Capital One Financial in McLean, Va., is trimming its sails across various lending businesses as defaults continue to rise.
The company reported Tuesday that its net chargeoff rate rose to 2.61% during the third quarter, up from 2.10% during the same period a year earlier. Meanwhile, average loans held for investment climbed by 4% to $245.8 billion, which represented the lowest growth rate at Capital One in at least two years.
“We posted another quarter of resilient and responsible growth,” Chairman and CEO Richard Fairbank said in a press release. “We continue to carefully manage risk across our businesses.”
The sluggish loan growth was partially offset by improving margins. Capital One’s net interest margin rose to 7.08%, up from 6.79% in the third quarter of 2016, due partially to higher interest rates.
In Capital One’s flagship U.S. credit card business, average loans held for investment climbed by 5% from the same period a year earlier, while the net chargeoff rate climbed from 3.70% to 4.51%. The company reported that 65% of the borrowers in its domestic card business had credit scores above 660, up one percentage point from the third quarter of last year.
In the firm’s commercial banking unit, average loans held for investment increased by 3% from a year earlier. That segment includes a struggling portfolio of taxi medallion loans. The unit’s net chargeoff rate rose to 0.96%, up from 0.66% in the same period a year earlier.
And in Capital One’s consumer banking segment, which includes its auto lending business, average loans held for investment rose by 5%, while the net chargeoff rate climbed by 21 basis points to 1.47%.
Overall, Capital One reported net income of $1.1 billion during the third quarter, up from $1.0 billion in the third quarter of 2016.
The company said that its earnings were hurt by several irregular items, including a $114 million pretax impact from the two hurricanes that battered Texas and Florida, as well a $105 million pretax impact from Capital One’s acquisition of a credit card portfolio from the outdoor retailer Cabela’s.
