Capital One CEO says consumers are a source of strength for the US economy

Takeaways

• Capital One CEO Richard Fairbank said consumers are relatively healthy and remain a "source of strength in the economy," during a quarterly earnings conference call on Tuesday.
• Fairbank said credit card trends are generally positive. She provided delinquency rate and charge-off metrics.
• He said consumers appear to have spent more, particularly on electronics and cars. This could be because they wanted to buy before the tariffs increased.

How are consumers faring in this uncertain time? Pretty well, according to Capital One's CEO.

Richard Fairbank, chief executive of the credit-card company—it’s set to become the biggest in the U.S. via a merger with Discover Financial (DFS), which he yesterday called a “singular opportunity”—during a Tuesday conference call with investors called American consumers a “source of strength in the economy.”

AlphaSense has made available the transcript of the call in which Capital One (COF) Fairbank discussed the state of American consumers:

• More Capital One card holders are repaying their debt compared to a year earlier, and delinquency rates—the portion of borrowers who are behind on payments—are improving. This could lead to a decrease in charge-offs. Capital One will write off debts if it believes it won’t receive what it’s owed.
• The portion of borrowers considered revolvers—those who carry a balance from month to month—has been stabilizing and remains below pre-pandemic levels.
• The share of borrowers making just the minimum monthly payment—the least they can pay to remain in good standing with the lender—is greater now than before the pandemic. Fairbank said: “While the average customer is doing very well, there are some customers who are probably feeling stress.”
• Fairbank suggested that the recent increase in retail spending on electronics may indicate consumers are trying make purchases before goods become subject to tariffs, and therefore more costly. Fairbank said that auto purchases may also indicate that consumers are trying to purchase before import taxes increase. Some of the recent increases in spending may be due to Easter being later this year than it will be in 2024.
• Customers are now buying less travel and fewer airfares.