April 15,2009
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News: Capital One CC Defaults Soar.
As unemployment rates continue to rise, credit card lenders are experiencing higher numbers of defaults. A major lender of MasterCard and Visa credit cards, Capital One Financial Corp, released their net charge-off rate for the month of March as 9.33%. Not only does the default rate exceed February's rate of 8.06% by more than a point, it also exceeds the U.S. unemployment predicted rate of 9.2% for April. Despite this increase in credit card debts that Capital One will never recoup, the company's loan delinquency rate experienced only a slight decrease from 5.1% to 5.08%.
Although the gap is closing between Capital One Financial credit card default rates and its competitors American Express Co and Citigroup Inc., it has yet to reach their highs. All three companies are traded on the New York Stock Exchange. As of late, the portfolios of both competitors have experienced some of the worst performances in credit card history. Although Citigroup traded at a low of $3.51 today, a 12% plunge, it closed with a mere .04 cent or a 1.0% decrease. American Express encountered similar results when it too experienced a low of $17.50, a 5% decrease. However, American Express was able to fully recover and closed at $20.62 experiencing an 11.8% increase. Capitol One, on the other hand, slumped 10% earlier in the day to $15.29 but it too recovered and came back to close at $17.32 with a 1.46% gain.
Capital One's auto loan charge-off rate does not look as bleak. The rate actually dropped in March from February's rate of 4.44% to 4.08%. Although delinquencies continue to be an issue, the rate did remain stable at 7.52%. The company's international operations did not fare as well. The charge-off rate for that division rose for the month of March from 7.20% to 8.67%. International delinquencies also rose from 6.16% to 6.25% in March. Capital One will be reporting its first quarter results soon and is expected to forecast more of the same in credit card losses as the unemployment rate continues to climb and consumers experience added burdens of a shaky economy.