By Juan Lagorio
NEW YORK (Reuters) - Capital One Financial Corp
The bank and credit card company is reducing its dividend to 5 cents a share from 37.5 cents beginning in the second quarter -- only one year after a 14-fold increase.
Analysts and investors had expected the decision after bigger rivals JPMorgan Chase & Co
Capital One, one of the largest U.S. issuers of MasterCard and Visa credit cards, said its pro forma tangible common equity ratio at the end of February was slightly above the 4.6 percent at the end of 2008. It added the dividend cut was equivalent to approximately 25 basis points of its TCE, which measures a bank's financial strength.
"We work to anticipate and mitigate risks, and to prepare for a range of possible downside scenarios," Chief Executive Richard Fairbank said in a statement.
"Given recent economic data, the broader economic outlook is somewhat weaker than expected, and subject to a greater level of uncertainty," Fairbank added.
In January, Capital One posted disappointing quarterly results and forecast more credit losses in 2009 as debt-burdened American consumers struggle with the highest unemployment rates in 25 years.
Weeks later, the McLean, Virginia-based company said the annual net charge-off rate -- a measure of credit defaults -- for U.S. credit cards had risen to 7.82 percent in January from 7.71 percent in December, while the rate for loans at least 30 days delinquent increased to 5.02 percent from 4.78 percent.
Capital One said on Monday that the overall credit trends have been roughly in line with expectations through February.
At Friday's close, shares of Capital One had fallen 74 percent in 2009 to their lowest levels since the mid-1990s amid growing concern about mounting credit losses and the need to set aside more money to cover them.
Capital One once specialized in credit cards, but expanded into branch banking in recent years after acquiring Hibernia Corp and North Fork Bancorp Inc. More recently, the February acquisition of Chevy Chase Bank expanded its presence in the affluent suburbs of Washington.
The bank's stock was down 7 cents, or less than 1 percent, at $8.24 in premarket trading.
(Reporting by Juan Lagorio, editing by Steve Orlofsky and Lisa Von Ahn)
