Strong Volumes, Stable Margins Propel Cap One Card Unit's Q4 Revenue Growth, But Profit Dips

Growth in loans, strong purchase volumes and stable margins helped Capital One Financial Corp.’s Credit Card unit to generate 2% fourth quarter revenue growth, to $2.59 billion from $2.54 billion during the same period in 2010. The unit’s profit, however, dropped 39.8%, to $353 million from $586 million.

In the U.S., Domestic Card revenue grew 4.5%, to $2.32 billion from $2.22 billion. Net income slipped 20.8%, to $395 million from $499 million.

The Domestic Card net charge-off rate dropped 321 basis points, to 4.07% from 7.28% a year earlier, resulting from the significant credit improvements experienced in 2011, the company said in its Jan. 19 earnings report. The 30-day delinquency rate fell 43 basis points, to 3.86% from 4.29%.

The provision for loan and lease losses grew 1.9%, to $600 million from $589 million.

Domestic Card loan balances grew 5.1%, to $56.6 billion from $53.85 billion, driven by seasonal spending and balance-building on a growing account base, Cap One said. Average loans for the quarter were $54.4 billion, up 2.3% from $53.19 billion.

Growth for the year resulted largely from the addition of the Kohl's private label partnership (see story).  Also helping was a return to growth in the company's general purpose card business in the second half of the year, the company said. Excluding the expected installment loan run-off, Domestic Card loans grew by $4.7 billion, or 9%, for the full year, Cap One said.

Purchase volume increased 28.2%, to $34.59 billion from $26.99 billion, reflecting continued strong growth in purchase volume across the company's Domestic Card business. Purchase volume grew 17.8% from a year earlier when excluding the impact of the Kohl's portfolio.

International Card revenue fell 18%, to $268 million from $327 million, and the unit reported a $42 million loss, which compared with an $87 million profit a year earlier.

The International Card net charge-off rate dropped 91 basis points, to 5.77% from 6.68% a year earlier. The 30-day delinquency rate fell 57 basis points, to 5.18% from 5.75%.

The provision for loan and lease losses dipped 3.6%, to $81 million from $84 million.

International Card loan balances grew 12.6%, to $8.47 billion from $7.52 billion. Average loans for the quarter were $8.36 billion, up 12.7% from $7.42 billion.

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