What’s in Capital One’s Wallet?

Capital One (COF) reported EPS $1.14 versus consensus estimate of $1.24 EPS.  It sees 2007 EPS $7.40 to $7.80, under consensus estimates of $8.10, but the number includes $430 Million of costs and charges.

INTERNAL METRICS:  Managed loans held for investment at December 31, 2006 were $146.2 billion, up $40.6 billion, or 38 percent, from December 31, 2005. Excluding the impact of $31.7 billion of loans acquired through North Fork, managed loans grew 8.4 percent in 2006, in line with expectations.  The managed charge-off rate for the company decreased to 2.99 percent in the fourth quarter of 2006 from 4.53 percent in the fourth quarter of 2005, but rose from 2.92 percent in the previous quarter. The company increased its allowance for loan losses by $114.1 million in the fourth quarter of 2006.  The managed delinquency rate (30+ days) decreased to 3.02 percent as of December 31, 2006 driven largely by the addition of North Fork loans to the portfolio. The delinquency rate decreased from 3.24 percent as of the end of December 31, 2005 and decreased from 3.29 percent as of September 30, 2006. Without the addition of the North Fork loans, the charge-off and delinquency rates would have increased in the fourth quarter of 2006 to 3.25 percent and 3.68 percent.

COF closed down 0.9% at $75.82 in regular trading, but shares are down 1.9% at $74.40 in initial after-hours trading.  The 52-week range is $69.30 to $90.04, so it is much closer to a year low.  The company plans on buying back $2.25B worth of shares starting this year, but that doesn’t seem to matter.  The company said it plans to focus on the integration of the North Fork and Hibernia acquisition.

What’s in Their Wallet? I guess not enough.

Jon C. Ogg
January 18, 2007