Capital One Financial Corp. showed a third-quarter profit, but it was clear the bank and credit-card issuer is repositioning its auto portfolio.

Capital One reported net income of $374.1 million for the third quarter of 2008, compared to a net loss of $81.6 million in the year-ago period.

Total deposits reached $98.9 million in the third quarter, an increase of $6.5 billion, or 7 percent from second quarter results. The net income of local banking segments reached $88.2 million, an increase of 31.5 percent of $21.1 million from $67.1 million in the second quarter of 2008.

Capital One’s auto portfolio, however, continues to shrink as a result of aggressive steps taken by the business to retrench the business at the beginning of 2008. The division posted net income of $14.5 million for the third quarter, down from the $33.6 million earned last quarter and down $3.8 million from the year-ago period.

Net charge-offs for the auto segment increased 116 basis points to 5 percent from the second quarter. Delinquencies increased from 7.62 percent last quarter to 9.32 percent in the third quarter.

The company originated $1.4 billion in loans during the quarter, a 55.5 percent decrease, or $1.8 billion, compared to the third quarter.

Observers have said the credit crisis will hit Capital One harder than its competitors because the company gleans a high proportion of its revenue from its U.S. credit-card business, according to the The Wall Street Journal.

Innovest StrategicValue Advisors said Capital One is at risk because its business model includes charging high fees for missed payments, giving the company high exposure to subprime credit-card holders and low payment rates.

In September, Capital One said it would increase its loan-loss reserve by $200 million in the third quarter, which would allow it to absorb $7.2 billion in loan losses over the following 12 months. It also said it would raise about $750 million in capital through a secondary stock offering.