Capital One to Cut Staff by 6%

Credit card company Capital One Financial plans to eliminate 2,000 jobs, or about 6 percent of its workforce, as part of a $700 million restructuring, the company said yesterday.

The McLean company, which is attempting to diversify into banking from being the largest independent issuer of credit cards in the United States, said the job reductions would affect all parts of the company, including its British unit. About half of the employees being eliminated have been notified, said the company, which has 33,000 workers.

Capital One, which has 720 retail bank branches throughout the Northeast, Texas and Louisiana, expects the layoffs to reduce operating expenses by about $400 million in 2008 and $300 million in 2009.

The company would record a one-time charge of $300 million, about half of which would pay for severance benefits. The rest would go toward contract and lease terminations and other charges.

The company expects the costs of the layoffs to reduce its 2007 after-tax earnings by about $0.33 per share and its second-quarter 2007 after-tax earnings by about $0.15 per share.

Capitol One would provide outplacement services, including retraining and job referrals, Capital One spokeswoman Tatiana Stead said. The laid-off workers would be eligible to apply for other openings at the company, she said.

In a statement yesterday, Capital One Chairman Richard D. Fairbank said: "Disciplined expense management is essential to maintaining and enhancing a strong competitive position in each of our businesses. Additionally, improved operating efficiency will help us drive sustained earnings growth, especially as we navigate the current interest rate cycle and normalizing consumer credit trends."

Fairbank, who became chairman Capital One in 1995 and built it into the 11th-largest bank in the United States, is one of the most highly compensated executives in the Washington region and a part-owner of the Washington Capitals National Hockey League franchise. He was awarded stock options and other compensation worth $18.2 million in 2006. Since 1997, Fairbank has given up all salary and bonuses in exchange for options or performance-based stock shares, Stead said.

The company offers a broad array of financial services to businesses and consumers through its principal subsidiaries, which include Capital One Bank, Capital One F.S.B., Capital One Auto Finance and Capital One N.A. Capital One's subsidiaries had a total of $87.7 billion in deposits and $142.0 billion in managed loans outstanding as of March 31.

Capital One bought Hibernia National Bank of New Orleans for $4.9 billion in November 2005. Last December, it bought North Fork Bank for $13.2 billion. North Fork operates in New York, New Jersey and Connecticut.

Capital One Financial shares closed yesterday at $78.80, down 1 cent.