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Over the past two years, rising living costs have caused many people to become more reliant on debt financing. Since March of 2021, the total US consumer credit outstanding has increased by 13%, while
Capital One: Defaults May Soar In 2023 Due To Deteriorating Household Financial Stability
Summary
- US Consumer Credit stability is faltering as default rates and provisions for loan losses begin to rise.
- Household financial health and consumer sentiment surveys suggest consumer financial conditions are deteriorating rapidly.
- Immense yield curve inversion suggests a more significant prolonged economic contraction may be around the corner.
- Capital One is heavily exposed to a significant potential rise in credit card default rates, particularly if unemployment eventually rises.
- Regardless of recessionary potential, Capital One's profitability will likely be strained in 2023 due to a sharp rise in bank borrowing costs.
Harrison is a financial analyst who has been writing on Seeking Alpha since 2018 and has closely followed the market for over a decade. He has professional experience in the private equity, real estate, and economic research industry. Harrison also has an academic background in financial econometrics, economic forecasting, and global monetary economics.
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