Capital One Gets Through Hard Part

MCLEAN, Va. (TheStreet) -- Investors considering buying, or dumping, Capital One Financial(COF) 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) and Bank of America(BAC), with $165 billion each, and Citigroup(C), 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%.