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Did The Canary In The Credit Coalmine Just Croak: Capital One Credit Loss Provisions Soar By 60%
Everyone knows Capital One's trite soundbite: "What's in your wallet?"
Overnight, the market found out what's in Capital One's balance sheet, and it didn't like it one bit.
Yesterday, Capital One Financial reported earnings that fell well short of consensus: the $311 billion-company's Q2 profit was $863 million, down 28% Y/Y. EPS was an ugly $1.50, $0.47 cents below the consensus estimate. Surprisingly this earnings plunge took place even as overall revenue rose 4% to $5.7 billion.
So what gives: a closer read through the numbers reveals that while average wages across the US are barely rising enough to cover inflation, Capital One felt the need to really incentivize its workfore with an increase in salaries and benefits 10 times higher than the national average, up 21%, to $1.4 billion, while marketing costs increased 16%, and professional-services fees grew 13%.
At the same time headcount increased 7%, to 47,500 even though COF concurrently took a $147 million charge for the restructuring its benefits plan "as a result of the realignment of our workforce." COF did not provide details on the workforce changes that led to the charge.
End result: in moments, the stock wiped out all of its hard-earned gains for the year, and then some:
But the biggest shocker was something else found between COF's top and bottom line: a surge in provisions for credit losses: at $1.1 billion this was a jump of 21% from Q1 and up a whopping 60% from the year prior. It was also the biggest credit loss provision the credit card company has taken since Q2 2012.
So the question: is this dramatic deterioration in COF's loan book specific to the financial company which is nowhere near having a balance sheet big enough to mask its deteriorating loan book (or quality it for Too Big To Prosecute and/or Fail status), or is this a very loud, and very dead, canary in the credit coalmine, suggesting US consumers are suddenly unable to repay even their most basic purchases on credit?
As for Capital One, we wonder: "Is that a blowing up loan book in your wallet"? We hope to have the answer over the next several quarters, especially if as the Fed's leak today suggested, a rate hike, which will lead to even greater credit losses, is imminent.
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Whats in yer wallet?
29% APR and a dollar bill.
But... but... I get points! On all my purchases! $100 spent = 100 points = $1 ! I am part of the 1% cash back club, love robbing my local merchants of 3 to get my 1. Capital #1 baby.
Fuck you credit! Die Mutha Ucker!
"End result: in moments, the stock wiped out all of its hard-earned gains for the year, and then some."
'Hard-earned'? ---I think maybe a typo?
I have had one for years at a 0 balance, they try to get me to spend....so they can collect their debt asset.
I could just close it down.....
Fuck em....ill keep that carrot hanging.
Just might have to buy some (thing*) before they find out what non recourse is.
RIPS
*Actual Physical Thing
Apply for their "Quicksilver" card, it pays back 1.5% cash on all purchases.
"What's in your wallet?"
Which one? They are all in cold storage and have many, many BTC in them! I guess you'll never know Capital One....
"What's in your wallet?" JPY , and mine is fater than yours.
At least your backed up by 1 dalla of capitol
Yes the canary croaked. There were not enough consumers to consume him so he croaked of manipulation. To be sure, it was death by a 1000 cuts... But he wasn't consumed.
Maybe it was a black swan, hard to tell in a coal mine.
Black like the black racist spokesman they have in Samuel L. Jackson or that other douchebag Alec Baldwin or the wife of that douchebag Ben Affleck?
This scum are all spokesvermin for Capital One. F them.
better watch it now, ol Hulk Hogan is ERASED from WWE history, an old podcast with "horrid" racial slurs has emerged....all merchandising the Hulkster is ERASED
3 days on a race awareness course and a grovellling appology should fix it. lol. A trip to Angloa to help the needy and lay the first brick in the foundation, will make him look reformed. Better still, drop the tears and repent in front of Oprah and his career is bigger than before.
Not a canary nor a black swan.
http://www.youtube.com/watch?v=Oj8RIEQH7zA
and the only reason it was sitting on the perch in the first place is because it had been nailed there.
No corp decides to heavily "incentivize" for no reason. There's a reason, and if the market knew what it was, it would be even less happy.
i doubt very much if the typical person who does all the work at Capital One saw all of that 21% increase.
Usually the huge increase is just for the select few. And they're worth it, ya know.
They were in the news for layoffs today along with the Newport News shipyard.
Unlce SAM and my X....Fuck you! Sherry
I wonder how much of that will be for litigation expenses? And I wonder what they have done? What is the equivalent of mortgage fraud for credit cards and personal loans?
Likely misrepresenting quality of securitized CC debt.
Crap One hasn't been securitizing very much lately.
http://www.sec.gov/Archives/edgar/data/922869/000119312515255588/d35610d...
Don't forget Capital One and Santander are both deep, deep into sub subprime used car lending.
"Whats in yer wallet?"
Moths!
You have a wallet?!
Braggart!!
What's in my wallet? Same as everyone else. RFID chips in your bills, drivers license & credit cards.
Who's in your wallet?
Same thing that's in your portfolio, suckah.
There's nothing in my wallet that's why I use Capital One dumbass.
We should really start a mass movement to bankrupt companies like Capital One, everyone take out a card, splurge, and watch it tank. We have the coms, we have the technology, all we need is the common sense.
Max out credit cards to buy PMs and ammo thn default. That will crush em.
I'm really tempted to use a $200k biz credit line to buy PM's right now Doc.
Its unsecured, and maybe its time to switch businesses.
The rotting fish has got down to main street level.I'll pay all the trade creditors,but the banks...fuckit.
Do you have any medication for that Doc ?
don't leave a paper trail
While the appears to be in sight it may be far enough away for such a plan to really bite you.
My advise is...be patient...it sucks but in the long run you will come out ahead.
I suspect the bank would really try to recover that stash when they found out what happened....especially if the stash is very valuable.
Do it in under $10k amounts.
Sounds like my kind of shopping spree.
i think that limit is even less now. Ask Denny Hastert for guidance.
i think that limit is even less now. Ask Denny Hastert for guidance.
Don't expend your efforts. Just look at American Express, Visa, and Mastercard. Let them lay in there own shit storm. Cash rules!
But oh the irony when your attempts to bankrupt Capital One actually help the economy.
Everyone has learned credit card companies take from your wallet. How is the backpage boycott working out for you?
http://www.chicagotribune.com/news/local/breaking/ct-backpage-dart-restr...
The sub-prime credit card is in the mail......
It's a glitch, bitch.
Time to refurnish a few Wallmarts.
US debts and unfunded liabilities easily exceed $1,700,000 per taxpayer and they rise at least $70,000 per taxpayer per year. Lots of croaking in America's future:
Renowned economist Laurence Kotlikoff recently testified at the U.S. Senate about the runaway U.S. budget. How bad is it? Kotlikoff says, “I told them the real (2014) deficit was $5 trillion, not the $500 billion or $300 billion or whatever it was announced to be this year. Almost all the liabilities of the government are being kept off the books by bogus accounting. . . . The government is 58% underfinanced . . . . Social Security is 33% underfinanced . . . . So, the entire government enterprise is in worse fiscal shape than Social Security is, but they are both in terrible shape.” So, how much is America on the hook for in the future? Kotlikoff contends, “If you take all the expenditures that the government is expected to make, as projected by the Congressional Budget Office (CBO), all the spending on defense, repairing the roads, paying for the Supreme Court Justices’ salaries, Social Security, Medicare, Medicaid, welfare, everything and take all those expenditures into the future . . . and compare that to all the taxes that are projected to come in, and the difference is $210 trillion. That’s the fiscal gap. That’s our true debt.”
http://usawatchdog.com/financial-system-will-collapse-just-a-matter-of-w...
I've always wanted to know how far in the future that $210 trillion dollar figure accounts for.
It's going on 20 years and I still haven't heard ONE person mutter an end point that this figure falls into.
Today? 2187? Anyone?
If you subscribe to MMT (Modern Monetary Theory) you already know that .gov debt doesn't matter. /sarc /barf
Edit to add: Guess who suggested I "educate" myself on MMT after seeing my rants about the Fed and debt on FB... A Bankster!!! LOLROFLMAO I'm feeling giddy.
Billy blog. Ask above poster what his weekend quiz rate equates to. I love getting those emails to predict what the cunt licks are going to do.
Shhhhhhh.
LOL, thank goodness i got a 0.
Congratulations - you have completed Quiz 2015 - 31.
Your Score
You scored 0 out of 3.
You thus achieved a score of 0.00 per cent overall.
Saturday Quiz Rating
If you try to use that math and logic youre not going to get this piece of paper dumbass.
Rips
You can take it as at about 50 years into the future. But remember that in 2003 this figure was only $60 trillion. So this number grows rapidly.
As indicated in the chart below, the fiscal gap has risen dramatically over the past dozen years. This reflects interest accrual. But the major reasons for the growth in the fiscal gap from $60 trillion in 2003 to $210 trillion today are tax cuts, increases in Medicaid and Medicare benefit levels, additional defense spending, and the introduction of Medicare Part D.
http://www.kotlikoff.net/sites/default/files/Kotlikoffbudgetcom2-25-2015...
http://www.businessinsider.com/6000-people-lose-jobs-at-anglo-american-2...
FEMA camp ID card in your wallet
The real story here is the wage increases. I have a hunch that the White Hoiuse has been somewhat successful at prodding Corporate America into raising salaries. Look out if this is true. I guess we'll know by the end of the 3rd quarter because we should see a rise in spending, which will cause the shorts to explode.
It will be media telegraph hyped as new GDP grow cycle in its 8th year of quantitative sleezing.
Credit card companies never get cited for pimping, prostitution, and kidnapping your bank account over prediatory inflated Credit Card scam artists utilizing federal reserve zero interest access.
Think about that.
$863 million in profit on $5.7 billion in revenue?!
Good plunder margins.
Liberty is demand. Tyranny is submission..
You can mark assets to fantasy unless they mature :)
I think I have a bill from Capital One from 2009 sitting on my desk.
I do think this is a big deal - during the depths of the recession, CEO Rich Fairbank stated many times that consumers were bailing on their mortgages but keeping current with their credit card payments. If that now has changed....
Also, much of the workforce at COF is waaay overpaid. They think of themselves as truly special and different compared to the rest of corporate America, and they reward themselves as such.
The only exception I take with this article: "End result: in moments, the stock wiped out all of its hard-earned gains for the year, and then some."
I'm not sure it's "hard-earned" to borrow at 2% and lend at 25% to down-on-their-luck working stiffs. Have those COF execs dig a ditch or spend a day picking strawberries. Then we can talk about "hard-earned"...
Making a business out of screwing people (ex: usury) is actually pretty hard to do, in practice. The people committing such evil inevitably end up miserable themselves (karma), and their anger at their personal misery turns them even more stupidly motivated to harm and predate on the rest of society.
I would far rather spend my years digging ditches than screwing people over. Nothin' beats waking up completely refreshed from a great night's sleep, or being at peace with yourself, in general.
Sociopaths sleep like babies and say fuck karma.
If Karma really existed then why aren't people like Obama, McConnell, Pelosi, Boehner, Feinstein, Hitlery, McShitStain, Lloyd, Dimon, et al, getting their just deserts?
Either these psychopaths have specially built Karma blocking force fields or something else is going on.
Be patient.
Karma:
There is no need for revenge.
Just sit back and wait.
Those who hurt you will eventually screw up themselves and, eventually, if you are lucky, God will let you watch.
Miffed;-)
Don't look back in Anger, i heard you say.
This is great news as it means people were buying things. Krugman approves.
Who knows, they tend to underestimate on those provisions, so increase could make up for last quarter and be part of some clever accounting scheme, or even PR - hey, now if they don't lose that much, the stock jumps up!
Capital One repossessed my car during the depths of the 2009 recession, and were certainly well within their rights to do so.
I was upside-down on my financing, so I had a balance due. By the time I was back on my feet enough to consider repaying it, doing so would cause my credit rating more harm than good, since it would keep the account "current" for seven more years, instead of just letting it fall off the end of my credit record completely next year.
I have a Capital One credit card in my wallet, with a substantial credit limit. (I pretty much sent in the application as a joke). They also constantly send me junk mail, with offers to re-finance the loan on my used car.
I certainly have no intention of defaulting on either account, but statistically, there's nothing to indicate that I am a better risk now than I was in 2008, or even 2009 or 2010, for that matter. The economy may (arguably) be better, but if my income dries up, my "outgo" eventually will, too, just like last time. Insanity is making the same mistakes, and expecting different results.
You bring up a good point. I get offers to take out a car loan with them all the time. I wonder what the mix is between auto loans and credit cards.
Civil unrest follows.
It' definitely a bull market a BULLSHIT market.
"Canary in the Credit Coal mine..."
It is lines like that that keep me coming back to ZH.
And COF is OK, it only lost $11.73 today, a measly 12.93%
BTFD!
(Do I need a sarc tag here? I wouldn't touch these toxic fuckers with a ten foot pole.)
Even with a ten foot pole you'd be neck deep in the toxic sludge pond.
All we need to do is change the schedule for long term capital gains and everything will fix itself.
Uncle Louis!
The Canary could have been defended and possibly saved by the Mockingbird. For more details see the link below.
http://www.zerohedge.com/news/2015-07-23/world-economy-visualized#commen...
"What's in your wallet?" Apparently, a lot of your customers have nothing!
It was car loans. Credit card debt was up, while change offs and delinquency were down, MoM and YoY for their card business.
Hmmm being we are in a corporate oligarchy It may be that the new mantra for patriotism will be not spend more but save america..pay your debts. I am curious about whether these losses are papered like when you make a late payment in a mortgage that put you in default status although you may never actually default or let the house go. Also whether people who have paid their accounts in full and no longer use but keep the credit line as Fica always tells us to do are they factored into these losses.. Layoffs are a clear signal something is afoot..Barclays announced theirs too..Discover is cutting a lot of its frills like road side hazard.. the one good thing I say are reductions in interest at 8 percent on barclays. and extend 0 percent periods ..as long as you dont add more debt..that is a good thing..Capitol certainly went overboard years ago throwing credit cards at the poorest high risk at high interest ..just like Santander....just give me a card with low interest and the hell with the frill and cash back programs. just sayin.
The reason that Capital One is in trouble is the money they spend sending my wife and I card offers. We sometimes get two or three a day, and never less than one. It's been going on for at least six months. When will they get the hint? My credit union gives me a card with half the interest rate.
Use that Capital One Card to get a house full of furniture and apliances at Rent-A-Center.
Capital One interest rate 21.9%. + Rent-A-Center interest rate 159% = New Furniture!
Ain't no reason to git all Xcited. What's dere to worry about what national debt ? All we gotta do is say the Chicoms hacked into the Super Duper Never break down firewall at the US govt. and wiped out all the data.
So sorry folks, we dun know what we owe and who we owe it to. Game, set and match.
Whats reelly important is, who knows how to write a program that can get into a bank's system and wipe out all dem details about credit card and all other kinds of debt.
That would be a service to hoomanity. Free moola and goodies fur everyone.
"Deficits don't matter."
Obummer said: raising the debt ceiling "does not increase our debt. It does not grow our deficits. It does not allow for a single dime of increased spending. All it does is allow the Treasury Department to pay for what Congress has already spent."
So, we all need to go out and get another credit card at the low, low, low, low introductory rate of 29% and use this debt to pay debt. You people here at Zerohedge obviously don't know how a fiat monetary system works. It works by increasing debt to pay debt!
You need to learn from the Keynesian masters! Go out and borrow and spend, and just keep kicking the can down the road with more debt! That's how it's done, and Capital One is no different.