Capital One Auto Finance Bolsters Originations by 32 Percent
McLEAN, Va. — Capital One Auto Finance recently reported that quarter-over-quarter auto originations are up 32 percent, but the management team said these remain down modestly from the first quarter of 2009.
Originations for the first quarter came in at $1,343,463, compared with $1,018,125 in the prior quarter and $1,463,402 in the same period of 2009.
The consumer banking segment, which includes the auto finance division, reported that auto declined $739.6 million, or 4.1 percent, to $17.4 billion.
"The decline reflects the continued impact of repositioning the business earlier in the recession," the management team explained.
Net charge-offs for the auto segment came in at 2.97 percent, down 1.58 basis points. This figure is down from 4.55 percent in the fourth quarter of last year and 4.88 percent in the first quarter of 2009.
Officials indicated that they believe the first quarter is "likely the peak of consumer credit charge-offs."
The company also pointed out to investors that when it comes to Capital One Auto Finance's share of bank originations, it came in at No. 4 last year. The top 10 companies listed include:
1. J.P. Morgan Chase at 18 percent
2. Wells Fargo at 11 percent
3. Bank of America at 6 percent
4. Capital One at 4 percent
5. U.S. Bancorp at 4 percent
6. Fifth Third Bank at 3 percent
7. Citizens at 2 percent
8. SunTrust at 2 percent
9. BMO/Harris at 2 percent
10. World Omni at 2 percent
Discussing the overall business, the management team indicated that "provision expense decreased $368.6 million from the prior quarter, or 20 percent, driven by lower charge-offs and an allowance release of $566 million. Total charge-offs in the quarter fell as improvements in the company's commercial, auto finance and retail businesses more than offset a slight increase in domestic card charge-offs."
For the company in its entirety, net income for the first quarter was $636.3 million, or $1.40 per common share, compared with $375.6 million, or $0.83 per common share, in the fourth quarter of last year. Capital One also indicated that its first quarter gain compares with a loss of $172.3 million in the first quarter of 2009, or a negative $0.44 per share.
Total revenue for the company dropped $79.3 million, or 1.8 percent, from the fourth quarter to $4.3 billion, by and large due to a decline in average loans. However, officials noted that an improvement in margin partially offset a 2.9-percent decline in average loans.
Additionally, non-interest income decreased $137.4 million, or 11.5 percent, compared to the previous quarter, while net interest income was up $58.1 million, or 1.8 percent.
Officials said the net interest margin increased 20 basis points in the quarter to 7.1 percent, driven by a 17 basis point decrease in the cost of funds and a 3 basis point increase in loan yields.
Discussing Capital One's results, Richard Fairbank, chairman and chief executive officer, said, "We've demonstrated our resilience through the most challenging economic cycle we've seen in generations, and we believe that charge-offs in our consumer lending business likely peaked in he first quarter.
"While legislative and regulatory uncertainty remains, we believe that we are well-positioned to ramp up our businesses as we emerge from the recession and deliver strong and sustainable returns over the long term," he continued.
Meanwhile, Gary Perlin, Capital One's chief financial officer, added, "Capital One posted strong bottom-line results in the quarter, as modestly improved pre-provision earnings were bolstered by lower provision expenses.
"As we begin to emerge from the challenging economic environment, our strong and flexible balance sheet continues to position us well to take advantage of profitable growth opportunities," he said.