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Capital One Financial's (COF) CEO Richard Fairbank on Q1 2016 Results - Earnings Call Transcript

Q1 2016 Earnings Conference Call

April 26, 2016 05:00 PM ET

Executives

Jeff Norris - SVP of Global Finance

Richard Fairbank - Chairman and CEO

Steve Crawford - CFO

Analysts

Moshe Orenbuch - Credit Suisse

Rich Shane - JPMorgan

Betsy Graseck - Morgan Stanley

Sanjay Sakhrani - KBW

David Ho - Deutsche Bank

Ryan Nash - Goldman Sachs

Chris Brendler - Stifel

Don Fandetti - Citi

Ken Bruce - Bank of America Merrill

Arren Cyganovich - D.A. Davidson

Matt Burnell - Wells Fargo

Chris Donat - Sandler O'Neill

Operator

Welcome to the Capital One First Quarter 2016 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 Global Finance. Please go ahead sir.

Jeff Norris

Thanks very much, Tom, and welcome everyone to Capital One's first quarter 2016 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 the financials, we've included a presentation summarizing our first quarter 2016 results. With me these evenings are Mr. Richard Fairbank, Capital One's Chairman and Chief Executive Officer; and 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 website, click on Investors, then click on Quarterly Earnings Release.

Please note that this 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 entitled 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.

And with that, I'll turn the call over to Mr. Crawford. Steve?

Steve Crawford

Thanks Jeff, I’ll begin tonight with slide 3. Capital One earned $1 billion or $1.84 per share in the first quarter. Pre-provision earnings increased 10% from the fourth quarter to $3 billion as we had higher revenues and lower marketing and operating expenses. Provision for credit losses increased linked quarter driven by higher charge-offs and a $286 million allowance build including $73 million of allowance build in our oil and gas portfolio.

As you can see on slide 4 reported NIM decreased 4 basis points from the fourth quarter to 6.75%, driven by one last day of recognized income and a full quarter of lower yielding GE commercial assets, partially offset by higher interest rates.

NIM increased 18 basis point year-over-year fuelled by strong growth in our domestic card business.

Turning to slide 5, our common equity Tier 1 capital ratio on a Basel III standardized basis was 11.1%, which reflects current phase-ins. On a standardized fully phased-in basis, it was 10.9%. We reduced our net share count by 12.8 million shares in the quarter. As we completed our previously announced incremental 300 million in repurchases in the first quarter. We are on track to complete our remaining C card authorization by the end of the second quarter of 2016.