by Mish

What’s in your wallet?

"Capital One Financial Corp. reported a 20% drop in first-quarter net income from a year earlier as losses jumped for U.S. credit cards and the bank took a bigger provision charge for credit losses.

The firm, known for its big presence in the subprime credit-card market, reported net income of $810 million for the first quarter, or earnings per share of $1.54. Excluding an item pertaining to a U.K. insurance customer refund reserve, the bank reported net profit of $910 million and earnings per share of $1.75.

Even so, the result badly missed Wall Street forecasts. Analysts had expected $937.5 million in net income and earnings per share of $1.92. Revenue of $6.5 billion also fell short of expectations.

The bank, often looked at by analysts as a gauge of consumers’ ability to pay back their debts, reported that domestic credit-card net charge-offs reached 5.14% in the first quarter. The was up from 4.16% a year prior. The companywide provision for credit losses jumped 30% from a year earlier to $1.9 billion.

Chief Executive Richard Fairbank said the bank raised its outlook for full-year, domestic card charge-off rates to the high end of a 4%-to-around 5% range.

“Against this backdrop, we have been tightening our underwriting,” he added. “We still see growth opportunities in our domestic card business, but our growth window is gradually getting smaller.”

In one other area of concern, auto-loan performance, Mr. Fairbank also struck a cautious note. Used-car values have been declining, based on some indexes, resulting in higher losses for some auto lenders."

Consumers Stretched

Despite glowing jobs reports and glowing wage growth (if you believe mainstream media on both ideas), it appears consumers are having a little bit of difficulty paying the bills.

No worries mate. Consumers deleveraged during the great financial crisis. Didn’t they? I happen to have a picture.

Minimum wages are rising, Amazon is killing brick-and-mortar stores, retail sales are slumping, auto sales are slumping, and used car prices are tumbling.

Apparently, home building and home flipping are all it takes to keep the economy humming.

Didn’t we try this once before?

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