There's Less Momentum In Capital One's Wallet

As Capital One Financial chief executive Richard D. Fairbank faced a gathering of investors several weeks ago, there was no avoiding the fact that one of Washington's biggest business successes had lost momentum.

Just months after the credit card issuer had plunged into an unconventional segment of the mortgage market with its acquisition of a major bank, that segment of the market imploded. First-quarter earnings were down and the stock price was languishing.

"Do you sense any level of impatience with your shareholders in terms of translating your end-game strategy into near-term earnings performance?" the moderator at the investor conference asked, noting that he was sugar-coating the question investors were posing.

Fairbank, whose mass marketing of credit cards had generated years of stellar returns for shareholders and had enriched him personally by hundreds of millions of dollars, addressed the question head-on.

"I'd have to be, have an awfully broken antenna not to pick up on concern in terms of our shareholders," he said. Capital One had run into "market head winds," he said, according to a transcript, "but it's not our job to whine. It's our job to deliver."

Last week, Capital One announced that its effort to deliver will leave about 2,000 of its approximately 32,000 employees out of a job. The layoffs, about half of which have already taken place, are part of a plan to cut costs by $700 million.

Company spokeswoman Julie Rakes would not say how many of the layoffs will be in the Washington area. At the end of last year, the company employed 865 people at its Tysons Corner headquarters.

"I am confident that this initiative will make Capital One a stronger and more competitive company," Fairbank said in a memo to employees.

Whether the head winds can be eliminated as easily as the jobs remains to be seen.

The stock market offered one assessment: Capital One shares ended the week at $78.44, down 36 cents from the pre-announcement close Wednesday and still down from a peak of $89.92 early last year.

Fairbank was not available to be interviewed for this article, and in advance of its next quarterly earnings report the company is in a blackout period that prevents it from offering an updated outlook, a company spokeswoman said by e-mail.

Capital One's announcement "represents a major cultural shift for the company . . . and reflects the slower-growth profile and more mature nature of the company as it stands today," financial services analysts at the investment firm Keefe, Bruyette & Woods said in a report to investors.