January 30, 2008 / 7:03 PM / 11 years ago

UPDATE 2-Advanta's Q4 profit misses Wall Street view

(Adds byline, analyst’s comments, share movement, other details)

By Sweta Singh

Jan 30 (Reuters) - Advanta Corp ADVNA.O ADVNB.O, an issuer of credit cards to businesses, reported a lower quarterly profit, which also fell short of Wall Street estimates, mainly on charges related to litigation and turmoil in the credit market.

The company, whose shares were trading down more than 5 percent in midday trade, reported fourth-quarter net income of $7.4 million, or 17 cents a share, compared with $18.2 million, or 41 cents a share, a year ago.

Analysts expected the credit card issuer, which focuses on small-business credit card market, to earn 35 cents a share, excluding items, according to Reuters Estimates.

“Even though they (Advanta) missed my number, I was pleasantly surprised to see that in terms of credit quality and loss provisioning, things are not as bad as investors had feared,” Sameer Gokhale of Keefe Bruyette & Woods said by phone.

Provision for credit losses in the Spring House, Pennsylvania-based company’s business cards segment more than doubled to $21.6 million in the quarter.

Large card issuers, including Citigroup Inc (C.N), Bank of America Corp (BAC.N) and JPMorgan Chase & Co (JPM.N) have also added to reserves to meet the consumer credit losses.

Capital One Financial Corp (COF.N), another large independent card issuer, posted a 42 percent drop in fourth-quarter profit.


“Although we’re disappointed with the impact of the current economy on our recent results, we believe the small-business market will continue to provide opportunities for us going forward,” Advanta Chief Executive Dennis Alter said.

Results for the quarter included a litigation charge of 11 cents a share and a gain of 5 cents a share on the sale of a portion of Advanta’s MasterCard shares.

The results also included charges of 39 cents per share mainly from recent credit trends.

Keefe Bruyette’s Gokhale said though Advanta’s credit quality will continue to deteriorate in 2008, it might be less than what investors are expecting.

Advanta shares, which have lost more than 70 percent of their value in the last 12 months, were trading down 36 cents at $8.02 in afternoon trade on the Nasdaq. They touched a low of $7.85 earlier in the session. (Editing by Himani Sarkar)

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