(Bloomberg) -- Capital One Financial Group will no longer be the exclusive issuer of Walmart Inc. credit cards after the retailer succeeded in a lawsuit regarding the relationship earlier this year.

Customers can continue earning and redeeming card rewards for now, and existing rewards won’t be lost, the two companies said in a joint statement Friday. The cards will also remain functional. 

“The parties determined that the best path forward for our customers is to end the current partnership and convert existing eligible Walmart Card customers to one of Capital One’s flagship branded rewards products,” a Capital One spokesperson said in a separate statement.

The partnership had been in place since 2018, when Capital One became the sole issuer of the retail giant’s private label and co-branded credit cards. Walmart sued in 2023, alleging the bank failed to deliver replacement cards in a timely manner and to promptly update transaction and payment information to accounts. 

At the time, a Capital One spokesperson said the lawsuit “is an attempt to renegotiate the economic terms of the partnership it agreed to just a few years ago, or end the deal early.”

A federal judge ruled in Walmart’s favor in March.

Capital One will remain on as owner and servicer of the credit-card portfolio of approximately $8.58 billion of loans, according to a filing. The card company originated and underwrote about 40% of the card balances, and the McLean, Virginia-based firm plans on converting eligible customers into its own banded cards.

“Additional information will be provided in the coming months to Walmart credit-card holders,” the companies said. 

Capital One is in the process of acquiring Discover Financial Services, a $35 billion deal announced in February. Discover has its own global payments network that runs tens of millions of credit-card transactions on a daily basis — a boon for Capital One’s card business if the deal is approved.

Sharing Agreement

Also ending is a revenue and loss-sharing agreement between Capital One and Walmart linked to the portfolio, according to the filing. If the loss-sharing pact hadn’t been in place for the first three months of this year, “the domestic card net charge-off rate would have been approximately 45 basis points higher and our allowance for credit losses would have been approximately $850 million higher,” Capital One said.

And if the revenue-sharing deal hadn’t been in place for the same period, Capital One said “domestic card revenue margin would have been approximately 45 basis points higher.”

Capital One reported greater stress in its loan portfolio during the first quarter, with credit-card write-offs totaling $2.2 billion — a 61% increase from the same time a year earlier. Card loans at least 30 days overdue climbed to 4.5% from 3.68% in last year’s first quarter.

Capital One shares advanced 0.8% at 11:56 a.m. in New York, and Walmart gained 0.7%.

(Adds Capital One comment in third paragraph, updates shares in last.)

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