AP
Capital One 4Q Profit Falls 42 Percent
Wednesday January 23, 6:47 pm ET
By Ieva M. Augstums, AP Business Writer
Closure of Mortgage Business, Loan Losses, Lowers Capital One 4Q Profit by 42 Percent


CHARLOTTE, N.C. (AP) -- Capital One Financial Corp.'s fourth-quarter profit fell 42 percent, hurt by rising losses on credit card loans and charges from closing its GreenPoint Mortgage business, the credit card company said Wednesday.

Capital One said its fourth-quarter profit totaled $226.6 million, or 60 cents per share, in the period ending Dec. 31, down from $390.7 million, or $1.14, in the same period a year earlier. Quarterly revenue climbed 28 percent to $3.92 billion.

Excluding the company's $95 million charge related to the shutdown of its troubled GreenPoint Mortgage unit, Capital One posted fourth-quarter earnings of 85 cents per share.

Analysts had estimated earnings of 63 cents per share on sales of $4.36 billion, according to a poll by Thomson Financial. Those forecasts usually exclude one-time items.

While the results are consistent with figures reported earlier this month when the company revised its earnings forecast, Capital One's Chairman and Chief Executive Officer Richard D. Fairbank said he remains focused on the future.

"We're acting decisively and aggressively to manage the company ... in the face of cyclical economic head winds," Fairbank said on a conference call with analysts.

"We're pulling back on loan growth, focusing on our most resilient businesses and closely manage credit with the insights and experience we have garnered in prior economic downturns."

Its shares rose $4.39, or 11 percent, to $44.20 Wednesday and have traded between $37.41 and $83.84 in the last 52 weeks.

Capital One, a credit card issuer that continues to expand into retail banking, said it is taking a $1.9 billion provision for loan losses in the fourth quarter, including about $1.3 billion it expects to write off as uncollectible.

The company is also adding about $650 million to its charge-off allowance because of recent delinquencies in its consumer lending businesses in "recognition of the weakening trends in the U.S. economy."

The company has worked hard to expand beyond its credit card roots into banking and mortgages. It bought two banks, Hibernia and North Fork Bancorp. Along with North Fork came its large Alt-A lender, GreenPoint Mortgage.

But as the nation's housing marked cooled, the mortgage lending industry has struggled with a dramatic rise in mortgage defaults and foreclosures. Many home buyers have been forced into default or foreclose because they haven't been able to sell their homes or end up owing more than their home is worth.

As lending froze up in mortgage markets, Capital One was forced to shut GreenPoint in August, and laid off nearly 2,000 employees.

"There's no doubt that we, like other banks will continue to face cyclical credit challenges in 2008," Fairbank said.

In the company's other business segments, bank deposits at the end of the fourth quarter totaled $73.3 billion, more than double the $35.3 billion at the end of the fourth quarter of 2006.

Capital One's U.S. card business, which is known for its "What's in Your Wallet" advertising campaign, reported net income of $522 million for the fourth quarter, a 54.8 percent increase, year over year, driven by growth in revenue.

Capital One's auto finance business reported a net loss for the quarter of $112.4 million, compared with a profit of $33.7 million in the year-ago period, due to the effects of the credit downturn.

Capital One Financial Corp.: http://www.capitalone.com