Capital One Financial Corp. swung to a fourth-quarter profit following big prior-year writedowns as the credit-card lender and bank posted better-than-expected results and a lower loan-loss provision.
The industry has been hurt by rising delinquency rates, a key gauge of future losses, as consumers struggle amid high joblessness. Credit-card issuers are also coping with sweeping legislation restricting certain fees and rate hikes that will bite into income. A number of lenders have responded by scaling back on credit and getting tougher about lending standards.
Still, Capital One last week reported that its credit-card delinquencies had eased in December, in a shift after at least six straight months of increases, though charge-off levels continued to rise from a month earlier.
For the quarter, Capital One posted a profit of $375.6 million, or 83 cents a share, compared with a prior-year loss of $1.45 billion, or $3.74 a share, which included a $810.9 million write-down.
Revenue jumped 6.2% to $3.37 billion. On a managed basis, it improved 11% to $4.37 billion.
Analysts surveyed by Thomson Reuters expected, on average, earnings of 45 cents on revenue of $4.31 billion.
On a managed basis, which includes securitized loans still managed by Capital One, loan-loss provisions were $1.85 billion, down 36% from a year earlier and 16% from the third quarter. The net charge-off rate climbed to 6.33% from 4.98% and 6%, respectively, while delinquencies of at least 30 days were 4.73%, compared with 4.49% and 4.55%.
Capital One's U.S. card business's charge-off rate rose to 9.59% from 7.08% a year earlier, but dropped from the third quarter's 9.64%. Delinquencies were 5.78%, compared with 5.93% and 5.38%, respectively.
At the company's banking operations, total deposits fell 1.1% on quarter.
Shares were up 0.4% to $42.85 in after-hours trading.
