Capital One Financial Corp is one of the largest U.S. and the most profitable issuers. After it posted its earnings, it has been voted as the second-best performer by the Standard & Poor's 500 Index. It had out beaten the estimates that were made by the analysts.
In the New York Stock Exchange trading, Capital One had advanced 4.1% to $38.76 by about 4:15 p.m. The net income had doubled from $394 million to $803 million, while the share price went up from 87 cents to $1.76 per share when compared to the previous year, stated McLean, a lender who is based in Virginia. Based on the reports by Bloomberg, the average estimates made by about 22 analysts was at $1.20.
Ever since the decline in delinquencies in the U.S. credit card industry this year, there has been a boost in profits, while consumers have reduced the balance in debts and also while the new rules weighed on the margins.
Since the write-off rates on credit cards in the U.S. have dropped, $624 million has been released (from an account) in order to cover losses in the future due to loan write offs. This allowance release by the third quarter was due to the fact that there had been continuous improvement in credit loss as well as delinquency performances in the company's portfolio.
Originations of loans
Capital One along with its alliances originated home loans to a tune of around $111 billion during the year 2005 through 2008. This also included the $11 billion that was sold to entities that were sponsored by the government and around $18 billion to securities backed by bonds.
Although Chief Financial Officer, Gary Perlin was quoted as stating in a conference call that they had no complete visibility with regard to the $82 billion loans, he was certain that there had been no repurchase activity. He goes on to state that about 50% of it had landed in "unwrapped public securitizations".
The reserves (at the end of the third quarter) to buy back faulty mortgages was at $836 million in comparison with the 3-month period previously, where it was at $853.
Greenpoint mortgage is the one responsible for originating most of the home loans and it is a subsidiary of Capital One. A subpoena has been sent by Federal Housing Finance Agency in its capacity as a regulator, wherein it wishes to determine if card issuers could be held liable for incurring losses on debt.
Capital One is the card issuer in the U.S. that has ranked #1 with regard to its profitability according to reports last year.