UPDATE 1-Capital One to add $200 mln reserves, sell stock
NEW YORK, Sept 23 (Reuters) - Capital One Financial Corp (COF.N), the credit card and banking company, said on Tuesday it expected to add $200 million this quarter to its reserves for bad loans, but affirmed its 2008 financial outlook.
The McLean, Virginia-based company also set plans to sell 14 million common shares, worth about $753 million based on Tuesday's closing stock price. It had 375.7 million shares outstanding as of July 31, Reuters data showed.
Capital One said the reserve increase reflects "continuing weakness in the U.S. economy, as observed in recent trends in economic indicators, including home prices and the unemployment rate." It said the increase would give it the capacity to absorb $7.2 billion of loan losses through Sept. 2009.
The company said it expects the rate of U.S. card charge-offs to be in the low-6 percent range in the third quarter, and rise to about 7 percent in the fourth quarter. It was 6.26 percent in the April-to-June period, according to Capital One's latest quarterly report.
For 2008, Capital One expects a low single-digit percentage decline in managed loans, and double-digit growth in deposits. It also projects low- to mid-single-digit revenue growth, and a decline of at least $200 million in operating expenses.
Capital One once specialized in credit cards, but expanded into branch banking in recent years with the acquisitions of Louisiana's Hibernia Corp and New York's North Fork Bancorp Inc. Among its major card rivals are: American Express Co (AXP.N), Bank of America Corp (BAC.N), Citigroup Inc (C.N) and JPMorgan Chase & Co (JPM.N).
Citigroup Global Markets and JPMorgan are arranging the stock offering. Capital One said it will use net proceeds for general corporate purposes.
Shares of Capital One closed Tuesday down 73 cents at $53.72 on the New York Stock Exchange. They began the year at $47.26. (Reporting by Jonathan Stempel)
