Fourth-quarter net interest income was $4.528 billion, declining from $4.646 million in the third quarter, but increasing from $3.182 billion in the fourth quarter of 2011, reflecting the ING Direct acquisition, as well as the company's purchase of HSBC's (HBC) domestic credit card portfolio during the second quarter of last year.
The net interest margin -- the spread between the average yield on loans and investments and the average cost for deposits and borrowings -- was 6.52%, declining sharply from 6.97% in the third quarter. Capital One said "the higher levels of estimated uncollectible finance charges and fees coupled with a substantial increase in the proportion of lower-yielding cash and investment securities in anticipation of the call of high coupon trust securities resulted in a decrease in net interest margin of 45 basis points to 6.52 percent." A sequential decline in the company's cost of funds of seven basis points to 0.99% partially mitigated the margin squeeze.
Operating expenses during the fourth quarter totaled $2.862 billion, increasing from $2.729 billion the previous quarter, "driven by higher year-end expense patterns and somewhat higher integration expenses." Marketing expenses also increased, to $393 million in the fourth quarter, from $316 million in the third quarter.
As part of its 2013 guidance, Capital One said "Overall, the company expects non-interest expense
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