Capital One Gets Through Hard Part

MCLEAN, Va. (TheStreet) -- Investors considering buying, or dumping, Capital One Financial(COF Quote) should take their eyes off the stock market, analysts' reports and pundits' musings, and review the U.S. job market.

Capital One had $70 billion in managed credit-card receivables as of Sept. 30, placing the McLean, Va.-based lender fourth among banks after JPMorgan Chase(JPM Quote) and Bank of America(BAC Quote), with $165 billion each, and Citigroup(C Quote), with $151 billion.

The company's annualized ratio of net charge-offs to average loans for the third quarter was 4.53%, and its loan-loss reserves kept up with that pace, covering 4.66% of total loans.

With almost half of its assets (on a managed basis, including securitizations) in credit-card receivables, Capital One's prospects are more directly tied to the health of the U.S. consumer than its rivals.

Credit-card losses have a tendency to match the unemployment rate, which hit a 26-year high of 9.8% in September. For the third quarter, the net charge-off ratio for Capital One's managed credit-card portfolio (including securitizations) was 9.59%, up from 9.24% in the second quarter and 6.10% a year earlier.

Capital One's credit-card charge-off ratio for the third quarter was the best among the "big four," with ratios of 12.9% for Bank of America and 10.3% for JPMorgan. Citigroup breaks down its credit-card loss ratios differently, with a loss ratio of 10.15% for Citi-branded cards and a whopping 13.3% for retail-partner cards.

Credit-card delinquencies of 30 days or more also increased, to 5.53% in the third quarter from 4.99% in the second quarter and 4.34% from a year earlier. Capital One had the lowest reported 30-day managed credit-card delinquency rate among the big four, except possibly for the Citi-branded cards. Citigroup only provided a 90-day delinquency figure for that portfolio, which was 2.37%.