Capital One stumbles

Capital One has long had a reputation for employing smart people, and for being the best at segmenting the credit card market – targeting the right products at the right people.

Well – not such good news, via the Washington Post:

Capital One Financial of McLean posted its first quarterly loss ever, from the expense of shutting down its mortgage lender, and warned of additional challenges in the credit card and auto finance businesses.

Capital One reported an increasing number of delinquencies and defaults in both the credit card and auto finance sectors

however

The credit card business remained profitable for Capital One, with earnings up 21.5 percent from a year earlier. The company said rising delinquencies were largely a result of changing credit policies. This summer, Capital One told some customers that it would raise the interest rates and alter the grace periods on their credit cards.

but

 “Consumers for a while were using their housing as ATM machines,” he said. Now they have increasingly turned to credit cards as a source of money, he said. Consumers already have considerable debt and may not have room to borrow more.

and

 “If [credit card issuers] were to cut back significantly, that would have the potential to be a blow to spending,” he said. 

This is a really bad sign to me – if these guys are getting it wrong, then it implies that many others are in a much worse situation – which means, well, incipient doom for a bunch of US households.