Cap One Card Profits, Charge Offs Rise

Capital One Financial Corp. reported yesterday a third quarter net loss of $81.6 million, compared with net income of $587.8 million in the third quarter of 2006. During the quarter, the McLean, Va.-based bank took a loss of $898 million on discontinued operations of the GreenPoint Mortgage unit of North Fork Bancorporation it acquired last year.

The company increased its provision for loan losses to nearly $596 million, from $431 million in the same period a year ago, a rise of more than 38 percent.

The National Lending division, including Cap One’s U.S. credit card, auto finance and global financial services units, reported profits rose nearly 12 percent to $675.4 million.

The U.S. card unit had net income of $560.8 million, a rise of more than 21 percent, while revenues rose 13 percent. Card receivables fell 3 percent to $49.6 billion at quarter’s end. Cap One attributed the decline to reduced marketing of teaser rates and the sale of a $600 million portfolio in the first quarter.

Charge offs rose to 4.13 percent from 3.39 percent a year ago, while delinquencies increased to 4.46 percent from 3.53 percent, due to the continued “normalization” of consumer credit following the lingering impact of the 2005 bankruptcy law changes, and to a decline in prime revolver loans. Cap One projected card charge offs would rise to 5.25 percent in the fourth quarter. The company noted the delinquency numbers were also affected by the second quarter implementation of a 25-day grace period, and to changes to its pricing and fee policies.

The Auto Finance group posted a loss of $3.8 million in the third quarter despite a revenue rise of nearly 6 percent. Total managed loans rose 15 percent to $24.3 billion due to greater originations and the addition of the North Fork portfolio. The net charge off rate was 3.56 percent, up from 2.34 percent, while the delinquency rate was 7.15 percent, up from 5.18 percent a year ago.