CapOne Loans Were Concentrated in Sandy’s Path
Almost $20 billion in consumer loans the bank holds for investment went to borrowers in those states, while $16.6 billion, or 45 percent, of its commercial loans are in those states, according to a securities filing today by the McLean, Virginia-based company. Capital One said it’s too early to estimate the actual impact.
While insurance and government support have limited losses in past natural disasters, “we cannot give assurance that those historical patterns will apply in this case, particularly given our concentration of commercial real estate exposure in the hardest-hit areas,” the bank said.
Hurricane Sandy struck the U.S. and Caribbean last month, killing at least 177 people and wiping out some beach-front communities in New York and New Jersey while flooding parts of Manhattan. Sandy left about 8.5 million homes and businesses without power and caused as much as $20 billion in insured damage, according to London-based underwriter Hiscox Ltd. (HSX)
Other lenders also said the storm may hurt their results. JPMorgan Chase & Co. (JPM), the biggest U.S. bank by assets, said any losses will depend on the amount of credit extended to borrowers in the affected areas, the extent of damage and reimbursements from insurance and government that borrowers receive.
“The firm is in the early stages of quantifying the potential impact from Hurricane Sandy to its financial results of operations,” the New York-based bank said today in a filing.
Citigroup Inc. (C), ranked third, said it was looking into how much the storm may cost and that if there are losses, they will show up in the New York-based bank’s fourth quarter. Wells Fargo & Co. (WFC), based in San Francisco and the biggest U.S. home lender, said in a Nov. 6 filing it may not release certain loan-loss reserves if the storm has a “significant impact” on consumer and business real estate loans.
Capital One fell 1.9 percent to $58.29 in New York trading. It was the third-worst performer in the 24-company KBW Bank Index, which dropped 0.6 percent. Citigroup fell 0.1 percent, JPMorgan dropped 0.2 percent while Wells Fargo declined 1.7 percent.
In a separate matter, Capital One said it faces allegations from Ambac Financial Group, Inc., the New York-based bond insurer, which claims Chevy Chase Bank, a lender purchased in 2009, breached guarantees on six mortgage bonds with an original balance of $5.2 billion.
Almost half of the bonds were insured by Ambac, which filed its suit Oct. 24 in the Southern District of New York. The losses may exceed reserves, Capital One said in its filing.
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