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Capital One 3rd-qtr profit rises 1 percent as loan provision decline offset by higher expenses
NEW YORK (AP) ' Capital One Financial Corp. on Thursday said its third-quarter profit edged up 1 percent, despite a big drop in the amount of loans written off as uncollectible.
The McLean, Va.-based bank had net income for the quarter ended Sept. 30 of $813 million, or $1.77 per share, compared with $803 million, or $1.76 per share, in the year-ago period.
Total revenue rose 3 percent to $4.15 billion, from $4.02 billion last year.
Analysts, on average, were expecting profit of $1.68 per share, on revenue of $4.04 billion, according to data provided by FactSet.
Net interest income, or money earned from deposits and loans, rose 6 percent to $3.28 billion, from $3.11 billion a year ago. Total deposits jumped nearly 8 percent to $128.32 billion. Total loans gained 3 percent to $129.95 billion.
"Overall, I think the results were pretty good," said Keefe, Bruyette & Woods analyst Sanjay Sakhrani.
The bank, best known for its ubiquitous "What's in your wallet?" advertising campaign, said U.S. credit card use rose 17 percent from the prior-year quarter. Sakhrani said the increased usage was "very strong."
Its auto finance unit wrote 40 percent more loans than last year, totaling $3.4 billion.
It wrote off $812 million in uncollectible loans, a drop of 47 percent from last year. That enabled Capital One to reduce the amount it set aside to cover soured loans by 28 percent, to $622 million.
But marketing and operating expenses rose 15 percent, offsetting some of that benefit.
Capital One also said it increased its reserve for mortgage-related claims by 3 percent to $892 million. The bank said it now believes the upper end of potential losses from such claims could be $1.5 billion.
Chairman and CEO Richard D. Fairbank said the company expects that its pending acquisitions of ING Direct and HSBC's U.S. credit card business will add to earnings in the near-term.
Capital One shares added 74 cents, or 2 percent, to close Thursday trading at $40.49. Shares rose 6 cents to $40.55 in aftermarket trading.