Capital One Financial's fourth-quarter profit fell short of projections as the McLean, Va., company boosted its reserves in anticipation of higher loan losses.
Net income at the firm totaled $920 million, a decrease of 8% from the same period a year earlier. Its earnings per share of $1.58 came in 6 cents below the consensus of analysts polled by Bloomberg.
Capital One's provision for credit losses ballooned to $1.38 billion during the fourth quarter, up 24% year over year and 26% from the third quarter of 2015.
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Following a new blueprint, card issuers are seeing returns on assets above 4% for the first time since before the financial crisis. How long the good times last will depend partly on how well the U.S. economy weathers turmoil in China and other markets.
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Capital One Financial in McLean, Va., rode growth in its flagship U.S. credit card business to stronger third-quarter earnings.
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In Capital One's flagship credit-card business, the provision for credit losses was up by $166 million from the fourth quarter of 2014. In the company's far smaller commercial banking unit, the provision for credit losses rose by $86 million.
In the credit-card business, Capital One and other issuers have been saying for some time that losses are expected to rise as loan volumes increase. Capital One grew its credit-card loan portfolio by 12% in 2015.
"The headline for 2015 was industry-leading growth in domestic card loans and purchase volumes," Richard Fairbank, Capital One's chief executive officer, said in a press release.
The company stated that certain adjustments in the fourth quarter also contributed to the fall in net income. It cited $72 million in charges associated with the of an acquisition of a health-care lending business from General Electric, planned site closures, and revisions to earlier restructuring charges.
Also in the fourth quarter, Capital One's noninterest expenses rose by 6% compared with the same period a year earlier, driven in large part by higher spending on marketing.
Net interest income, noninterest income and total net revenue all rose by 7%.
