Capital One's Profit Eroded by Walmart Deal Collapse, Discover Uncertainty

Core Insights - Capital One Financial reported a significant decline in profit for Q2 2024, primarily due to increased provisions for credit losses related to the end of its partnership with Walmart [1][2] - The company's provision for credit losses surged by 57%, rising from $1.2 billion to $3.9 billion, which was unexpected by analysts [2] - Net income fell by 58% to $597 million compared to $1.3 billion in Q1 2024 and $1.4 billion in Q2 2023 [2] Commercial Banking Performance - Ending deposits in commercial banking decreased by $1.9 billion, or 6%, quarter-over-quarter, while average deposits fell by $1 billion, or 3% [2] - Revenue in commercial banking remained "substantially flat" quarter-over-quarter [3] Consumer Banking Performance - Ending deposits in consumer banking increased by $19.2 billion, or 7%, year-over-year [3] - Auto loan originations rose by $1.3 billion, or 18%, year-over-year, but overall revenue for the consumer banking division declined by $221 million, or 9%, year-over-year [3] Discover Acquisition - Capital One incurred $31 million in costs related to the integration of Discover Financial Services during Q2 [4] - The proposed $35 billion acquisition of Discover aims to enhance competition and create a global payments platform with extensive merchant acceptance [5] - Challenges to the merger include opposition from Congresswoman Maxine Waters, who testified against it during a recent meeting [4][5] Market Strategy - Capital One is focusing on attracting higher-income consumers while maintaining its appeal to less affluent segments [6] - The company aims to build a franchise targeting high spenders, indicating a shift in competitive strategy in the rewards market [6]