October 15, 2009
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News: Capital One Nears 10% in CC Defaults
First and second quarter record breading highs in credit card delinquencies of 30 days or more forecasted Capital One Financial Corp's (COF) rise in credit defaults for third and fourth quarters. In the company's regulatory filing Capital One's U.S. credit card defaults rose to 9.77 percent for the month of September, up from 9.32 percent in August. Capital One's U.S. credit loan delinquencies of 30 days or more also increased for September from 5.09 percent in August to 5.38 percent. Capital One's credit card and loan delinquencies and defaults have a positive correlation with the nation's unemployment rate which also rose to 9.8 percent in September. Experts predict unemployment will meet an all time high of 10 percent by the end of 2009.
Capital One's credit card delinquencies and defaults were not the only areas to suffer, the company's U.S. automobile loan defaults also increased in the month of September to 4.58 percent up from 4.31 percent in August. Auto loan delinquencies had a moderate increase to 9.52 percent up from 9.42 percent in August. The company's international business realized some difficulties as well. International loan and credit card defaults increased to 9.24 percent up from 8.60 percent in August. Despite the high increase in international defaults, international loan delinquencies of 30 days or more had the best showing with a decrease to 6.63 down from 6.67 percent in August.
The decrease in international loan and card delinquencies gives some insight into what the nation's fourth largest credit card company can expect for future international write-offs. However, the predicted continued rise in the U.S. unemployment rate indicates it's not over yet for the financial industry. Capital One will need to continue its focus on risk reduction strategies to protect stockholders from any further decay in profits. Capital One is based out of Tysons Corner, Virginia and is traded on the New York Stock Exchange (NYSE) under the symbol COF.