Fourth-quarter profits fell at Capital One Financial in McLean, Va., because of lower fee income and a larger set-aside for problem loans.
The $357 billion-asset company earned $791 million, or 14% less than a year earlier. Earnings per share were $1.45, falling 16 cents short of an estimate of analysts polled by Bloomberg.
The provision for loan losses jumped 27% to $1.7 billion. The net chargeoff rate climbed 52 basis points to 2.48%.
During a conference call with analysts, CEO Richard Fairbank attributed jump in chargeoffs to “growth math,” or a rise in chargeoffs on newer loans.
Total loans grew 7% to $245.6 billion because growth in credit card, auto and commercial portfolios.
Approximately 64% of the company’s credit card borrowers had FICO scores above 660, compared with 66% a year earlier. Just over half of its auto borrowers had credit scores above 660 as of Dec. 31.
Net interest income increased 10% to $5.5 billion. The net interest margin rose 6 basis points to 6.85%.
Meanwhile, fee-based revenue fell 9% to $1.1 billion mostly from lower service charges.
Noninterest expenses rose 6% to $3.7 billion due to higher salary and benefit costs.
Fairbank reiterated that Capital One is not expected to receive regulatory approval for its planned acquisition of a $5.2 billion credit card portfolio from Cabela’s, the outdoor equipment chain, prior to its Oct. 3 deadline.