Capital One Financial Corp.'s (COF) fourth-quarter profit fell a
surprise 42% as the card-issuer-turned bank reported higher
provisions for losses on loans.
Shares recently dropped 5.3% to $46.20 after hours on the
weaker-than-expected results. Capital One's stock had climbed 23%
over the past three months though Thursday's close.
The company, which transformed itself from a credit-card lender
to a bank just before the financial crisis hit, has benefited along
with many of its peers in recent months as its credit quality
improves. A stronger portfolio helped drive Capital One's profits
higher earlier in the year, though the credit improvements have
showed some signs of slowing in recent months.
Federal regulators are meanwhile continuing to review Capitol
One's proposed $9 billion acquisition of ING Groep N.V.'s (ING,
INGA.AE) U.S. online-banking business. The deal would be the first
big bank merger since the passage of federal legislation last year
aimed at stemming risks from large financial institutions, but the
Federal Reserve has recently expanded its review of the deal to
address concerns from some legislators and consumer groups that the
merger would create a "too-big-to-fail" institution.
Capital One is also buying HSBC Holdings PLC's (HBC, HSBA.LN)
U.S. credit-card business, which includes about $30 billion in
loans, for $2.6 billion. The deal is expected to close in the
second quarter and would make Capital One the largest issuer of
private-label credit cards.
Capital One posted a profit of $407 million, or 88 cents a
share, down from $697 million, or $1.52 a share, a year earlier.
Total revenue fell 2.5% to $4.05 billion.
Analysts polled by Thomson Reuters expected a $1.56 per-share
profit and $4.11 billion in revenue.
On a managed basis, which includes securitized loans still
managed by Capital One, loan-loss provisions were $861 million, up
from $839 a year ago and $622 million in the third quarter. The
company said growth in loan balances and seasonal effects more than
offset a better credit-performance outlook.
The total net charge-off rate fell to 2.69% from 4.45% a year
ago but was up from 2.52% the previous quarter. Overall
delinquencies were 3.35%, compared with 3.6% and 3.13%,
respectively.
The charge-off rate for Capital One's U.S. card business was
4.07%, down from 7.28% a year ago yet up from the third quarter's
3.92%. Delinquencies reached 3.66%, compared with 4.09% and 3.65%,
respectively.
-By Drew FitzGerald, Dow Jones Newswires; 212-416-2909; Andrew.FitzGerald@dowjones.com