News : Cheap Credit Cards

Date : 17/10/2008

Oct. 16 (Bloomberg) -- Capital One Financial Corp., the Mclean, Virginia-based credit-card lender and bank, reported a third-quarter profit that exceeded analysts' estimates as deposits surged 19 percent.

Profit from continuing operations was $1.03 a share, beating the 92-cent average estimate of 17 analysts surveyed by Bloomberg. Those results exclude a loss from the shutdown of Capital One's GreenPoint Mortgage unit, which was closed in August 2007. Deposits grew by $15.8 billion from a year earlier to $98.9 billion, the company said today in a statement.

Capital One has remained profitable amid a U.S. economic downturn and a worldwide credit crisis. Its reserves could absorb about $7.2 billion in soured loans in the year through September 2009, the company said last month. The lender raised $750 million in the third quarter in a common stock offering to shore up its balance sheet.

``Against the backdrop of increasing economic headwinds and unprecedented change in the financial-services landscape, Capital One continues to deliver profits and generate capital,'' Chief Executive Officer Richard D. Fairbank, said in the statement.

Capital One rose 94 cents, or 2.5 percent, to $38.70 today in New York Stock Exchange composite trading. Results were released after the close of regular trading in U.S. markets. The shares have fallen 24 percent this month on concerns the U.S. economic slowdown is worsening.

The company said Sept. 23 it expected ``continuing weakness'' in the U.S. and may add $200 million to loss reserves in the third quarter. Retail sales fell for the third straight month in September, the longest slump in as least 16 years, the Commerce Department said.

`Under Pressure'

``Earnings will remain under pressure as the overextended consumer will have difficulty meeting his debt obligations,'' said Scott Valentin, analyst at Friedman Billings Ramsey & Co., yesterday in a research note. He rates the company ``underperform.''

Net income was $374.1 million, $1 a share, in the third quarter, compared with a loss of $81.6 million, or 21 cents a year earlier, Capital One said. A year ago, Capital One reported a loss on $883 million in after-tax costs related to GreenPoint.

American Express Co., the largest U.S. credit-card company by purchases, told investors Oct. 6 it had enough cash to last at least 12 months even if access to ``secured and unsecured fixed- income capital markets'' were interrupted. The New York-based lender is expected to report third-quarter results next week.

Discover, based in Riverwoods, Illinois, said last month that third-profit from continuing operations fell 27 percent to $178.9 million as it almost doubled loan loss provisions.

Capital One is the fourth-largest issuer of Visa Inc. and MasterCard Inc. credit cards by volume of purchases and cash advances, according to the Carpinteria, California-based Nilson Report. Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. are larger.

Source : http://www.bloomberg.com/