Capital One Financial Corp. (COF), a credit card issuer and bank, said Thursday that second quarter profit dropped 40% from last year, hurt by rising provision for loan losses owing to the current economic downturn.
The McLean, Virginia-based company reported second quarter earnings of $452.90 million, or $1.21 per share, which declined from $750.37 million, or $1.89 per share reported for the same period last year.
On average, 15 analysts polled by First Call/Thomson Financial expected earnings of $1.31 per share for the quarter.
Earnings from continuing operations for the period decreased to $462.5 million, or $1.24 per share from $767.6 million, or $1.93 per share. Earnings from continuing operations exclude the loss from discontinued operations related to the shutdown of GreenPoint Mortgage in August 2007.
At the Local Banking Segment, net income slipped to $67.1 million from $75.8 million in the first quarter of 2008. Profit for the National Lending segment was down 37.2% from last year.
Total revenue increased to $3.35 billion from $3.51 billion in the previous year quarter, falling short of Street target of $4.37 billion. Revenues rose 2% for the Auto Finance division and 5.2% for the U.S. Card division, compared to last year.
Net interest income rose to $1.727 billion from $1.538 billion in the prior year quarter. Non-interest income declined to $1.622 billion from $1.971 billion in the year-ago quarter.Capital One provided $829.1 million during the second quarter for loan losses, a surge from the year-ago figure of $396.7 million.
Total deposits rose 5.4% to $92.4 billion at June 30, 2008 relative to March 31, 2008. The company increased readily available liquidity by $3 billion to $33 billion and generated excess capital, increasing TCE ratio 15 basis points to 6.18%.
On a reported basis, net charge-off rate was 3.24% in the latest quarter, compared to 1.76% last year. Return on average assets was 1.20%, compared to 2.15% last year. Second quarter return on average equity was 7.45%, compared to 12.22% in 2007.
Year-to-date, net income dropped to $1.001 billion or $2.69 per share from $1.425 billion or $3.51 per share reported last year. Non-interest income edged down to $3.678 billion from $3.746 billion. Net interest income advanced to $3.539 billion from $3.143 billion posted last year.
According to Richard Fairbank, Capital One's Chairman and Chief Executive Officer, "Despite cyclical economic headwinds, the company continues to deliver profits and generate excess capital. We remain well-positioned to navigate the near-term economic challenges and to deliver strong shareholder value through the cycle."
COF closed Thursday's regular trade at $42.80, up $5.52 or 14.81% from the previous close, on 34.40 million shares. The stock that trended in the range of $0.82-$78.80 for the past year dropped $1.92 in the extended trade.
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