The company's noninterest income declined to $981 million in the first quarter from $1.096 billion in the fourth quarter and $1.521 billion a year earlier. The sequential decline reflected $97 million provision for mortgage repurchase claims in the first quarter. There was no provision for mortgage putback claims in the fourth quarter. The provision was $169 million in the first quarter of 2012. The year-over-year noninterest income decline reflected the prior period's gain on the ING Direct (USA) purchase.
First-quarter non-interest expense totaled $3.028 billion, declining from $3.255 billion in the fourth quarter, and increasing from $2.504 billion in the first quarter of 2012.
The provision for credit losses -- which is the amount added to loan loss reserves each quarter, thus lowering pretax earnings -- was $885 million in the first quarter, declining from $1.151 billion in the fourth quarter, and increasing from $573 million a year earlier.
Oppenheimer analyst Chris Kotowski rates Capital One "outperform," with a 12 to 18 month price target of $69. In a note to clients late on Thursday, the analyst wrote that "COF's 1Q13 was a tad better than we expected and way better than our worst fears."
While the first-quarter results were padded with a release of loan loss reserves that added 23 cents a share to the bottom line, the results were "still a dime better than expected," Kotowski wrote.
Kotowski raised his 2013 EPS estimate for Capital One to $6.71 from $6.48, and his 2014 EPS estimate to $6.86 from $6.79. "COF remains one of our top picks," he wrote. "Operating [return on tangible common equity] was 16.5%, the card business is resilient and granular with generally good earnings visibility and should fetch more that 8x current year's earnings."
Capital One's shares are down 3% this year, following a 38% return during 2012. The shares trade for 8.4 times the consensus 2014 EPS estimate of $6.66. That is one of the lowest forward price-to-earnings valuations among large U.S. banks.
Interested in more on Capital One? See TheStreet Ratings' report card for this stock.
-- Written by Philip van Doorn in Jupiter, Fla.