentation and press release, please go to Capital One's website, click on Investors, then click on Quarterly Earnings Release.

Please note that the presentation may contain forward-looking statements. Information regarding Capital One's financial performance and any forward-looking statements contained in today's discussion and the materials speak only as of the particular date or dates indicated in the materials. Capital One does not undertake any obligation to update or revise any of this information whether as a result of new information, future events or otherwise.

Numerous factors could cause our actual results to differ materially from those described in forward-looking statements. And for more information on these factors, please see the section titled forward-looking information in the earnings release presentation and the risk factors section in our annual and quarterly reports, which are accessible at the Capital One website and filed with the SEC.

Now I'll turn the call over to Scott.

Executive
Scott Blackley

Thanks, Jeff. I'll begin tonight with Slide 3. Capital One earned $1.6 billion or $3.24 per share in the second quarter. Net of adjusting items, earnings per share were $3.37. Adjusting items in the quarter included $54 million of launch and integration costs associated with our Walmart partnership and $28 million of restructuring charges associated with the exit of certain investing businesses. Slide 13 of our earnings presentation outlines the financial impact of these costs.

In addition to these adjusting items, we sold several small partnership portfolios in the quarter, totaling approximately $1 billion of outstandings, which resulted in a pre-tax impact of $128 million or $0.21 per share and included a gain on sale of $49 million and an allowance release of $68 million. This collection of partnerships generated about $160 million in annual revenue. Relative to a year ago, adjusted pre-provision earnings declined 1%, with revenue growing 4%, offset by non-interest expense growing 9%, which was driven by higher marketing expense and the absence of a non-recurring adjustment to a vendor agreement this time last year.

Provision for credit losses increased 5%, driven by a