Citing improving performance in its pared-down portfolio, Capital One Financial Corp. on April 22 reported its credit card unit earned $489.6 million in profits during the quarter ended March 31, up dramatically from $3.3 million a year ago. Total revenue was $2.83 billion, up 4.8% from $2.7 billion.
Cap One held $63.8 billion in total credit card loans at the end of March, down 15% from $75.1 billion a year ago.
U.S. card purchase volume was $22 billion, up 1.9% from $21.6 billion. The charge-off rate on outstanding U.S. card receivables was 10.48%, up 209 basis points from 8.39% a year ago. The delinquency rate for U.S. accounts at least 30 days past due was 5.3%, up 5 basis points from 5.08% last year.
Outside the U.S., Cap One’s purchase volume for operations in regions that include Canada and United Kingdom was $1.94 billion, up 3.7% from $1.87 billion. The charge-off rate outside the U.S. was 8.83%, up 153 basis points from 7.3% last year. The delinquency rate for non-U.S. accounts at least 30 days past due was 6.39%, up 14 basis points from 6.25%.
During a conference call with analysts on April 22, Richard Fairbank, Cap One chairman and CEO, said he believes the company’s charge-offs peaked during the quarter, and he expects to see “modest improvements” moving forward.
Cap One this year will earn less fee revenue because of provisions of the Credit Card Accountability, Responsibility and Disclosure Act, most of which went into effect last month, said Fairbank, who sees the card industry gradually returning to profitability.
Cap One never relied on “aggressive, single-infraction penalty repricing” of card accounts the CARD Act prohibits, Fairbank said, noting that as the economy recovers, Cap One plans to “restart the marketing of similar products to similar customers that we were doing before we pulled back during the recession.”
It remains to be seen “how much demand there is [for credit] on the other side of this [recession] and also [whether] the growth of debit cards is causing some modest encroachment into [credit] card territory,” Fairbank said.
