Banks
Mortgage Mess Mauls Capital One
Laurie Kulikowski
08/20/07 - 04:44 PM EDT
Capital One (COF) slashed its 2007 guidance by almost a third and said it will close its GreenPoint Mortgage unit, cutting 1,900 jobs.
The McLean, Va., company said it now expects to make $5 a share for the year, down from the previous $7.15. Capital One will take a charge of $860 million to write off the value of GreenPoint, which it acquired last December in its purchase of North Fork.
"The reductions in demand and pricing in the secondary mortgage markets make it difficult to operate our wholesale mortgage banking business profitably," said Gary Perlin, Capital One's chief financial officer. "Beyond that, Capital One's other businesses are supported by ample liquidity and funding including deep access to deposits, a 'stockpile' of subordinated credit card funding in place that allows approximately $9 billion of AAA credit card funding going forward, and a $25 billion portfolio of highly liquid securities."
Capital One joins Countrywide (CFC) and other big lenders in being hit hard by the collapse of the market for mortgage securities. Investors have fled those markets after defaults and delinquencies spiked earlier this year on recent-vintage loans to homebuyers with poor credit histories.
Shares fell $2.18 to $64.54.