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Capital One Profit Rises, Yet Misses Estimate; Stock Down


Capital One Financial Corp. (COF) Thursday reported a sharply higher fourth-quarter profit, as revenues increased mainly on contributions from the ING Direct and HSBC U.S. credit card businesses acquired last year.

However, Capital One's results were partly offset by an increase in loan-loss provisions and lower net interest margin. The company's earnings as well as revenues for the quarter came in below Street analysts' estimates, sending its shares down six percent in after-hours trade on the New York Stock Exchange.

Moving forward, Capital One expects average quarterly revenue levels in 2013 to be consistent with the fourth quarter of 2012, as a modest decline in earning assets will be offset by a steady to slightly higher net interest margin.

Capital One has boosted its loan portfolio by $30 billion through its $2.6 billion purchase of HSBC's U.S. Credit Card business in May last year. The company also has added $80 billion in deposits through the $9 billion purchase of ING Direct USA from ING Groep last February. The company saw strong increase in its domestic card revenues, as well as consumer banking businesses.

"Capital One remains well positioned to deliver sustained shareholder value through sure-footed execution, substantial capital generation, and disciplined capital allocation for the benefit of our shareholders," said CEO Richard Fairbank.

"As a first step, we expect to return to a meaningful dividend in 2013, following the completion of the current CCAR process," added Fairbank.

The McLean, Virginia-based company reported fourth-quarter net income to common shares of $825 million or $1.41 per share, up from $381 million or $0.88 per share last year.

On average, 25 analysts polled by Thomson Reuters expected earnings of $1.60 per share for the quarter. Analysts' estimates typically exclude special items.

The company reported quarterly net revenues of $5.62 billion, compared with $4.05 billion in the prior year. Nineteen analysts expected revenues of $5.80 billion.

Credit Card net revenues for the quarter surged to $3.7 billion from $2.6 billion a year ago, and Consumer Banking grew to $1.7 billion from $1.26 billion. Commercial Banking revenues were higher at $536 million, compared with $512 million last year.

The company suffered a decline in net interest margin for the quarter to 6.52 percent from 7.22 percent last year.

Provision for credit losses for the quarter increased to $1.2 billion from $861 million a year ago. Delinquencies were higher, with net charge-offs increasing to $1.2 million from $884 million last year.

The company's Tier 1 capital ratio, a measure of a bank's financial strength, was 11.4 percent, compared with 12 percent last year.

End of period net loans held for investments totaled $206 billion, compared with $136 billion last year. End of period customer deposits totaled $212 billion, compared with $128 billion in the prior year.

Capital One closed Thursday at $61.59, down 0.26%, on a volume of 4 million shares on the NYSE. In after hours, the stock dropped $3.96 or 6.43%. In the past year, the stock has trended in a range of $44.30 - $62.92.

by RTTNews Staff Writer

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