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Capital One Says Profit Is Way Off
Capital One Financial said it would take a $1.95 billion fourth-quarter charge to cover bad loans.
(By Pat Sullivan -- Associated Press)
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Delinquencies and bad loans have risen for the past six months, but they remain below historical levels. The past few years have featured remarkably low interest rates and relatively few defaults and delinquencies.
Eric Wasserstrom, an analyst at UBS, said the challenge for Capital One is "whether we move to levels of loss that are much higher as a consequence of job losses and economic downturn."
Yesterday's profit forecast, which came in a news release issued shortly after midnight Wednesday, was another negative development for Capital One, whose share price has soared in recent years.
Capital One has expanded aggressively into banking, spending more than $18 billion to buy two banks in the past 2 1/2 years.
But the company was hit hard by the credit crunch that swept financial markets last summer. Its stock price has fallen 40 percent over the past year as several analysts cut ratings. Yesterday, its shares fell 43 cents to close at $42.92.
In October, Capital One announced its first quarterly loss ever, mostly from charges associated with the closing of its GreenPoint Mortgage subsidiary. That closing eliminated 1,900 jobs, and came after a $700 million restructuring that eliminated 2,000 jobs, about 6 percent of Capital One's workforce.
The company now employs about 30,000 people and has more than 700 retail bank branches in the Northeast, Texas and Louisiana.
