Consumers Are a ‘Source of Strength’ for the US Economy, Capital One CEO Says

How are consumers holding up during an 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.”

Here’s how Capital One’s (COF) Fairbank broke down the state of the American consumer, according to a transcript of the call made available by AlphaSense:

• 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. That may lead to a moderation in charge-offs, which occur when Capital One determines it is unlikely to receive what it is owed and writes off the debt.
• 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. “So while the average customer is doing well,” Fairbank said, “some customers at the margin are likely feeling stress.”
• Recent increases in retail spending, particularly on electronics, may indicate that consumers are trying to make purchases before goods are subject to tariffs and therefore more expensive, Fairbank said. (Auto purchases also suggest consumers are trying to buy before import taxes rise, he said.) Some of the recent year-over-year pickup in spending may also be a reflection of Easter falling later this year than in 2024.
• Clients have been easing up on travel and airfare purchases.