Shares of Capital One Financial [COF] fell sharply in Friday trading on news that the bank missed analyst expectations for the first quarter due to mortgage-related problems.
The bank posted a profit of $675.1 million, or $1.62 per share, versus $883.3 million, or $2.86 per share, for a similar period a year ago.
Revenue rose to $3.43 billion, up from $3.07 billion last year.
The numbers undershot Wall Street expectations. Analysts forecasted earnings of $1.98 per share on revenue of $4.1 billion.
Looking ahead, Capital One lowered its full-year profit outlook. Previously, the bank had said it was looking for earnings in a range between $7.40 and $7.80 per share. Now it's giving guidance of earnings in a range between $7 and $7.40 per share.
Shares of Capital One were down 5.9%, or $4.53, to $72.81 in Friday trading.
Capital One, like M&T Bank, is starting to see its earnings pressured by problems plaguing the Alt-A mortgage business.
The bank, which issues credit card, auto, and mortgage loans, told investors that its mortgage banking sub-segment posted a net loss of $12.6 million in the first-quarter. The business originated $6.8 billion in loans during the quarter, down $1 billion from first quarter of 2006 originations and down $2.5 billion in originations in the last quarter of 2006.
Friedman, Billings, Ramsey & Co. analyst Scott Valentin told his clients that, while problems in the Alt-A mortgage space negatively impacted earnings, the U.S. card and auto platforms were also troubled.
Capital One's U.S. card business reported that net income totaled $495.3 million for the first quarter, versus a record $602.8 million in the first quarter of 2006. Management's normal outlook for a cautious yet optimistic credit card space has now changed, Valentin noted.
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