(Bloomberg) -- Capital One Financial Corp. set aside much more money to cover loan losses than expected in the second quarter, after ending a program to issue credit cards exclusively for Walmart Inc.
The end of a loss-sharing agreement tied to that program meant that Capital One’s provisions spiked 57% year-over-year, to $3.9 billion, according to a statement Tuesday. Analysts had expected provisions of $2.8 billion, according to estimates.
Net income fell 58% to $597 million, well below analyst forecasts of $1.3 billion. Net charge-offs rose 21% to $2.64 billion, in line with analyst estimates. Total deposits and loans held for investment were up about 2% each.
The McLean, Virginia-based bank is looking ahead to the second half of the year as it eyes closing a $35 billion deal to buy rival Discover Financial Services, which would create the largest US credit-card issuer by loan volume. Still subject to antitrust reviews and shareholder approvals, the deal could close before the end of the year or in early 2025. The acquisition also faces legal challenges, including a suit filed this week by cardholders alleging the deal would jack up credit card prices.
“We’re ‘all in’ and working hard to complete the Discover acquisition, which will create a consumer banking and global payments platform with the potential to enhance competition, deliver compelling financial results, and create significant value for merchants, small businesses, and consumers,” Chief Executive Officer Richard Fairbank said in a statement.
The firm is known for catering to less affluent consumers, as compared with its rival American Express Co., but now offers a credit card with a $395 annual fee similarly aimed at capturing customers spending on travel.
--With assistance from Paige Smith.
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