Capital One (COF), a credit card company, reported poor fourth quarter earnings and gave a very negative outlook. For the quarter, COF lost $3.74 per share while analysts were expecting a profit of $0.33. The company set aside $1 billion for bad loans, and expects unemployment to rise to 8.7% and home prices to decline another 10%. The company’s CFO said that “the really big risk to our outlook isn’t 2009, but it is what 2010 might look like.” The company also said that 7.08% of its credit card and auto loans were in default. During the third quarter, this figure was only 5.85% (Source: WSJ).
Based on what Capital One said, we should not expect a quick recovery anytime soon. 2009 just began and COF is already preparing for a bad 2010. Many analysts are expecting credit cards and auto loans to be the next shoe to fall.
Citigroup tapped the government’s Temporary Liquidity Guarantee Program for $12 billion. This money is guaranteed by the Federal Deposit Insurance Corp. (FDIC) making it the highest rated debt. This is the largest debt offering under this program since its inception on November 25, 2008. When will the government just cut its losses and let Citigroup go under?
Freddie Mac also announced it will need $35 billion of government TARP money.
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