Capital One Profit Falls On Loan-loss Provision

(RTTNews) - Credit card lender Capital One Financial Corp (COF), Thursday reported a decline in third-quarter profit, hurt by loan-loss provision and a marginal drop in revenue. Earnings for the quarter were in line with Wall Street estimates, while revenue surpassed expectations.

Capital One shares slid 2.5 percent in after-hours trade on the New York Stock Exchange.

Companies like Capital One have benefited from a rebound in the domestic economy, marked by low interest rates and a pickup in employment level.

The McLean, Virginia-based company posted quarterly net earnings to stockholders of $1.06 billion or $1.86 per share, compared with $1.09 billion or $1.84 per share last year.

Excluding losses from discontinued operations, earnings for the quarter were $1.94 per share, compared with $1.86 per share a year ago.

On average, 23 analysts polled by Thomson Reuters estimated earnings of $1.94 per share for the quarter. Analysts' estimates typically exclude special items.

Revenue for the third quarter edged down to $5.64 billion from $5.65 billion in the prior year. Seventeen analysts had a consensus revenue estimate of $5.56 billion for the quarter.

Credit card revenue fell 3 percent from last year, consumer banking revenue slid 4 percent from a year ago, while commercial banking was up 12 percent.

The company's net interest margin for the quarter fell 20 basis points to 6.69 percent from a year ago.

Its provision for credit losses for the quarter rose 17 percent to $993 million from $849 million last year.

Net charge-off rate was 1.52 percent, a reduction of 40 basis points from a year earlier. At the end of the quarter, Capital One's loans held for investments rose 5 percent to $201.6 billion.

Capital One ramped up its loan portfolio by the $2.6 billion purchase of HSBC U.S. Credit Card business in May 2012, and shored up deposits through the $9 billion purchase of ING Direct USA from ING Groep in February that year. The company also had closed the sale of Best Buy's U.S. credit card portfolio to Citigroup Inc (C).

On Wednesday, bigger rival American Express Co (AXP) reported an 8 percent increase in third-quarter profit, led by higher card spending by its affluent customers. Earnings topped Wall Street expectations, but revenue fell short of estimates.

COF closed Thursday at $78.53, down $0.68 or 0.86%, on a volume of about 6 million shares. In after hours, the stock dropped $1.93 or 2.46% at $76.60.