January 21, 2010
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News: Capital One Card Division Post Profit
Good news for Capital One Financial Corp. as the company posted a profit in its credit card division for fourth quarter. In response, the company reduced its allocations for future defaults and consumer loan defaults by $386 million while increasing its reserve for bad commercial loans. The company's net income was $376 million against a loss of $1.45 billion for the same time last year. Although fourth quarter credit card defaults fell slightly to 9.58 percent from third quarter's 9.59 percent and same time last year's 6.93 percent, Capital One expects its domestic credit card defaults to peak near 11 percent during first quarter 2010.
The bank's commercial division lost $136 million and $7.7 million in its consumer loan division; however, its credit card unit realized net income of $509.9. United States consumers had more difficulty paying back debt with credit card defaults in December at 10.14 percent and 9.6 percent in November. Historically, defaults tend to trend side by side with the national unemployment rate which hit over 10 percent in December. Capital One's U.S. card delinquencies of 30 days or more fell slightly in December to 5.78 percent down from 5.87 percent in November.
Capital One is the third largest credit card company in the U.S. and is based out of McLean, Virginia. The company recently repaid $3.56 billion that it borrowed from taxpayers in the government bailout, the Troubled Asset Relief Program (TARP), program last spring. A proposed tax liability on companies that received money from the bailout program could cost Capital One over $124 million. Richard Fairbank, Capital One's Chief Executive Officer says the company is exploring their options to increase profits to offset a decline in consumer and commercial loan business and a recent significant decrease in consumer card spending. Capital One Financial Corp is traded on the New York Stock Exchange (NYS) under the symbol of COF.