COF Confirms Consumer Credit Stress

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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 showed a similar trend in both portfolios.

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.

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