Capital One Earns Profit, Despite Credit Card Charge-off Peak

On the heels of strong earnings reports from American Express, Capital One announced fourth quarter 2009 profits of 83 cents per share. The credit card issuer recorded net income of $376 million for the final quarter of the year, a major boost from the $1.45 billion loss the company suffered during the same period in 2008.

Although American Express officials crowed about signs of recovery among small business customers, the consumer driven accounts at Capital One could explain the company's more conservative outlook. CEO Richard Fairbank told reporters that he saw a "strikingly low" demand for personal credit cards in 2010, raising concerns that the company's charge-offs had not yet peaked.

Fairbank recently told investors on a company conference call that he expected charge-offs to top off at around 11 percent, mirroring the country's official employment rate. Meanwhile, 30-day delinquency rates among American credit card account holders dropped to just 5.78%. Fewer customers entering a default cycle allows companies like Capital One to shift more resources to marketing and away from emergency loss reserves, company officials said on the call.