Virginia-based Capital One has announced a 4% rise in second quarter profits despite raising its allowance for loan losses by $90 million due to higher loan balances and continued credit quality deterioration in the UK.
The US credit card issuer said that earnings for the second quarter were $552.6 million, or $1.78 per share, compared to $531 million for the comparable prior period, or $2.03 per share. The per share figure fell as Capital One had more shares outstanding.
As a result of the worsening credit environment in the UK, the company built incremental reserves of $42.9 million and took a write down of $36.4 million in expected servicing income from its UK securitizations. Together these UK-related actions impacted the company’s second quarter earnings per share by approximately 16 cents.
Richard Fairbank, Capital One’s chairman and CEO, said: Our businesses continued to post strong results in terms of loan growth and profitability in the second quarter, and credit performed well in all of our businesses with exception of the UK, which continued to operate in a challenging credit environment.
In the US, card income fell 2% to $421.8 million. Capital One said that it expects credit card charge-offs to begin to return to more normal levels late in the year as the effects of the bankruptcy filing spike dissipate.