Summary
Capital One Financial Corporation (COF) disclosed on April 7, 2023, that its subsidiary, Capital One, National Association, received a notice of termination from Walmart regarding their exclusive credit card partnership agreement (CCPA). Walmart has subsequently filed a lawsuit seeking to terminate the program early. Capital One disputes Walmart's right to terminate and intends to vigorously defend its contractual rights. This partnership, as of December 31, 2022, comprised approximately $8.3 billion in outstanding loan balances and contributed roughly $214 million in net income for the year 2022. The company notes that the allowance for credit losses and capital held against this portfolio are lower due to a loss-sharing arrangement. The financial impact on Capital One will depend on the resolution of the dispute and litigation, with a potential portfolio transfer to a new issuer not expected before January 2025 if Walmart prevails. The agreement outlines terms for the sale of the private label and co-branded accounts.
Key Highlights
- 1Walmart has notified Capital One of its intent to terminate the exclusive U.S. private label and co-branded credit card partnership.
- 2Walmart has filed a lawsuit seeking a declaratory judgment to terminate the agreement early, which Capital One disputes.
- 3The card program had approximately $8.3 billion in outstanding loan balances as of December 31, 2022.
- 4The program generated approximately $214 million in net income after taxes for the year ended December 31, 2022.
- 5Capital One states it will vigorously defend its contractual rights against the termination.
- 6If Walmart's termination is upheld, the card portfolio transfer is not expected to occur before January 2025.
- 7The CCPA includes provisions for the purchase price of the transferred accounts, with Capital One potentially retaining a premium on co-branded accounts.