Capital One Financial Corp., the largest independent U.S. credit card issuer, is reducing its workforce by slashing 2,000 jobs, which accounts to about 6 percent of its total workforce.
The company has set a target to save $700 million by 2009 and is expecting that the resent change will help it to achieve about $400 million of pretax savings in 2008 and an additional $300 million in 2009.
Capital One, based in McLean, Va., expects to incur $300 million of pretax charges for the revamping; company will take a pretax charge of $200 million this year, including $90 million in the second quarter, to pay severance and other expenses. The charges will reduce earnings by about 15 cents per share in the second quarter and 33 cents for the year.
Approximately half of the planned job eliminations have already occurred and the affected employees have been notified. Other cuts will come through attrition and the elimination by the end of next year of selected positions that are currently vacant. Capital One currently has about 32,000 employees.
The McLean, Virginia-based Company has struggled with weaker credit quality and losses in a mortgage business it acquired late last year when it paid $13.2 billion for Melville, New York’s North Fork Bancorp Inc. The company fell short of analysts’ earnings estimates in April, posting a 24 percent decline in first-quarter profit to $675.1 million as customers missed debt payments and its mortgage business had a loss.
In 1995, Capital One was primarily a credit card issuer with five million accounts. In the decade since, it has evolved into a robust and broadly diversified Fortune 200 company with more than 50 million customer accounts worldwide and one of the most recognized brands in America.
As the news became familiar in the market, Capital One’s shares respond negatively as they fell 3 cents to $78.77 in after-market trading. The stock has declined 6.6 percent over the past year, compared with an 8 percent rise in the 24-member KBW Bank Index.
Via: USA Today
