Citing an increase in card spending and a declining rate of account defaults, Capital One Financial Corp. on Oct. 19 reported net income of $631 million for its credit card segment for the third quarter ended Sept. 30, up 116.1% from $292 million a year earlier.
Total revenue for the segment was down 10.3%, to $2.6 billion from $2.9 billion.
Purchase volume for U.S. cards during the quarter totaled $24.86 billion, up 4.6% from $23.76 billion a year earlier, while noninterest income declined by 32.8%, to $575 million from $856 million. Loan-loss reserves for U.S. cards dropped by 58.8%, to $577 million from $1.4 billion.
The net charge-off rate for U.S. cards was 8.23%, down 141 basis points from 9.64% a year earlier; the delinquency rate for domestic accounts at least 30 days past due was 4.53%, down 85 basis points from 5.38% a year earlier.
Cap One’s U.S. card segment held $53.8 billion in loans at the end of the quarter, down 13.1% from $61.9 billion a year ago.
Purchase volume for Cap One’s international cards segment was $2.18 billion, down 1.8% from $2.22 billion, while noninterest income declined 13.5%, to $96 million from $111 million.
Loan-loss reserves for international cards stood at $83 million at the end of September, down 59.9% from $207 million a year earlier.
The net charge-off rate for international cards was 7.6%, down 159 basis points from 9.19% a year earlier, and the delinquency rate on accounts at least 30 days past due was 5.84%, down 79 basis points from 6.63%.
Cap One’s international card segment held $7.5 billion in loans for investment in the international card segment at the end of the quarter, down 11.8% from $8.5 billion.
Overall, Cap One has “absorbed” the changes from the CARD Act, and the issuer’s U.S. card business is positioned to increase its market share in “the new, level playing field” the CARD Act is fostering, Richard Fairbank, Cap One chairman and CEO, told analysts during an earnings conference call.
Cap One expects to see “modest” effects from pending regulations that may cut debit-interchange rates, Fairbank said. He also noted that he has high hopes for the company’s recently inked deal to issue private-label credit cards for retailer Kohl’s Corp. (
The issuer may seek private-label card deals with other retailers as a way to diversify its card revenues over the long term, but on a “very selective” basis, Fairbank said.
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