Capital One Auto Finance Back in the Black After Tough 4Q
McLEAN, Va. — Capital One's National Lending segment reported that economic deterioration ramped up in the first quarter, most particularly in the labor markets, hurting this division. However, interestingly enough, the officials said that their auto finance unit proved to be an exception to this trend.
The National Lending segment incorporates Capital One's U.S. card business, in addition to auto finance and international lending units.
More specifically, officials explained, "Economic deterioration continued at a rapid pace during the first quarter, particularly in the labor markets, with the exception of auto finance."
After posting an approximately $925 million loss in the fourth quarter of 2008, the auto finance unit earned about $71 million in net income for the first quarter of this year.
This compares to about $15 million in the third quarter of 2008, $34 million in the second quarter and a loss of $82 million in the first quarter of last year.
As for originations, Capital One Auto Finance reported that these came in at roughly $1.46 billion for the first quarter, compared with $1.47 billion in the prior quarter.
While slightly down from the last quarter of 2008, the division's origination volume remains higher than $1.44 billion in the third quarter, $1.51 billion in the second quarter and $2.44 billion in the first quarter of last year.
However, the number of loans was down slightly to 1.61 million for the period, compared with 1.63 million in the prior period. In the third quarter of 2008, this figure stood at 1.66 million.
The net charge-off rate showed some improvement for the time frame, coming in at 4.88 percent for the quarter, compared with about 5.67 percent in the prior period and 5 percent in the third quarter of 2008.
Continuing on, the auto finance segment reported that its 30-plus day delinquency rate was 7.52 percent for the quarter, which is down from 9.91 percent in the previous quarter and also down from 9.32 percent in the third quarter of last year. This number was 7.52 percent in the second quarter of 2008 and 6.42 percent in the first quarter.
Overall, the National Lending segment, which incorporates several different divisions, reported revenues of $3.1 billion for the quarter, down $267.2 million, or 8 percent, when compared to the fourth quarter of last year.
Discussing Capital One in its entirety, Richard Fairbank, chairman and chief executive officer, stated, "While our first-quarter results reflected significant pressures from the worsening economy, our balance sheet remained a source of strength.
"We continued to build our allowance, increase coverage ratios and manage our capital levels well in excess of regulatory requirements. While we remain cautious about near-term economic challenges, we are confident that our balance sheet provides the stability to weather the current economic crisis and the flexibility to generate value on the other side," he added.