Capital One holds $2 billion for losses s dealer volume falls by 45%

-

Shares of Capital One Financial fell 1.9% late, Thursday after the credit card and banking company swung to a loss in the first quarter and posted revenue that narrowly missed Wall Street expectations. The net loss in the quarter was $1.34 billion, or $3.10 a share, compared with net income of $1.2 billion, or $2.25, a year earlier. Capital One Financial Corp.

said more than tripled the amount of money set aside to cover souring loans, prompted by the coronavirus pandemic and a drop in oil prices during the first quarter has affected the company. The total allowance for credit losses increased due to “significant economic uncertainty” from the pandemic and “credit deterioration in the oil and gas industry,” the company said.

“Capital One rapidly mobilized to respond to Covid-19 and the disruption it is causing,” Chief Executive Officer Richard Fairbank said Thursday in a statement announcing quarterly results. “We are well positioned to navigate and manage through these uncertain times, and to emerge with strength on the other side.” Across the U.S., many consumers were ordered to stay inside and businesses began to shutter in March as governments sought to stem the spread of the deadly coronavirus pandemic.

Still, spending on Capital One’s cards managed to increase 7% to $99.9 billion in the first three months of the year. Turning now to guidance, because of the economic disruption and uncertainty caused by COVID-19, they are withdrawing their efficiency ratio guidance, including guidance of annual operating efficiency ratio of 42% in 2021.

It is only a handful of weeks into the pandemic and its economic effects, and there is a wide range of possible outcomes. It is difficult to forecast specific efficiency targets or time frames while the pandemic runs its course. But they are focused on delivering positive operating leverage over time.

From my certain view as they manage through what lies ahead, I believe they will continue to be well served by the strong balance sheet, resilient businesses, digital transformation, and most importantly, their deep experience and learning from managing through good times and bad times for 2.5 decades. During the course of this pandemic this financial corporation did not lose the ray of hope and did not give up , as far watching them fall now , few months later we are going to applaud to their rise.

Also Read: Finance Commission Chief NK Singh against RBI lending to Centre