Capital One Financial Corp. reported a month-over-month rise in charge-offs and delinquencies by 0.06% and 0.36%, respectively, according to a monthly report ending July 31.
The rise in charge-offs is in line with previous statements from Capital One, including its second-quarter earnings. Charge-offs rose to 1.8% in July, and delinquencies 30 days past due reached 5.8%.
Back in the fourth quarter, Capital One adjusted charge-off timing to charge down a loan to the estimated collateral value within 60 days of a bankruptcy notification receipt — regardless of whether the consumer is current on loan payments. Previously, Capital One avoided charging off a loan if the consumer was making payments.
“Continuing throughout 2018, we expect these accounting changes to increase annualized charge-off rates by 15 to 20 basis points, after which the effect begins to reverse over time,” Richard Fairbank, chief executive of Capital One, said on the earnings call. “If we look in hindsight at this three- or four-year period while we’ve been raising our estimates for losses, we think there’s been a lot of value creation, there are good opportunities for growth.”
Additionally, Capital One is continuing its same approach and underwriting standards within the prime and subprime sectors, Fairbank said. Many lenders have been pulling back subprime loans and tightening standards, but “competitive easing is more in the near-prime and prime part of the marketplace … therefore the opportunity for growth is a little higher there,” he said.
Capital One did not respond by press time.
