Capital One Profits Hit by Consumer Slump

Capital One's (COF Quote) profit slumped 40% in the second quarter, fueled by worsening credit trends in the consumer card issuer's U.S. credit card business.

The McLean, Va.-based financial firm made $452.9 million, or $1.21 a share in the second quarter, missing analysts' estimates by a dime, according to Thomson Reuters. In the year-earlier period, Capital One made $750.4 million, or $1.93 a share. Net income from continuing operations -- which excludes a loss related to the shutdown of GreenPoint Mortgage in August 2007-- was $462.5 million, or $1.24 a share, compared to $767.6 million, or $1.93 a share, a year earlier.

The company said it added a provision of $829.1 million in the quarter to cover against loan losses, down 23% from the first quarter provision but more than double its provision a year earlier.

Capital One's stock slumped 4.7% to $40.80 after the market closed, despite surging 15% in Thursday's regular session after several better-than-expected earnings reports from JPMorgan Chase(JPM Quote), PNC Financial Services(PNC Quote) and BB&T(BBT Quote).

"Despite cyclical economic headwinds, the company continues to deliver profits and generate excess capital," said Capital One Chairman and CEO Richard Fairbank. "We remain well-positioned to navigate the near-term economic challenges and to deliver strong shareholder value through the cycle."

The company said that its U.S. card business -- housed in its national lending segment and its largest contributor to profit -- reflected "continued cyclical credit worsening" and the company's "actions to navigate the downturn." Capital One remains "cautious on loan growth" and "continues to focus its marketing and originations on the parts of the U.S. card market that the company believes provide the best combination of risk-adjusted returns and losses," it said.