The last super bank credit card issuer has reported and it is confirmed beyond a doubt that Americans view their general purpose credit cards very differently than a year ago. “Transactors” are overtaking “Revolvers” which is bad news for an industry doling out purchase incentives subsidized by interest revenue says CardData.
Capital One (COF) reported a 5% year-on-year (Y/Y) decline in second quarter (Q2/14) after-tax U.S. bank credit card profits to $607 million. The decline was primarily driven by a 14% Y/Y decline in net interest income. However, purchase dollar volume (PDV) jumped 11% Y/Y in Q2/14 and 19% sequentially.
For Q2/14 COF reported $71.2 billion in end-of-period (EOP) outstandings, a 4% Y/Y increase, compared to $68.3 billion in the prior quarter and $70.5 billion one-year ago. Average outstandings for the period were likewise flat Y/Y at $69.4 billion.
U.S. bank credit card purchase dollar volume (PDV) soared to $52.7 billion, compared to $44.1 billion in Q1/14 and $47.3 billion in Q2/13.
Helping the bottom line we find record low delinquency and charge-offs for COF’s U.S. bank credit card portfolio.
Delinquency (30+ day) declined 22 basis points (bps) Y/Y and 19 bps quarter-to-quarter (Q/Q). The 30+ day delinquency rate ended the second quarter at 2.83%, compared to 3.02% in Q1/14 and 3.05% in Q2/13.
Charge-offs sank by 49 bps sequentially and 76 bps Y/Y. Net charge-offs are now running at 3.52%, compared to 4.01% in the prior quarter and 4.28% one-year ago.
COF’s net revenue margin declined 164 bps and the average yield dropped 196 bps Y/Y. The net revenue margin ended the quarter at 17.07%, compared to 16.94% in Q1/14 and 18.71% in Q2/13. COF’s average yield on its U.S. credit card portfolio stands at 13.95%, compared to 14.19% in the prior quarter and 15.91% one-year ago.
RAM Research projects Capital One’s after-tax profits will likely remain flat in the third quarter.
For more data on Capital One’s Bank Credit Card Portfolio access CardData®. For information and commentary on Capital One’s Bank Credit Card Portfolio visit the searchable CardFlash® Library of more than 58,000 articles published since 1995. Custom RAM Research® projects on Capital One’s Bank Credit Card Portfolio are available exclusively through CardWeb.com.®
The transfer of the Best Buy Stores portfolio to held for sale resulted in an increase in the average yield for Domestic Card and Total Credit Card of 121 basis points and 110 basis points, respectively, in Q3 2013, 168 basis points and 152 basis points, respectively, in Q2 2013 and 107 basis points and 97 basis points, respectively, in Q1 2013. The sale of the Best Buy portfolio was completed on September 6, 2013.
The transfer of the Best Buy portfolio to held for sale resulted in an increase in the net revenue margin for Domestic Card and Total Credit Card of 136 basis points and 123 basis points, respectively, in Q3 2013, 188 basis points and 169 basis points, respectively, in Q2 2013 and 123 basis points and 112 basis points, respectively, in Q1 2013. The sale of the Best Buy portfolio was completed on September 6, 2013.
Purchase volume includes credit card purchase transactions, net of returns for both loans classified as held for investment and held for sale. Excludes cash advance and balance transfer transactions.