Capital One Financial Corp. (COF) Thursday reported a decline in first-quarter profit, as the card lender provided more funds to cover loan losses at its Domestic Card business and incurred other expenses. The prior year quarter included gains related to the acquisition of ING Direct U.S.A. Nonetheless, quarterly earnings topped Wall Street estimates.
Revenues meanwhile increased from last year and exceeded expectations, on continued growth at its Domestic Card business.
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. Nonetheless, the company incurred increased credit losses, partly emanating from the HSBC acquisition.
In February, Capital One agreed to sell to Citigroup Inc. (C) about $7 billion of Best Buy private label and co-branded card loans for undisclosed terms.
The McLean, Virginia-based company reported quarterly net income to common shares of $1.05 billion or $1.79 per share, compared to $1.4 billion or $2.72 per share last year.
Results for the prior year included a gain of about $590 million related to the ING Direct acquisition, excluding which, earnings for that period would have been $809 million or $1.56 per share.
On average, 24 analysts polled by Thomson Reuters expected earnings of $1.60 per share for the quarter. Analysts' estimates typically exclude special items.
The company reported an increase in quarterly net revenues to $5.55 billion from $4.94 billion in the prior year. Analysts on consensus estimated revenues of $5.49 billion for the quarter.
Credit Card net revenues were higher at $3.7 billion, compared to $2.6 billion a year ago, with robust growth in Domestic card business.
Consumer Banking net revenues climbed to $1.66 billion from $1.46 billion in the prior year. Commercial Banking net revenues were higher at $538 million, compared to $516 million a year ago.
Results were dampened by loan-loss provisions that escalated to $885 million from $573 million a year ago. Delinquencies were higher, with net charge-offs worsening to $1.08 billion from $780 million last year.
Exacerbating factors include income tax provision that increased to $494 million from $353 million a year earlier.
At the end of the quarter, Capital One had loans held for investment of $191 billion, compared to $173.8 billion last year. End of period customer deposits totaled $212.4 billion, compared to $216.5 billion.
Capital One closed Thursday at $52.79, up 0.06%, on a volume of 5.5 million shares on the NYSE. In the past year, the stock has trended in a range of $47.99 - $62.92.
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