Last night on Capital One's 3Q earnings call, their founder and CEO Richard Fairbank made some interesting comments about what the credit card company is seeing in the COVID affected economy. Fairbank has over 30 years experience and has seen many economic downturns so his perspective is invaluable. He said, “This is the biggest disconnect that I certainly have experienced in my three decades of building Capital One between what we see in the economy itself and the actual performance of the consumer, especially from a credit point of view.”

It is certainly an unusual environment where over 20 million Americas are still collecting unemployment benefits; however Capital One has seen its charge off rates and delinquency rate fall year over year. Thanks to massive government stimulus and forbearance programs, consumers have been able to weather the storm by tightening their belts and driving the personal savings rate to a record 33.6% in April — the previous high was 14% in 1975!

While the economy is gradually improving, there are still far too many people without jobs. There will be need for additional government support to help those that can't find new employment. This will be a key variable to watch in the upcoming months.

Here is the clip from the Capital One conference call.


Photo by Nick Fewings on Unsplash

By Chris Wang