Capital One Shows Some Good Signs

In a recent regulatory filing, Capital One (COF), one of the largest issuers of Visa (V) and MasterCard (MA) branded credit cards, released its June 2009 credit quality data.

Capital One’s annualized net charge-off rate for U.S. credit cards increased to 9.73% from 9.41% in May 2009. Also, COF’s U.S. auto annualized net charge-off rate rose to 3.89% in June from 3.62% in May. In addition, the delinquency rate increased to 8.89 percent from 8.59 percent.

However, positives were noted.

While COF’s international operations (to include Canada and U.K) showed a glimmer of improvement as the annualized net charge-offs for credit cards moderated to 9.26% from 9.77% for the same comparative periods, the delinquency rate was unchanged at 6.69% for the month.

COF’s 2Q09 is expected to show the company’s third straight quarterly loss next week, hurt like most of its rivals by growing credit losses and higher provisions for bad loans.

A key indicator for the potential future loan losses — the 30-day delinquent rate — continued to exhibit positive trends, moderating for the fourth straight month, to 4.77% for June from 4.90% for May.

Clearly, results from companies such as (but not limited to) Citigroup (C), JPMorgan Chase (JPM) and Bank of America (BAC) will give more pieces to the credit quality puzzle for both the U.S. and world economies.

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