Capital One Profit Boosted by Credit Card Spending

Mike Randall • August 4, 2014

In a sign that consumer spending continues to recover, Capital One Financial reported its second quarter 2013 net profit rose to $1.1 billion.

The company is one of the largest credit card issuers in the U.S. and said it expects the increase to carry into the third quarter as well.

Consumer spending in the U.S. is expected to be up 8 percent in the second quarter (according to Credit Suisse estimates), and Capital One attributes its strong results to this increase.

The company said income from its credit card business rose 19 percent to $2.8 billion.

“In discussing the results of the quarter, we generally see some seasonal improvement this time of year, although what we saw in the second quarter was better than what we would expect,” Capital One CEO Richard Fairbank said.

Capital One wasn’t the only credit card issuer to report an uptick in profits recently — American Express reported an increase of 8 percent in card member spending in the second quarter as well. This seems to confirm a growth in consumer confidence and an increase in spending patterns.

In more good news, the company said the percentage of loans written off as unrecoverable has fallen from 2.2 percent in the previous quarter to 2.03 percent currently.

They’ve also reduced the amount set aside for defaults from $1.2 billion to $762 million.

In recent years, Capital One has become more of a bank than a specialty credit card lender. It now has more than 1,000 branches and is one of the top 10 U.S. banks by deposits.

In 2012, they purchased the credit portfolio of Best Buy, adding to their consumer exposure.

Photo source: visualphotos.com.

Editorial Note: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

About the Author

Mike Randall

Mike Randall is most knowledgeable in the areas of credit scores and credit cards, having written on those topics and others for the past eight years. He graduated from California State University with a degree in English literature, and he has an extensive background in personal finance studies. When he's not keeping readers informed of changes in the subprime market, Mike’s hobbies include sailing and gourmet cooking. Connect with Mike on Google+.