top line
Credit card giant Capital One sees bank profits hit in coming months as rising delinquencies begin to lead to expected losses as Americans pile on debt in the face of high interest rates I warn you that it is likely. recession.
important facts
On Thursday night’s post-earnings conference call, Capital One CEO Richard Fairbank said the delinquency rate for customers who made payments 30 days or more late was up 134 basis points from a year ago to 3.66%, up from March 2019. He pointed out that it reached the highest level since March.
The chief said write-offs, which refer to the percentage of losses incurred on debts banks no longer believe will be repaid, have yet to catch up with delinquency but are likely to return to 2019 levels. also admitted. The industry lags him by a quarter or a half, as happened during the pandemic and global financial crisis.
He is “very happy with the business” but part of his forecast is that the labor market will face a “significant deterioration” and the unemployment rate will rise from “today’s very low levels” of 3.5% to over 5%. , suggesting that about 2.5 million people could be out of work by the end of the year.
Warning came after Capital One report Earnings for the first quarter were $887 million, or $2.31 per share, well below the average analyst’s expectations for earnings of $3.90 per share.
Much of the hit came from net charge-offs surged to $1.7 billion from $845 million a year ago, reflecting uncertainty in the domestic credit and commercial real estate markets .
Capital One’s stock fell nearly 2% on Friday and is up about 1.5% this year, compared to the S&P 500’s 8% gain.
main background
Consumer credit hit a record high of over $4.8 trillion in February, responding to the accelerated rise in debt burdens over the past year. Glenmead’s Jason Pryde and Michael Reynolds warned in a research note earlier this month that there are “early signs of trouble” with credit arrears, adding: of depression. To make matters worse, the percentage of banks reporting an increased willingness to offer consumer installment loans fell to -12.5% in the first quarter.
amazing facts
credit card loan delinquency rate Minced It rose from a multi-decade low of less than 1.6% during the pandemic to 2.25% at the end of last year. During the Great Recession, delinquency rates peaked at nearly 7%.
big number
$5,910. That’s how much credit card debt the average American had at the end of last year, according to data company Experian. This is his increase from 2021 by more than 13%.
References
Americans racked up record consumer debt in February (Forbes)
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