Capital One posts lower 3Q net income, revenue

Capital One Financial's profit slips in 3Q on lower revenue, higher operating expenses

Associated Press
Capital One posts lower 3Q net income, revenue
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FILE - In this July 18, 2013, file photo, a woman uses a Capital One Bank automated teller machine in New York. Capitol One reports quarterly earnings on Thursday, Oct. 17, 2013. (AP Photo/Mark Lennihan, File)

LOS ANGELES (AP) -- Capital One Financial Corp.'s profit fell about 6 percent in the third quarter, as the lender booked higher operating expenses and its revenue declined versus the same period last year.

Still, the results exceeded Wall Street's expectations for the July-to-September period, boosting Capitol One's shares about 2 percent in after-market trading on Thursday.

Chairman and CEO Richard Fairbank told Wall Street analysts during a conference call that the company's cardholders remain cautious, but are stepping up spending.

"Cardholder spending for Capital One and for the industry continues to grow at a rate faster than overall retail spending," Fairbank said.

That's given Capital One motivation to increase some of its cardholder's credit lines and sign up new customers to the company's namesake card, something that should boost growth in loans and card purchase volume over time, Fairbank said.

The gradually improving U.S. job picture could help boost consumer spending during the coming holiday season — traditionally good news for card issuers. Between January and August, the most recent figures available, the economy added an average of 180,250 jobs a month. Unemployment, meanwhile, was 7.3 percent in August, down from 7.9 percent in January.

Capital One said overall credit card purchase volume grew 6 percent in the third quarter from a year earlier. Even so, the lender reported a 6 percent drop in revenue at its credit card segment.

At quarter's end, the company's card loans were down 13 percent versus the same period last year. The decline would have been about 3 percent, excluding the impact of Capital One's sale of its portfolio of Best Buy co-branded credit card accounts during the quarter.

Revenue also declined at Capital One's consumer banking business, slipping 5 percent from a year earlier. The segment's loans were down 7 percent from the prior-year period at the end of the quarter, with home loans down 20 percent. Auto loans increased 17 percent, however.

Loans at Capital One's commercial banking segment jumped 14 percent.

Capital One, based in McLean, Va., is best known for its credit card business, but it has taken steps to increase its profile as a national bank in recent years. The acquisition of ING Direct, a deal that closed in February 2012, made Capital One the nation's sixth-biggest bank, based on deposits. It has since rebranded ING to Capital One 360.

For the three months ended Sept. 30, Capital One said that net income after paying preferred dividends was $1.1 billion, or $1.86 per share. That compares with net income of $1.17 billion, or $2.01 per share, last year.

Analysts polled by FactSet, on average, expected earnings of $1.80 per share.

Total revenue slipped 2 percent to $5.65 billion from $5.78 billion. Analysts had forecast $5.58 billion.

All told, Capital One's net interest income, or money earned from loans, dipped 2 percent to $4.56 billion in the quarter from $4.65 billion a year earlier. Non-interest income, which includes service charges and other customer-related fees, fell 4 percent to $1.09 billion from $1.14 billion.

Operating expenses climbed 7 percent to $2.65 billion, including $100 million related to a legal settlement.

Capital One shares ended regular trading down 10 cents at $72.15. The stock added $1.35 to $73.50 in aftermarket trading following the third-quarter report.

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