Capital One Financial said it more than tripled the amount of money set aside to cover souring loans, prompted by the coronavirus pandemic and a drop in oil prices during the first quarter.
The bank earmarked $5.42 billion in provisions in the period, a 220% increase from a year earlier. The total allowance for credit losses increased due to “significant economic uncertainty” from the pandemic and “credit deterioration in the oil and gas industry,” the company said.
“Capital One rapidly mobilized to respond to COVID-19 and the disruption it is causing,” Chief Executive Richard Fairbank said Thursday in a news release announcing quarterly results. “We are well positioned to navigate and manage through these uncertain times, and to emerge with strength on the other side.”
The net loss in the quarter was $1.34 billion, or $3.10 a share, compared with net income of $1.2 billion, or $2.25, in last year’s first quarter.
Capital One said nearly three-quarters of its $6.24 billion exposure to the oil and gas industry lies with companies responsible for exploration and production. The remaining 28% is dedicated to midstream and oilfield-services firms. Net charge-offs in the portfolio more than doubled to 11% from the fourth quarter.
Across the U.S., many consumers were ordered to stay inside and businesses began to shutter in March as governments sought to stem the spread of the deadly coronavirus pandemic. Still, spending on Capital One’s cards managed to increase 7% to $99.9 billion in the first three months of the year.
