There's not a lot of new on this yet but it looks like Capital One is shutting down its mortgage unit. Capital One expects that the total after-tax charge associated with this closure will be approximately $860 million, or $2.15 per share.
"The reductions in demand and pricing in the secondary mortgage markets make it difficult to operate our wholesale mortgage banking business profitably," said Gary Perlin, Capital One's Chief Financial Officer. "Beyond that, Capital One's other businesses are supported by ample liquidity and funding including deep access to deposits, a "stockpile" of subordinated credit card funding in place that allows approximately $9 billion of AAA credit card funding going forward, and a $25 billion portfolio of highly liquid securities."
What's interesting is that the release sounded very pessimistic on the longer-term mortgage trends. As it states:
" Further, recent and continuing developments in the mortgage markets reduce the long- term outlook for profitability in the business, as the company expects markets for prime, non-conforming mortgage products are likely to remain challenged for the foreseeable future. "
1,900 positions will be eliminated as a result of this decision, the majority by year-end.
On the markets, Capital One shares dropped 5% to $63.38.
Comments
Ralph Smith
August 21, 2007
The extraordinary thing here is that these guys paid through the nose for Greenpoint less than 12 months ago (North Fork Bank).
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