Capital One Financial Corp.

The stable outlook indicates our expectation that the company's credit profile will remain resilient and that it is well positioned to absorb higher credit losses, which we expect will normalize as economic conditions tighten, over the next two years. We also expect that Capital One's diverse business model and disciplined approach to risk management, as well as still-low U.S. unemployment, will generate good operating performance over the next two years. We could lower the ratings if Capital One's asset quality deteriorates substantially more than we currently anticipate or if its risk appetite increases. We could also lower the ratings if we think the bank's risk-adjusted returns will significantly lag peers' or if it does not continue to conservatively manage capital

...Stronger consumer balance sheets have aided Capital One Financial Corp.'s good recent financial results. Consumer creditworthiness has held up better than we expected even as the benefits from pandemic-era stimulus measures implemented by the U.S. government have gradually faded. Capital One's operating performance and balance-sheet strength have also benefited from prudent management of credit and liquidity, even as capital ratios have normalized from recent highs. Although asset quality remains excellent, we believe losses will increase as consumer creditworthiness reverts towards pre-pandemic norms and the Fed continues to tighten monetary policy. Capital One is well positioned to absorb higher credit losses. As of June 30, 2022, the bank's reserve for credit losses was about 3.88% of consolidated loans held for investment. (Coverage of domestic cards was higher at 6.8%; for branded cards only, it was 7.6%.) Although reserve levels have declined, they will remain above pre-pandemic norms...

Full Report