Capital One Financial U.S. credit card charge-offs decline to 9.48 pct in May

June 15, 2010

(Reuters) - Capital One Financial Corp's (COF) U.S. credit-card defaults fell in May in a sign that consumer stress was easing.

In a regulatory filing, Capital One said the annualized net charge-off rate -- debts the company believes it will never collect -- for U.S. credit cards fell to 9.48 percent in May from 9.68 percent in April.

Accounts at least 30 days delinquent -- an indicator of future loan losses - declined to 4.80 percent from 5.07 percent.

For U.S. auto loans, Capital One's charge-off rate was 1.87 percent in May, up from 1.75 percent in April, and the delinquency rate rose to 7.75 percent from 7.13 percent.

In credit card international operations, including Canada and Britain, the charge-off rate decreased to 8.21 percent from 8.60 percent, while the delinquency rate was lower at 6.08 percent from 6.28 percent in April.

Capital One routinely kicks off the monthly reporting of credit card charge-offs. JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N), Citigroup Inc (C.N), American Express Co (AXP.N) and Discover Financial Services (DFS.N) are expected to report the monthly performance of their credit card portfolios later.

Capital One is the third-largest U.S. issuer of Visa (V.N)-branded credit card and the fifth-largest issuer of MasterCard (MA.N)-branded credit cards.

Capital One shares closed at $40.46 Monday on the New York Stock Exchange. (Reporting by Supantha Mukherjee in Bangalore; Editing by Aradhana Aravindan)

Grandpa: ...decline to 9.48 pct in May...a sign that consumer stress was easing...Nearly a 9.5% charge off rate and this is deemed a sign that consumer stress was easing!!?? Their charge off rate for February 2009 was 9.33% so please HELP ME with defining "easing stress".

Maybe Capital One Financial is crafting yet another "accounting twist" as they implemented in May 2009. Their reported headline charge off number was 9.41% however "a change in bankruptcy processing" reduced their headline figure by 50 basis points:

A change in bankruptcy processing resulted in an improvement in the U.S. Card charge-off rate that is reflected in the May results. The impact was approximately 50 basis points. While our internal guidelines require bankrupt accounts to be charged off within 30 days, our practice had been to charge off customer accounts within 2 to 3 days of receiving notification of bankruptcy. Due in part to an increase in the volume of bankruptcies, we have extended our processing window to improve the efficiency and accuracy of bankruptcy-related charge-off recognition. The new process remains within Capital One’s internal guidelines, as well as FFIEC guidelines that bankrupt accounts must be charged-off within 60 days of notification.

What's in your wallet? More important question...What's in your corporate ethics policy?