Capital One Profit Tops Estimate

(RTTNews) - Capital One Financial Corp (COF) Thursday reported an increase in second-quarter profit as the credit card lender allocated less funds toward loan losses, even as the year-ago quarter included loss from discontinued operations.

Revenue for the quarter slid three percent, but came in above Wall Street estimates.

Capital One Chief Executive Richard Fairbank said the company is seeing growth at its domestic card business, at a time when a pickup in employment level and higher retail-spending somewhat buffer the U.S. economy.

Capital One, based in McLean, Virginia, posted second-quarter net income of $1.2 billion or $2.04 per share, compared with $1.1 billion or $1.85 per share last year.

On average, 25 analysts polled by Thomson Reuters expected the company to earn $1.82 per share for the quarter. Analysts' estimates typically exclude special items.

Results for the prior-year quarter included loss of $119 million from discontinued operations, mainly related to mortgage representation and warranty reserve.

Results were also helped by loan-loss provision that dropped 8 percent from a year ago to $704 million.

Revenue for the quarter fell 3 percent to $5.47 billion from $5.64 billion a year ago. Twenty analysts had a consensus revenue estimate of $5.43 billion for the quarter.

Net interest margin for the quarter slid to 6.55 percent from 6.83 percent a year ago.

At the end of the quarter, Capital One's domestic card loan originations rose 1 percent from a year ago to $71.17 billion. Consumer banking loan originations fell 2 percent to $71.06 billion, due to decline at home and loan and retail banking segments, while auto loans improved.

Commercial banking loan originations climbed 18 percent to $48.3 billion.

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. The company also had closed the sale of Best Buy's U.S. credit card portfolio to Citigroup Inc (C).

Capital One closed Thursday at $82.49, down $1.89 or 2.24% on a volume of 4 million shares on the NYSE. In after hours, the stock gained $0.26 or 0.32%.