Capital One Financial Corp.'s (COF) first-quarter profit rose 38% as an acquisition-related bargain purchase gain boosted the bank's bottom-line results and net charge-offs improved.
The company, which transformed itself from a credit-card lender to a bank just before the financial crisis hit, has benefited along with many of its peers in recent months as credit-loss provisions declined and delinquency rates eased. A stronger portfolio helped drive Capital One's profits higher earlier in 2011, though the credit improvements have showed some signs of slowing in recent months.
Capital One is buying HSBC Holdings PLC's (HBC, 0005.HK, HSBA.LN) U.S. credit-card operations, which includes about $30 billion in loans, for $2.6 billion. The deal would make Capital One the third-largest issuer of private-label credit cards. The company last month unveiled plans to offer $1.25 billion of its common stock to help fund the HSBC acquisition.
In February, Capital One completed its acquisition of ING Direct USA from ING Groep NV (ING, INGA.AE) in a deal valued at $9 billion.
For the latest quarter, Capital One posted a profit of $1.4 billion, or $2.72 a share, up from $1.02 billion, or $2.21 a share, a year earlier. Excluding the impact of a bargain purchase gain related to the ING Direct acquisition, earnings were $1.56 a share in the latest period.
Total revenue increased 21% to $4.94 billion.
Analysts polled by Thomson Reuters expected a $1.39 per-share profit and $4.37 billion in revenue
On a managed basis, which includes securitized loans still managed by Capital One, loan-loss provisions were $573 million, up from $534 million a year ago and down from $861 million in the fourth quarter.
The total net charge-off rate was 2.04%, down from 3.66% a year ago and from 2.69% the previous quarter. Charge-offs are loans banks don't expect to be able to collect. The overall delinquency rate was 2.23%, compared with 3.07% in the year-ago period and 3.35% in the previous quarter.
The charge-off rate for Capital One's U.S. card business was 3.92%, down from 6.2% a year ago and from the fourth quarter's 4.07%. Delinquencies reached 3.25%, compared with 3.59% in the year-ago period and 3.66% in the previous quarter.
Shares were up 2% to $55 after hours. Capital One's stock is up 28% since the start of the year.
