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Click on individual bank names in the table below to access American Banker's coverage of each company's earnings report. Links to relevant coverage, filings, releases, and bank benchmark profile data can be found in the Related Links area of each article.
April 29
While credit quality is improving for Capital One Financial Corp., the card issuer expects loan growth to continue to be slow as competition for new customers intensifies.
With new pricing restrictions inhibiting their ability to charge late fees and raise interest rates, multiple issuers are focusing marketing efforts on the same pool of high-quality borrowers. But Capital One also expects that focus to lead to ongoing improvements in chargeoffs and higher spending, Richard Fairbank, the chairman and chief executive of the McLean, Va., bank, said on Thursday.
"We are not focusing nearly as much on business that generates balance transfers and the kind of immediate loan growth" that had been common in industry's heyday a few years ago, Fairbank said in a conference call to discuss earnings. Rather, it is focusing "on the things that are the longer-term, lower attrition, really highest-quality annuities. In almost every case that tends to take us toward the higher costs to acquire … and that is very advertising- and marketing-sensitive. So I think you should expect that our investment in marketing will continue to be pretty robust."
The average cost to book new a credit card account rose to $135 in 2010, up from $109 in 2007, according to data from R.K. Hammer, a credit card consultancy in Thousand Oaks, Calif.
Capital One's domestic credit card loans totaled $50.6 billion at the end of the first quarter, down 10% from a year earlier and 6% from the fourth quarter as a result of seasonal conditions and the run-off in its installment loan portfolio.
The company said purchases on its domestic credit cards grew 14% from a year earlier to $25.02 billion, which was down 7% from the previous quarter.
It wrote off 6.2% of its domestic card loans in the quarter, down from 10.48% a year earlier. The total chargeoff rate for all its loans, including for cards, automobiles, homes and businesses, also fell to 3.66% from 6.01%.
Lower chargeoffs helped lead to a smaller provision for future losses, which was $534 million in the quarter compared with $1.5 billion a year earlier, and helped boost profits by nearly 60%.
Capital One's net income was $1.02 billion, or $2.21 per diluted share, beating Thomson Reuters estimates of $1.55 per share. A year earlier, the company reported net income of $636 million, or $1.40 per diluted share.
Revenue declined about 5% form a year earlier to $4.08 billion, though it was up 3% from the fourth quarter as both net interest and noninterest income ticked up.
As part of its growth strategy, Capital One is continuing to focus on private-label and co-branded card partnerships, which have become a more prominent part of its business.
It recently completed the acquisition of apparel retailer Kohl's Corp.'s store-card portfolio from JPMorgan Chase & Co., which involved the transfer of more than 20 million customer accounts. It also recently bought the credit-card portfolio of Canadian retailer Hudson Bay Co. from General Electric Co.'s finance arm.
"This really isn't a change in strategy for Capital One," Fairbank said. "We have always liked the partnership business."
However, doing such deals "really depends on price and the pricing used to be almost insane in this business," Fairbank said. "It has become a lot more rationalized and I'm talking about the bid price to get these portfolios."
