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Capital One Financial Corp. said Thursday that its first-quarter net income tumbled 25 percent from the same period last year, when the lender booked a hefty gain from its acquisition of online bank ING Direct.
Across its segments, Capital One posted annual increases in revenue in its domestic card, consumer banking and commercial lending businesses in the January-March period. That offset a decline in its international card segment.
All told, the company's net interest income, or money earned from loans, grew 34 percent to $4.57 billion in the quarter. Non-interest income, which includes service charges and other customer-related fees, fell 35 percent to $981 million.
"Each of our businesses delivered solid results in the quarter and our balance sheet is strong," said Richard D. Fairbank, Capital One's chairman and CEO.
Capital One, based in McLean, Va., is best known for its credit card business, but it has taken steps in recent years to increase its profile as a national bank. The acquisition of ING Direct, a deal that closed in February 2012, made Capital One the nation's sixth-biggest bank, based on deposits.
The company's net interest income grew in the quarter to $4.6 billion from $3.4 billion a year earlier. Non-interest income slid to $981 million from $1.5 billion in the prior-year quarter, which included a gain of $594 million related to the ING Direct acquisition.
Auto loan originations were down 11 percent from the first quarter of last year to $3.8 billion.
"The year-over-year decline in originations reflects increased competition and our choice not to chase growth that might compromise the sustained returns or resilience of the business," Fairbank said during a conference call with Wall Street analysts.
Purchase volume for Capital One's domestic card business, excluding accounts obtained through the company's acquisition of lender HSBC's U.S. card business last year, rose about 5.5 percent from a year earlier.
Charge-offs, or the rate of loans written off as unpaid, inched higher to 4.4 percent, but the rate of delinquent loans improved to 3.4 percent.
Fairbank noted that consumers are being more cautious, which tends to suppress growth in loans, but also translates into improved payment trends.
Consumers have been more reluctant to run up big credit card bills since the recession ended. Credit card debt remains 17.2 percent below the peak set in June 2008. Analysts believe consumers will stay cautious with their plastic this year, largely because of an increase in Social Security payroll taxes that went into effect in January.
At the same time, consumers are feeling wealthier and more inclined to spend, thanks to rising home values and stock prices that have hit records. When consumers spend more, that can help boost credit card use, benefiting card issuers like Capital One.
Most analysts think the economy strengthened from January through March, helped by the pickup in hiring, a sustained housing recovery and steady consumer spending. Consumers stepped up purchases in January and February, even after Social Security payroll taxes rose this year.
Even so, employers added only 88,000 jobs in March, a sharp slowdown from average gains of 220,000 in November through February. And consumers cut back on their spending at retail stores and restaurants last month.
That didn't appear to hurt Capital One, however.
The company's net income after paying preferred dividends fell to $1.05 billion, or $1.79 per share, in the first three months of this year. Analysts polled by FactSet expected earnings of $1.61 per share.
A year ago, the company earned $1.4 billion, or $2.72 per share. When excluding the impact of the ING Direct deal, profit amounted to $1.56 per share.
Revenue jumped 13 percent to $5.55 billion, but to below analysts' prediction of $5.57 billion.
Capital One added 71 cents to $53.50 in after-hours trading following the release of the earnings report. The shares ended regular trading up 3 cents at $52.79. Through Thursday's close, the stock is down about 9 percent this year.