Capital One Financial Corp (COF) announced it was cutting its earnings projections for their fiscal year by 20 percent, as losses from loans continue to mount in the slowing economy.
The company recorded its first quarterly loss since 1994 in the third quarter, cutting 1,900 jobs and shutting down its Greenpoint Mortgage division.
For 2007, the adjusted earnings will come in at $3.97 a share, a sharp decline from its guidance of $5 a share. For the fourth quarter, the company said it expects profits of 60 cents a share.
The majority of the adjustment was attributed to an increase of around $1.9 billion in loan-loss provisions, and $80 million in legal reserves for the fourth quarter. Legal costs were in relationship to the $2.25 billion settlement of a lawsuit initiated by American Express (AXP). Per the settlement, Capital One will be dropped from the suit.
Along with the approximate $1.3 billion in write-offs in the fourth quarter, the company says it will be adding another $650 million for write-off allowance because of the growing number of slow loan payments. Another weakening area is their home equity lines, where they hold about $700 million for investment.
The company estimates that they will finish 2007 with over $29 billion in liquidity available to them.
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