Capital One Financial is facing an unusual challenge — potentially steep write-offs of loans it made to taxi operators for their medallions.
It is an issue that has already hit New York--based Signature Bank, which wrote down its own medallion loan book 38 percent in the second quarter. Analysts at Morgan Stanley said in a note Wednesday that Capital One could mark down its own loans 40 percent as well, which would shave 33 cents a share off second quarter earnings.
The analysts are quick to point out that they don't know how Capital One's $655 million in taxi medallion loans compare to Signature's, so a write-down might not happen or be as severe.
Medallions, which are issued by the local taxi authority and are required for cabs to operate legally, once sold for more than $1 million in New York. But they are now selling for one-fifth that amount.