NEW YORK — A sharp increase in credit-card loan losses at Capital One Financial Corp. does not bode well for Bank of America Corp. and other big consumer lenders.
Capital One said Wednesday its net charge-off rate for United States card holders — the rate of loans for which collection is unlikely — rose 1.27 percentage points in one month, to 9.33% in March, exceeding the unemployment rate by an expanding margin.
Usually, card loss rates during economic stress more or less track the unemployment rate, but bankers at JPMorgan Chase & Co. and Bank of America had warned recently that the loss rates could exceed the unemployment rate in this severe downturn. The unemployment rate for March is 8.5%, up from 8.1% in February.
At Capital One, "March managed-basis results show credit deterioration continued at a slightly higher-than-expected rate," Fox-Pitt Kelton analyst Bill Carcache wrote in a research report.
However, Capital One said some of the spike is because February has fewer days. Adjusted, the U.S. card charge-off rate would have been 9.00% in March, and 8.38% in February.
Capital One also disclosed that it continued to shrink its credit-card portfolio in at home and overseas.
Its net charge-offs in the auto-finance segment fell to 4.08% from 4.44%, according to a filing with the Securities and Exchange Commission. Net charge-offs for card customers oversees rose to 8.67% from 7.2% in February.
Shares of the McLean, Va., bank fell almost 7% in premarket trading, to $15.90, in a mixed market for bank stocks.