Capital One Falls as Profit Misses Estimates, Reserves Increaseby
Capital One Financial Corp., the lender that generates most of its revenue from credit cards, fell in New York trading after posting profit that missed analysts’ estimates and saying it may have to set aside more money this year for soured energy debt.
Capital One slid 3.7 percent to $73.15 at 9:30 a.m., the most intraday since Feb. 11, paring its gain for the year to 2.5 percent.
First-quarter net income tumbled 12 percent to $1.01 billion, or $1.84 a share, the McLean, Virginia-based company said Tuesday in a statement, missing the $1.92 average estimate of 26 analysts surveyed by Bloomberg. Provisions for credit losses rose 63 percent to $1.53 billion from a year earlier, fueled by impaired energy, auto and taxi medallion loans.
“While our current reserves fully reflect all the information we have today, as the turmoil in the energy industry continues, future developments could lead to further reserve builds and possibly increasing charge-offs,” Chief Executive Officer Richard Fairbank said Tuesday on a call with analysts.
Total revenue climbed 10 percent to $6.22 billion, led by an 11 percent increase in credit-card revenue. Net interest margin, a measure of lending profitability, climbed 18 basis points to 6.75 percent from a year earlier.
“While we were encouraged by the strong top-line performance, we expect shares to be under near-term pressure from this quarter’s miss and the risk of further negative credit migration in energy,” Bill Carcache, a Nomura Holdings Inc. analyst, said in a note to investors.