June 16, 2009
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News: Capital One CC Defaults Increase
Capital One Financial Corp's May regulatory filing showed that the company's U.S. credit card write-offs (those loans they do not expect to collect on) increased to 9.41%; up from April's number of 8.56%. The company's U.S. auto loan write-offs increased to 3.62% for May; up from April's number of 3.46%. The report also indicated that Capital One's credit card delinquency rate of 30 days or more past due had a moderate decrease in May to 4.90% down from April's 5.04%. On a positive note, the decrease, which is the third straight month in a row, is an indicator of future defaults. On the other hand, Capital One's auto loan delinquencies of 30 days or more increased in May to 8.59%; up from April's number of 7.81%. The company's international operations credit card write-offs didn't fare as well as they increased to 9.77% in May; up from 8.91% in April. Delinquencies also increased to 6.69% in May; up from 6.43% in April.
Capital One posted higher than anticipated losses for 1st quarter as their credit card and loan defaults rose in the wake of a weak economy and high unemployment. However, they continue to out-perform other major credit card companies including CitiGroup, Bank of America, and American Express whose default rates have climbed much higher. A contributing factor to the moderate improvement in write-offs is credited by Visa and MasterCard's recent change in their accounting procedures. Both companies have increased the length of time before they declare debt acquired from consumer bankruptcies. Based on previous standards, Capital One's write-offs would have reached the 10% mark.
Capital One was founded in 1995 and in under ten years has evolved from a traditional card company into a diversified financial services company with a variety of products from credit cards to branch banking. The government's recent stress test results indicated that Capital One had sufficient capital to ride out the depression. The company acquired $3.55 billion in the recent government's bailout program which it expects to pay back shortly.