Capital One sees $1.9B charge from tax bill, cuts buyback authorization
Capital One Financial announced the resubmission of its capital plan, as required by the Federal Reserve Board for the 2017 Comprehensive Capital Analysis and Review process to address certain weaknesses identified in the company's capital planning process. In connection with the resubmission, the company's board reduced the authorized repurchases of the company's common stock to up to $1B for the remaining 2017 CCAR period, which ends June 30, 2018. In June, Capital One announced that its board had authorized the repurchase of up to $1.85B of the company's common stock beginning in Q3 of 2017 through the Q2 of 2018. To date, the company said it has repurchased an "immaterial amount" of its common stock under the 2017 repurchase program. If the Federal Reserve objects to the resubmitted capital plan, it may restrict subsequent capital distributions, Capital One cautions. It added. "The Board's decision was driven by the estimated near term adverse impact to the Company's financial position as a result of the anticipated reduction in the carrying value of certain tax assets and additional tax expenses resulting from the Tax Act." Capital One estimates that the Tax Act will result in an approximately $1.9B charge against net income primarily due to the write down of its deferred tax assets as a result of the Tax Act's reduction in the corporate tax rate from 35% to 21%, a one-time tax on the company's unrepatriated foreign earnings, and other anticipated impacts associated with the law. In addition, the Tax Act would eliminate the company's ability to carryback any net operating losses against prior period taxable income, which impacted the amount of the allowable deferred tax assets included in the company's common equity Tier 1 capital in its stress scenario, the bank added. Capital One expects to maintain its quarterly dividend of 40c per share, subject to approval by its board. Shares of Capital One closed Friday up 98c to $100.50.