An earlier version of this story contained an incorrect quote. It has been corrected. | An Oct. 17 Business article incorrectly stated the percentage decline in Capital One's third-quarter profit, excluding the costs of shutting down a mortgage lender. Profit under that measure fell 53 percent. The credit card default rate in the quarter was also incorrect. It was 6.13 percent.
Capital One Turns a Profit While Major Banks Rack Up Losses
Citigroup reported a third-quarter loss of $2.81 billion, its fourth straight quarter in the red. It said it is increasingly losing money in foreign countries.
(By Mark Lennihan -- Associated Press)
TOOLBOX
   Resize
COMMENT
 Discussion Policy
 CLOSE
Comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions. You are fully responsible for the content that you post.
Who's Blogging  |
Friday, October 17, 2008
Capital One, the McLean banking and credit card company, reported yesterday it had eked out a profitable quarter even as several other major financial firms continued to disclose dramatic losses.
Merrill Lynch, a large investment bank, reported massive losses on mortgage-related assets. Citigroup, which operates both a retail bank and an investment bank, showed losses on both fronts, an ominous sign for the company and the economy.
Even for Capital One, the news wasn't that good. The company said it earned $374.1 million in the third quarter with revenue down by 2.5 percent. The company's earnings fell 56 percent from the same period last year, excluding the one-time cost of closing a mortgage lending subsidiary.
The quarterly reports underscored that customers are going to share the financial industry's pain. Both Citigroup and Capital One, which have similar positions in credit card lending and retail banking, said they were cutting back on lending and charging customers higher prices.
Capital One is one of the nation's largest credit card companies, finances auto and other kinds of loans, and has more than 700 bank branches in the New York area, Texas and Louisiana. With 50 million customers, Capital One's credit card business offers an important window into U.S. consumers and small businesses, and their ability to access credit. The default rates on credit card accounts rose to 6.34 percent in the third quarter compared to 3.96 percent in the comparable period last year.
Capital One said it is tightening its marketing and issuance of credit cards. Earnings from its card business were almost half of what they were in 2007.
"We've begun to very selectively reduce credit lines," said Richard Fairbank, the company's chief executive.
Fairbank praised the government's recent moves to invest in banks and guarantee their debt, but was circumspect about whether Capital One would participate. "Since we aren't in a real need for it, the standard is whether we can put the additional equity or funding to good use," he said.
Shares of Capital One rose 2 percent to $38.70 yesterday. The bank reported earnings after the market closed.
Citigroup reported a third-quarter loss of $2.81 billion, its fourth straight quarter in the red. Revenue fell 30 percent compared to the same period last year for the New York financial services conglomerate. Losses on loans ranging from mortgages to credit cards and commercial real estate continued to climb. And Citigroup, the most international of the American banks, also warned it is increasingly losing money in foreign countries, particularly in Mexico, India and Brazil.
Citigroup reduced its lending to businesses by 15 percent in the quarter. Chief financial officer Gary Crittenden said the company was continuing to reduce the flow of its money to borrowers.
"In some cases we size them down, in some cases we eliminate them all together, in some cases we stay where we are," he said.
