"Seasonal Patterns," but Lower 2013 Guidance
Following Thursday's market close, Capital One reported fourth-quarter net income available to common stockholders of $825 million, or $1.41 a share, missing the consensus estimate of $1.59, among analyst polled by Thomson Reuters. In comparison, the company earned $1.173 billion, or $2.05 a share, in the third quarter, and $381 million, or 89 cents a share, in the fourth quarter of 2011, when Capital One incurred unusually high expenses at it prepared for its first-quarter acquisition of ING Direct (USA). Capital One CFO Gary Perlin attributed the sequential earnings decline to "seasonal expense and margin trends," but also said that "with a few exceptions largely related to these seasonal patterns, fourth quarter 2012 results give us a good picture of what to expect in terms of pre-provision earnings in 2013, assuming little change in the external environment." The company's fourth-quarter revenue was $5.624 billion, declining from $5.782 billion in the third quarter, "almost entirely driven by higher levels of estimated uncollectible finance charges and fees in the company's Domestic Card business." Capital One's fourth-quarter provision for loan losses was $1.151 billion, increasing from $1.014 billion the previous quarter, and $861 million a year earlier. The company said that the provision increased form the third quarter because fewer nonperforming loans acquired through acquisitions were absorbed by credit marks previously taken.
State Street Impresses
State Street ( STT) of Boston was Friday's financial winner, with shares rising 6% to close at $53.36, after the company reported fourth-quarter earnings available to common shareholders of $521 million, or $1.11 a share, beating the consensus estimate of a dollar a share, among analysts polled by Thomson Reuters. Operating earnings grew from $473 million, or 99 cents a share, in the third quarter, and $454 million, or 93 cents a share, in the fourth quarter of 2011. Fourth-quarter GAAP earnings available to common shareholders were $468 million, or a dollar a share, and included acquisition and restricting costs totaling $139 million, "primarily related to severance and benefits costs for targeted staff reductions expected to be substantially completed during 2013," which is expected to result in 630 staff positions being eliminated. State Street's management fees on an operating basis grew 4% sequentially and 29% year-over-year, to $260 million in the fourth quarter, with the year-over-year increase "primarily due to stronger equity markets, net new business, and higher performance fees." Please see TheStreet's earnings coverage for much more detail on State Street's fourth-quarter results.
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