While three of the nation’s four largest issuers struggle with growth in U.S. outstandings Capital One (COF) emerges as the only major U.S issuer not facing erosion or stagnation, but real growth. COF’s End-of-Year (EOY) U.S. credit card outstandings have produced a compound annual growth rate (CAGR) of 9.63% between 2010 and 2014, according to CardData.
For Q4/14, COF reported $77.7 billion in end-of-period (EOP) outstandings, a 10.4% Y/Y increase, compared to $73.1 billion in the prior quarter and $73.3 billion one-year ago. Average outstandings for the period increased 5% Y/Y at $74.0 billion.
COF’s strong growth and its penetration into the near-prime and sub-prime markets does present some challenges in higher potential losses.
Delinquency (30+ day) declined 16 basis points (bps) Y/Y but increased 6 bps quarter-to-quarter (Q/Q). The 30+ day delinquency rate ended the fourth quarter at 3.27%, compared to 3.21% in Q3/14 and 3.43% in Q4/13.
Charge-offs surged up by 56 bps sequentially, but down 50 bps Y/Y. Net charge-offs are now running at 3.39%, compared to 2.83% in the prior quarter and 3.89% one-year ago.
Capital One (COF) reported a 7% year-on-year (Y/Y) rise in fourth quarter (Q4/14) after-tax U.S. bank credit card profits to $487 million, but sequentially declined 11.5%. However, Purchase Dollar Volume (PDV) rose 15.5% in the quarter to $58.2 billion.
COF’s net revenue margin declined 5 bps and the average yield dropped 1 bps Y/Y. The net revenue margin ended the quarter at 17.29%, compared to 17.41% in Q3/14 and 17.34% in Q4/13. COF’s average yield on its U.S. credit card portfolio stands at 14.43%, compared to 14.46% in the prior quarter and 14.44% one-year ago.
RAM Research projects Capital One’s after-tax profits will likely decline to $550 million in the first quarter.
EOY U.S. Credit Card Outstandings
2010: $53.8 billion
2011: $56.6 billion
2012: $83.1 billion
2013: $73.3 billion
2014: $77.7 billion
Source: Capital One
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. RAM Research® forecasts 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.