Time To Roll
16 년 전
Capital One's Credit Losses Outpace Jobless Growth
Since charge-offs typically lag unemployment changes, the first-quarter numbers may add up to big trouble for credit-card issuers
The jump in likely credit-card loan losses at Capital One Financial (COF) suggests that other major consumer lenders may be facing similar losses for the first quarter. On Apr. 15, the issuer of MasterCard and Visa credit cards reported a one-month spike of 1.27% in net charge-offs for U.S. cardholders, to 9.33%, in March, surpassing the increase in unemployment by a widening margin.
The unemployment rate rose to 8.5% in March, from 8.1% in February. Historically, the bad debt rate on credit cards has lagged unemployment, but deteriorating economic conditions have spurred growing concern that the rate would start to outpace climbing unemployment, which seems to be occurring now, according to Michael Taiano, an analyst at Sandler O'Neill & Partners in New York.
It's a much bigger concern, considering that some economists think unemployment might rise to 10%. "That would be mean a bigger drag on [issuers'] earnings in those quarters where that happens," says Taiano, who has a hold rating on Capital One's shares.
There are a few reasons for the spike in Capital One's charge-offs. First, fewer days in February meant that some of that month's charge-offs were recognized in March. When adjusted for this, the loss rates in February and March become 8.38% and 9.0%, respectively. "Still, a 60-plus basis-point increase in one month is a lot," says Taiano.
Loss Rates Climb For All Issuers
Another factor is the impact of Capital One having to adopt the minimum payment rule after it came under the regulatory oversight of the Office of Currency Comptroller about a year ago. That requires credit-card holders to make higher minimum monthly payments on their balances. Taiano expects the shift to boost Capital One's losses by 50 basis points in 2009 and says it could result in a slightly higher charge-off rate than its competitors suffer. The bright side, however, is that the company has already increased its reserves for this, so the adjustment should already be reflected in earnings. Capital One is scheduled to report first-quarter results on Apr. 21.
Loss rates for all credit-card issuers are climbing as their total loan portfolios—the denominator in the loss rate equation—shrink due to dramatically reduced originations of new loans and stricter underwriting standards.
Some analysts, including Taiano, say net charge-offs don't offer the most accurate picture of Capital One's credit-card losses. A more accurate picture, they say, can be found in the master trust data the company files each month with the Securities & Exchange Commission. Master trust numbers reflect pure credit-card losses, says Taiano, while the managed numbers include about $15 billion in closed-end personal loans—debt unsecured by collateral, much like credit cards, but not provided as a revolving line of credit to borrowers.
The master trust numbers show a rise in credit-card losses to 7.96% in March, from 6.89% in February, which means Capital One's losses are still lagging the unemployment rate.
But analyst Robert Napoli at Piper Jaffray in Chicago found even the master trust data disappointing and notes that the company is making less money on its loan portfolio (measured by a weaker portfolio yield) because of the higher charge-offs. "The drop in yield is concerning, especially since we understand Capital One, along with other credit-card issuers, has been increasing rates and fees," he wrote in an Apr. 15 note. "Discover (DFS) and JPMorgan Chase (JPM) card trusts had stable yield and less of an increase in credit losses."
While the month-to-month hike was higher for Capital One, the credit loss rate went up for all issuers between February and March, says Taiano.
makesumgravy
16 년 전
How many workers could be supported by Richard D. Fairbank's pay package? Using the SEC Total, Richard D. Fairbank made $20,412,429, which is equal to: Using the AFL-CIO Total*, Richard D. Fairbank made $17,084,879, which is equal to:
12 Nobel prize winners
51 average university presidents
51 U.S. presidents
78 AFL-CIO presidents
108 Chairmen of the Joint Chiefs of Staff
690 average workers
1,498 minimum-wage earners
10 Nobel prize winners
42 average university presidents
42 U.S. presidents
65 AFL-CIO presidents
91 Chairmen of the Joint Chiefs of Staff
578 average workers
1,254 minimum-wage earners
--------------------------------------------------------------------------------
How long would it take to equal Richard D. Fairbank's total compensation for 2007? Using the SEC Total: Using the AFL-CIO Total*:
A Nobel prize winner would have to work until 2020 A.D.
An average university president would have to work until 2059 A.D.
The President of the United States would have to work until 2059 A.D.
AFL-CIO President John Sweeney would have to work until 2086 A.D.
The Chairman of the Joint Chiefs of Staff would have to work until 2116 A.D.
An average worker would have to work until 2698 A.D.
A minimum-wage earner would have to work until 3506 A.D.
A Nobel prize winner would have to work until 2018 A.D.
An average university president would have to work until 2050 A.D.
The President of the United States would have to work until 2050 A.D.
AFL-CIO President John Sweeney would have to work until 2073 A.D.
The Chairman of the Joint Chiefs of Staff would have to work until 2099 A.D.
An average worker would have to work until 2586 A.D.
A minimum-wage earner would have to work until 3262 A.D.
conix
16 년 전
KeyCorp, Capital One to receive cash infusion: source
Sunday October 26, 5:15 am ET
WASHINGTON (Reuters) - KeyCorp (NYSE:KEY - News), Zions Bancorp (NasdaqGS:ZION - News) and Capital One Financial Corp (NYSE:COF - News) are some of the banks that will receive cash under the U.S. government's second round of capital infusions, a source familiar with the Treasury Department's thinking said on Sunday.
Four banks, including PNC Financial Services Group Inc (NYSE:PNC - News), have already announced they are participating in the second round of capital injections.
Under the government's $700 billion financial services rescue package, the Treasury Department will inject $250 billion of capital directly into banks in exchange for preferred shares and warrants.
Treasury is providing funds in a bid to revive the financial sector, which has suffered since lending dried up and many of the loans banks made have gone bad.
Treasury has already allotted $125 billion to nine of the nation's largest banks including Goldman Sachs (NYSE:GS - News).
About 20 regional U.S. banks are expected to receive cash under the Treasury Department's second round of the bank recapitalization program.
It was not clear how much KeyCorp, Zions and Capital One will receive. The banks are expected to make the announcement as early as Monday.
BMiles
16 년 전
I think COF is currently in better condition than most but it is going to get real bad for them in a hurry. People charging Christmas because they have no money and no job thinking they will get a job soon. No job will come as thousands are being released from work weekly. New unemployment claims are about to get out of control. No job, no income, no money to pay credit card bills. COF's April earning announcements for Q1 2009 is going to send this stock and a few others like AXP, C, and BAC to near junk value or very close in my opinion.
US indexes seem to be holding up better than the rest right now but I don't think Americans really understand how bad it is about to become. Traders are currently trying to catch a falling knife right now, the knife has barely even started its fall in my opinion. So many Americans are so naive to what is going on and think this is only a temporary oversold condition. I am a glass half full kind of guy but I understand the severity of what is taking place and I really feel for everyone as we go forward.
Brad
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