Capital One’s Credit Card Business: What’s Expected?



What factors could impact COF?

Capital One Financial Corporation’s (COF) Credit Card segment is primarily impacted by purchase volume transactions and loans. While interest income is generated from its loans, purchase volume transactions are the primary contributor to the company’s non-interest income.

In the second quarter, Capital One’s (COF) Credit Card business could see a sequential rise in its loans due to the improving US economy and lower unemployment levels. In 2018, its performance is expected to be highly dependent on global economic factors. A greater number of transactions could boost the Credit Card segment’s non-interest income.

Among Capital One’s competitors (IYF), American Express (AXP), Discover Financial Services (DFS), and Mastercard (MA) are expected to see higher transaction volumes. This increase is expected to result from a healthy US economy, elevated oil prices, and the increased adoption of digital payments.

Performance in Q1 2018

Capital One’s (COF) Credit Card segment generated total net revenues of ~$4.4 billion in the first quarter, compared to ~$4.1 billion in the first quarter of 2017, reflecting an 8.0% YoY (year-over-year) increase. The segment’s net interest income totaled $3.5 billion in the first quarter, which reflects a YoY rise of 6.0% due to an increase in loans in its domestic card business.

COF’s Credit Card segment garnered non-interest income of $857.0 million in the first quarter, an increase of 16.0% YoY. Capital One’s domestic card business’s net income rose in the first quarter on a YoY basis, primarily due to a decrease in its credit losses provisions, higher non-interest income, and higher net interest income.

In the next article, we’ll look at Capital One’s Consumer Banking segment.

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