COF Confirms Consumer Credit Stress
While most investors are focused on Microsoft (MSFT), I’m more interested in Capital One Financial (COF) which reported 4Q22 earnings Tuesday afternoon as well. COF has a $312 billion loan portfolio, $132 billion of which is domestic credit cards and $78 billion auto loans. And the credit quality metrics they just reported confirms the stress that Discover Financial (DFS) reported last week.
The net charge off rate in the domestic credit card portfolio increased to 3.22% in 4Q22 from 2.20% last quarter. The net charge off rate in the auto loan portfolio also had a big jump from last quarter to 1.66% from 1.05%. 30+ day performing delinquency rates increased to 3.43% from 2.97% in the domestic credit card portfolio and 5.62% from 4.85% in the auto loan portfolio in 4Q22 compared to 3Q22.
Combined with the results from DFS last week, this confirms for me that consumers are being squeezed and that will ripple throughout the economic system.