May 14, 2009
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News: Capital One CC Defaults Modest Decline
Good news for Capital One Financial Corp (COF) and the U.S.; the company’s credit card default rate fell for April to 8.91% from the previous month of 9.33%. Capital One’s international default numbers did not fare as well as it rose to 8.91. The news sent the premarket trading up 2.5%. Capital One is a major issuer of MasterCard and Visa credit cards. The company attributed the decrease to a change in accounting involving customer bankruptcy filings. The new accounting procedure allows Capital One to wait a longer time period before declaring the uncollectible credit card debt. Capital One also reported that loan delinquencies of 30 days or more experienced a modest decline as well falling to 5.04% from the previous 5.08% in March. The company’s auto loan write-off rate also declined for April to 3.46% down from 4.08% in March.
In April, Capital One announced a net loss of $111.9 million for first quarter 2009. Losses for first quarter 2009 were higher than predicted as the company continues to suffer from escalating credit card and loan defaults due to a struggling economy. Despite the losses, Capital One’s Chairman and Chief Executive Officer, Richard D. Fairbank, the company’s balance sheet “remained a source of strength.” Further, Mr. Fairbank indicated that they will continue to monitor current economic crisis and remain optimistic in weathering the storm. Recent stress test results indicated that the company has sufficient capital to carry it through continued credit card defaults and the recession. As a participant in the federal government bailout program, Capital One borrowed $3.55 billion. After the release of the stress test results, the company sold $1.55 billion in stock toward repayment of the debt
Capital One is one of the top four credit card providers in the nation. Capital One Financial Corporation is a holding company that offers a wide selection of financial products to personal consumers, small businesses and large commercial clients. Their subsidiaries are Capital One, N.A. and Capital One Bank (USA) and are headquartered in McLean, Virginia. The company trades on the NYSE under the symbol “COF”. The company’s stock which had dropped 21% this year has nearly tripled within the past two months.