Credit Commentary

Capital One Earnings Release

By Administrator on Tuesday, April 28 2009

Capital One Financial Corp (NYSE: COF), a leading issuer of MasterCard and Visa credit cards, reported a first-quarter loss on Tuesday, hurt by growing credit losses, and higher provisions for bad loans. Although, all National Lending businesses reported profits in the first quarter of 2009 including U.S. Card business delivering $2.4 million this quarter.

In the U.S. card, charge-offs   increased to 8.39 percent in the first-quarter from 7.08 percent in the fourth quarter due to seasonal weakening in bankruptcy trends and declining loan balances resulted in higher charge-off rates compared to the fourth quarter of 2008.  The company expects further increases in U.S. Card charge-off rate through 2009 as the economy continues to weaken. Additionally, the delinquency rate of over 30 days rose to 5.1% compared to 4.8% in fourth quarter of 2008. 

Chairman and CEO Richard Fairbank said in a written statement; "While our first-quarter results reflected significant pressures from the worsening economy, our balance sheet remained a source of strength. We continued to build our allowance, increase coverage ratios, and manage our capital levels well in excess of regulatory requirements." Capital One added $124.1 million to its allowance for loan losses, saying it expects higher charge-offs this year.

Moreover, the US cards purchase volume has been decreased by 14% compared to the previous quarter which could be due to the decrease in number of card accounts to 35,273 thousand in first quarter of 2009 from 37,436 thousand in last quarter of 2008.