This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Credit Card Stocks Hammered

Credit card lenders weren't enjoying the fruits of Wednesday's rally after federal regulators raised concern about Capital One's (COF) loan reserves and Metris (MXT) missed earnings estimates by a huge margin.

Capital One entered a memorandum of understanding with regulators directing it to boost certain capital balances and increase its loan-loss reserves. The agreement, of a variety popularized in the savings and loan and real-estate lending crises of the 1980s and '90s, caused a minor panic among shareholders, who offered the stock down 35% to $32.99 at midday.

Other stocks falling in sympathy included MBNA (KRB), down 6.6% to $19; Providian (PVN), down 14.8% to $3.45.

"Regulators have informed the company that they intend to request the company, Capital One Bank and Capital One F.S.B., enter into an informal memorandum of understanding with respect to capital, allowance for loan losses and other regulatory requirements," the company said in a release.

The same release showed he company earned $213.1 million, or 92 cents a share, in the second quarter compared with $155.3 million, or 70 cents a share, a year earlier. Analysts had expected earnings of 86 cents per share. The company also raised its target for earnings-per-share growth for 2002 to 30% from 20% and said it expects to report earnings-per-share growth in 2003 of 20 percent or more.

Salomon Brothers subsequently lowered its rating on the stock to neutral from buy, saying the company could experience higher-than-expected loan defaults.

Meanwhile, Metris reported a wide second-quarter loss on a higher delinquency rate and said it will not issue guidance for the remainder of the year.

The company, said it lost $36.4 million, or 74 cents a share, compared with a profit of $62.8 million, or 64 cents a share, in the year ago quarter. Wall Street had been expecting a profit of 22 cents in the quarter, according to analysts polled by Thomson Financial/First Call.

Metris said its managed credit card portfolio fell $81 million to $11.7 billion, while the net interest margin fell to 14% from 14.1% in the year ago quarter. Fees from managed credit cards fell 19% to $127 million.

Overall charge volume fell 14% to $2.2 billion in the quarter from $2.5 billion a year ago, while the managed delinquency rate rose to 10.2% from 9.8% a year ago. The company's loan loss reserve increased $51 million to $1.019 billion.

Looking ahead, Metris warned that it will not issue any guidance for the remainder of the year.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,154.19 +22.22 0.13%
S&P 500 1,997.61 -1.37 -0.07%
NASDAQ 4,551.4250 -1.3340 -0.03%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs