Dallas is in for a surprise when it comes to where some of their jobs are going. The news out today is that Capital One plans to cut roughly 950 jobs in the Dallas area as they get out of the home equity loan business and eliminate a call center. On Tuesday, the company came out in a statement and said that it has proven too challenging for them to remain competitive in the home mortgage business. This in turn lead to the announcement that they would be closing down that part of their business in the Dallas area.
The home loans that currently exist through Capital One will be allowed to remain, and they will continue to service them. However, they are not going to take on writing any new loans. They are simply getting themselves out of that realm of business says the Dallas News.
Bloomberg is reporting that the President of the financial services division of the company wrote a statement that employees were able to read about the company. It stated that given the current rate environment and the lack of the company’s competitive positioning, that they would be getting out of the mortgage game altogether.
This is all difficult news for employees of the company to swallow. Not only do they have to live with the fact that they are out of a job, but they must also suffer through the fact that their company would seem to have been in a great position to deal with this type of market. Two factors in particular would have pointed to this company being a strong player in the market:
- As of June 30th, the company had $20.6 billion worth of residential mortgage loans
- They were the 12th largest lender of mortgages among the banks
Those two things would have made it easy for a new recruit to have believed that he or she was going to work for a great company that was in a great financial position. The truth was a little bit more difficult to get to. It turns out, the company just did not feel that they could compete with the others. They were getting squeezed out of an industry in which they were the number 12 player. That is stunning indeed.
Call Centers Shuttering
The perhaps not-so-surprising part of the statement from Capital One is that they are closing their call center in Dallas. This was a major call center for them, but the fact remains that they simply do not need it nearly as much as they perhaps once did. This used to be a way in which customers could get answers to the questions they had on a variety of topics. However, this is no longer as necessary given the growth of mobile and other technologies.
Many customers simply use their mobile device to find out what they need to know about their account. They are not calling the credit card company to see where they stand on something. Rather, they are just using their smartphone to access the websites they need to get the information they require regarding how to take care of any issue.
Couple the rise of smartphone use with the fact that automation makes it relatively easy to set up a system at the call centers that does not require a human voice on the other side, and you can see why Capital One has closed up the center. It does mean that hundreds will continue to lose their jobs working there, but that is something that was relatively easy to predict in some ways. If these types of advantages are available to a company, you can pretty well expect that they will use them.
Not Everyone Is Out Of Work
While this news is important, it is also worth noting that not everyone working for Capital One in Dallas has lost their job. The Washington Business Journal reports that there are still roughly five-thousand employees of Capital One working in the area.
The remaining employees may be able to enjoy their jobs for now, but there is no telling when cuts could come their way as well. The fact remains that the company just recently beat its latest earnings expectations, and yet they still have cut hundreds of jobs. Then again, you could make the argument that by making those tough decisions they are helping to ensure that they will continue to beat their expectations for earnings.
The Stock Just Keeps Performing
You can make the moral argument against cutting these people’s jobs, but it is difficult to argue with the numbers. CNBC.com reports that Capital One beats its most recent earnings statement handily. After doing so, the company went on to see its stock jump by four percent on the day. That is an incredibly strong move for a single trading day. It gives executives at the company all the more reasons to continue to take the kind of actions that they have up to this point.
The stock market as a whole has been on a tear lately, and Capital One does not want to get left behind. All companies have to make cuts from time to time. They do so in order to save money and increase profits, but they also do so because some of those segments of their business just become useless after a while. The call center is a pretty good example of something that Capital One simply did not need anymore. They were cutting out some of the fat so that they could make more profitable decisions going forward. Expect them to continue to do the same in the future.