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A legacy – Capital One’s credit card business


Mar. 5 2015, Updated 7:58 p.m. ET

Credit card is the bank’s legacy business 

The credit card business is Capital One’s oldest and most important business. The bank has a long history of operations in this business. So, this is a business where the bank enjoys significant competitive advantages. These advantages arise from a number of factors.


First, it’s simply about the time the bank has been operating in this business. Second, the bank has top data analytics-focused customer segmentation and marketing initiatives. Capital One (COF) was one of the first credit card companies to use analytics to drive the credit card business. It’s difficult to replicate the competencies that this focus gave the bank. Third, refreshing and innovating the product line also helps the bank retain its edge in this business.

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International credit card business 

Capital One’s credit card results are divided into two parts—domestic credit cards and international credit cards. Let’s look at the international credit card segment first.

Most of Capital One’s international credit card business comes from the United Kingdom and Canada. The total revenue from international credit cards was $1,379 million. This was nearly 9.55% of the credit card segment’s total revenue. This was a minor drop of 1%—compared to 2013.

However, the net income increased to $240 million in 2014 from $234 million in 2013. This was an increase of 3%. This rise was driven by lower income tax provisions. The biggest bright spot was increased yield on international cards. Yields on international cards stood at 16.53% in 2014. This was an increase of 29 basis points from 2013.

Other banks—including Wells Fargo (WFC), U.S. Bank (USB), and PNC Bank (PNC)—don’t have a strong international card presence. These three banks account for 12.93% of the Financial Select Sector SPDR (XLF).


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