By Andrew R. Johnson
Business clients are holding back on investments amid
uncertainty over the so-called fiscal cliff, Capital One Financial
Corp. (COF) Chairman and Chief Executive Richard Fairbank said
Wednesday.
"You can feel out there ... small businesses and medium-sized
businesses and even larger businesses pulling back as they approach
the fiscal cliff," Mr. Fairbank said during a Goldman Sachs Group
Inc. (GS) conference In New York. "It's very clear in our customers
on the commercial and small-business side that they are approaching
the fiscal cliff with concerns."
Mr. Fairbank joins a long roster of banking executives who have
warned in recent days that businesses are sitting idle because they
fear another economic downturn if political leaders are unable to
reach a compromise on taxes and spending. The fiscal cliff refers
to government tax increases and spending cuts set to take effect
after the end of the year if Congress doesn't act. The worry is the
combination of tax increases and spending cuts could send the U.S.
economy back into recession and drive up unemployment, potentially
resulting in a new wave of loan losses for lenders.
Capital One is one of the largest U.S. credit-card lenders but
has expanded into other areas of lending over the last several
years. Its embarked on a series of acquisitions during a period of
tepid lending demand, completing purchases of ING Direct USA from
ING Groep NV (ING) and HSBC Holdings PLC's (HBC) U.S. credit-card
business earlier this year.
Even if political leaders reach a resolution over how to avoid
going over the fiscal cliff, Mr. Fairbank said he is skeptical it
would suddenly cause businesses to become more optimistic about the
economy.
Consumer-loan demand in the credit-card industry also remains
low, he said.
"The card industry is working hard to pretty much hold its own
in terms of" outstanding loan balances, Mr. Fairbank said.
Capital One's shares were up 0.5% at $57.28 in recent trading
and are up more than 35% this year.
Write to Andrew R. Johnson at andrew.r.johnson@dowjones.com
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