The Clearing House - Corporate Changes in Payment Practices - September 2023

Capital One Reports Delinquency Rate Back to Pre-Pandemic Level

The delinquency rate in Capital One’s domestic card business continued to rise in the third quarter and has returned to its pre-pandemic level.

The 30-day performing delinquency rate in the domestic card business was 4.3% during the quarter ended Sept. 30, up from 3.7% in the previous quarter and 3.0% a year earlier, according to a presentation released Thursday (Oct. 26) in conjunction with Capital One’s quarterly earnings call.

“Domestic credit card results continue to normalize from the historically strong results we saw during the pandemic,” Capital One Chairman and CEO Richard Fairbank said during the call. After outlining the results, he added, “Both the monthly delinquency rate and the monthly charge-off rate are now modestly above 2019 levels.”

Purchase volume in the domestic card business during the quarter was $155 billion, slightly higher than the previous quarter and 6% higher than the same period in 2022, according to the presentation.

Capital One’s allowance for losses in its credit card portfolio was $11.3 billion in the third quarter, representing a 7.7% ratio, per the presentation. That’s about the same as the previous quarter, but up from 6.9% a year ago. However, it remains below the 10.5% recorded at the end of 2020.

In the domestic card business, 69% of customers had a FICO score of at least 660 in the third quarter, down a percentage point from 70% who had such a score in the same period in 2022, according to an earnings release issued Thursday.

Asked about the health of the consumer, and whether those with higher FICO scores and those with lower ones are faring differently, Fairbank said delinquencies in all segments have returned to pre-pandemic levels and are beginning to stabilize there.

The bank also reported in the presentation that, compared to a year earlier, auto loan originations were down 10%, average deposits were up 12% and credit card period-end loans were up 16%.

“In closing, we continued to deliver solid results in the third quarter,” Fairbank said during the call. “We posted another quarter of strong top-line growth in domestic card revenue, purchase volume and loans. The pace of domestic card delinquency normalization slowed. We grew consumer and total deposits. And we added liquidity and capital to further strengthen our already strong and resilient balance sheet.”