Capital One Signaling Trouble Ahead?

[sjt]

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@Legally_Speaking2512 wrote:

I was reading through Capital one's earnings call the other One part in particular really caught my attention. CEO Richard Fairbank stated, "the delinquency rate for customers at least 30 days late on payment rose 134 basis points from one year earlier to 3.66%—reaching the highest level since March 2019" (Ponciano, 2023). They also said that their net charge-offs increased to $1.7 billion dollars. 

One would think with the number of rate hikes by the Fed that there would be a tighter squeeze on the issuance of credit to consumers. Even more so considering the current economic conditions. 

Capital One also said they are predicting an unemployment rate of around 5% by the end of summer or about 2.5 million jobs. I have a feeling that a lot of these are going to be in the banking and credit sector given Capital one's recent earnings - seeing as they recorded $960 million net revenue compared to 1.2 billion last quarter. 

I kind of feel that we are slipping back into that "give credit to everybody" status, despite history showing us how disastrous that can be. I can only imagine that the sheer rising delinquencies is due to things such as people making riskier financial decisions that they normally wouldn't make because of inflation forcing their hand for certain needs such as food, loan payments, etc.

Who knows? Thoughts anyone? 

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Why do you feel we are headed to "give credit to everybody status?" I think the opposite.