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Tony Sagami (Harvest Advisors) submits: Capital One Financial (NYSE:COF) reported $1.81 a share of Q3 profits on Thursday night. Too bad that is way down from the $1.97 it made last year and the $1.82 Wall Street was expecting.

Capital One also warned that its full-year 2005 earnings would be at the low end of its $6.60 to $7 guidance, again lower than the $6.97 the Jack-and-the-beanstalk crowd was expecting.

Naturally, Capital One trotted out the newest version of the dog-ate-my-homework excuse.

First, a $44 million impact related to the Gulf Coast hurricanes; and second, a $75 million impact from the unprecedented number of bankruptcy filings made last week immediately in advance of the new legislation.

While there is certainly some truth to the hurricane and bankruptcy impact, it isn’t like nobody knew about them. The hurricanes -- while horrible -- are old news and the surge in bankruptcy filings have been front-page news for weeks.

The reality is that Americans are having trouble making ends meet because of higher energy prices, higher interest rates, higher insurance premiums, higher real estate taxes, and higher inflation on everything from eggs to nails to clothes.

You can tell by these other troublesome warnings buried in the fine print:

  • Capital One raised its credit card default rate forecast to 5% and increased its Q3 loss reserves to $42.0 million.
  • The delinquency rate of loan more than 30 days past due rose to 3.73% in Q3 compared to 3.49% in Q2.
  • Even though the loan portfolio increased by $1.8 billion to $84.8 billion, Capital One’s interest revenue fell from 12.65% in Q2 to 12.54% in Q3. And it is way, way down from the 13.03% it made in Q3 of 2004.
  • The big shots running Capital One are doing just fine though. Thanks to generous stock options, the number of outstanding shares grew from 263.5 million to 266.6 million in the last 90 days.

Even though Capital One is an accident waiting to happen, its problems are NOT company specific. Everybody in the consumer lending business is going to see their deadbeat rate sharply rise and profits sharply fall.

Related:

  • Other articles on the Seeking Alpha Network by Tony Sagami

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Source: Capital One Reduces Guidance; Is the US Consumer Weakening? (COF)