Monday, June 15, 2009

Capital One Unadjusted Charge Off Rate Hits Record 9.91%

A number you won't hear much about on CNBC: Capital One's official annualized U.S. credit card net charge-off rate hit 9.41% for May, however as footnote (1) advises, the real charge-off rate was actually 9.91%, a record for the company. Companies will fudge anything and everything for even 30 days worth of green shoots - in the meantime Ken Lewis will upgrade the stock and issue 3 equity follow-ons while State Street orchestrates a short squeeze. From the footnote:
A change in bankruptcy processing resulted in an improvement in the U.S. Card charge-off rate that is reflected in the May results. The impact was approximately 50 basis points. While our internal guidelines require bankrupt accounts to be charged off within 30 days, our practice had been to charge off customer accounts within 2 to 3 days of receiving notification of bankruptcy. Due in part to an increase in the volume of bankruptcies, we have extended our processing window to improve the efficiency and accuracy of bankruptcy-related charge-off recognition. The new process remains within Capital One’s internal guidelines, as well as FFIEC guidelines that bankrupt accounts must be charged-off within 60 days of notification.
Just a reminder that a mere 3 months ago the charge off rate was just over 8% - a 20% deterioration in 12 weeks and accelerating.

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