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.