Skip to main content

The Capital One headquarters is shown March 13, 2006 in Mclean, Virginia.

Mark Wilson/Getty Images

Capital One Financial Corp.'s net income plunged 90 per cent on higher credit loss reserves from its purchase of HSBC Plc's U.S. credit card portfolio, but the lender said it expected the deal to have a modest impact on reserves in the current quarter.

Capital One has spent much of the past decade transforming itself from a specialty credit card lender dependent on bond market funding into a bank that relies on deposits.

The company last year bought online deposit taker ING Direct, making it the fifth-largest U.S. bank by deposits, and bulked up its credit card division with a deal to buy HSBC's domestic business, totalling $30-billion (U.S.) in credit card loans.

Story continues below advertisement

McLean, Virginia-based Capital One, which gets over half of its revenue from credit cards, recorded net income for the second quarter of $92-million, or 16 cents per share, down from $911-million, or $1.97 per share, a year earlier.

From continuing operations, it earned 33 cents in the quarter, net of tax.

Total net revenue was up 2 per cent at $5.1-billion.

Provision for credit losses rose to $1.68-billion from $343-million. Provisions in the quarter included a $1.2-billion allowance build for the non-impaired loans brought on to the balance sheet as a result of the HSBC U.S. card acquisition.

But Capital One, which had warned of a 'significant build in allowance' in the second quarter due to the integration of the new units, said it does not expect to see a similar impact on reserves in the current quarter.

Period-end loans in the domestic card business increased by $27.6-billion to $80.27-billion, largely due to the addition of the HSBC U.S. card portfolio.

The bank agreed to pay $210-million earlier on Wednesday to resolve charges by regulators that its call-centre representatives misled consumers into paying for extra credit card products.

Story continues below advertisement

The enforcement action, announced by the Consumer Financial Protection Bureau, included $150-million to reimburse affected customers.

Capital One, which blamed the problem on vendors who did not adhere to its sales scripts, agreed to stop marketing the extra products until it implements a new plan.

Shares of Capital One, which has a market value of $32.4-billion, have risen 32 per cent this year.

They closed at $54.89 on Wednesday on the New York Stock Exchange.

Report an error
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies