October 23, 2009
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News: Capital One Performs Better Than Expected
In spite of a continuous rise in unemployment and record breaking credit card defaults, banks have continued to find other methods to make profits. Capital One Financial Corp. is no exception. The big bank reported on third quarter numbers last Saturday showing $425.6 million profit which was up 14 percent against the $374 million the credit card giant earned last year. Capital One's credit card division reported a net income of $291.7 million versus $356 million for same quarter last year. However, the good news is that it was up by $172.6 million from second quarter this year due mostly as a result of the domestic business.
Capital One's credit card division didn't stand alone in showing an income increase, revenue for the total company rose to $3.6 billion a 2.8 percent increase from same period last year. The net interest income increased to $2.05 billion as well; a 14 percent increase from last year. Capital One's Chief Executive Officer, Richard D. Fairbank, noted that although the company was adequately riding out the recession, the unemployment rate is expected to continue to rise to 10 percent. As credit card defaults typically mirror the unemployment rate, the Capital One will need to continue preparing for high write-offs. In doing so, the company set aside an additional $296 million to cover bad debt.
Capital is the nation's fifth largest credit card issuer hovering between this year's top performer, American Express, and Discover Financial. Despite the gloom and doom, Capital One did fair much better than analysts had originally predicted which lead some to raise the company's target stock price. In addition to being one of the largest card issuers, Capital One also offers a full line of banking products including home mortgages, auto loans, and personal banking services. Capital One Financial Corp is based out of McLean, Virginia and is traded on the New York Stock Exchange (NYSE) under the symbol “COF.”