This Day On The Street
Continue to site
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

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 - Get Report) 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.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
MXT $0.57 -20.95%
COF $72.39 0.00%
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs