Capital One Posts Loss on Mortgage Unit Shutdown
From the Associated Press
Capital One Financial Corp. posted a third-quarter loss Thursday, hurt by charges from shutting down its GreenPoint Mortgage business.
The McLean-based company, a credit card issuer that continues to expand into retail banking, said its third-quarter net loss totaled $81.6 million, or 21 cents per share, in the July-September period, compared with a profit of $587.8 million, or $1.89 per share, in the year-ago quarter.
Excluding the company's $898 million charge related to the shutdown of its troubled GreenPoint Mortgage unit, Capital One posted third-quarter earnings of $2.09 per share.
Revenue grew to $3.77 billion from $3.06 billion last year.
"Capital One remains focused on driving revenue growth, reducing costs, and effectively deploying capital to generate strong returns for our investors," Capital One's chairman and chief executive officer Richard D. Fairbank said in a statement accompanying Thursday's report.
"Our businesses are generating robust revenue margins, even as we continue to take a cautious approach to underwriting and managing credit risk in the current environment."
Analysts had estimated a loss of 30 cents per share on revenue of $4.13 billion, according to a poll by Thomson Financial. Analysts' estimates typically exclude one-time items.
The company had several charges in the quarter that hurt results.
It took a $19.4 million before tax charge for a previously announced cost-cutting program expected to eliminate about 2,000 jobs, or more than 6 percent of its work force.
It also recorded $898 million loss from discontinued operations related to the shutdown of GreenPoint Mortgage, which is largely complete, the company said.
When originally announced in August, Capital One estimated after-tax charges to be $860 million, whereas the total charges in the third quarter was $883 million. The company expects to incur about $23 million of additional charges related to GreenPoint in the fourth quarter.
As the nation's housing market has cooled, the mortgage lending industry has struggled with a dramatic rise in mortgage defaults and foreclosures. Many homebuyers have been forced into default or foreclose because they haven't been able to sell their homes or end up owing more than their home is worth.
As a result, it has become more difficult for lenders like GreenPoint to sell the mortgages they originate to investors.
Once a stand-alone credit card company, Capital One has moved in the past two years to acquire traditional banks as part of an effort to diversify. In acquired GreenPoint in December as a part of a $13.2 billion purchase of North Fork Bancorp, which operates banks in New York, New Jersey and Connecticut.
"Unfortunately, GreenPoint has run into unforeseen challenges that are beyond its control," Fairbank said in August.
In the company's other business segments, total bank deposits at the end of the third quarter were $73.4 billion, more than double the $35.2 billion at the end of the third quarter of 2006.
Capital One's U.S. card business, which is known for its "What's in Your Wallet" advertising campaign, had net income totaling $560.8 million for the third quarter, a 21.5 percent increase, year over year, driven by growth in revenue and reductions in non-interest income.
Capital One's auto finance business reported a net loss for the quarter of $3.8 million, down from $35.3 million in the year-ago period.
The results were issued after the cclose of financial markets on Thursday. During normal trading hours, its shares fell 90 cents to $66 and have traded in between $59.49 to $83.84 in the last 52 weeks.
October 18, 2007; 7:45 PM ET
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