Capital One Financial (NYSE:COF) reported first-quarter 2026 earnings of $2.2 billion, or $3.34 per diluted share, as the company continued integrating Discover and highlighted a major post-quarter acquisition and travel technology move. Chief Financial Officer Andrew Young said results included “adjusting items related to the ongoing Discover integration and purchase accounting impacts,” and that earnings per share were $4.42 net of those items.
Compared with the fourth quarter, Young said revenue fell 2% while non-interest expense declined 9%, helping lift pre-provision earnings by about $530 million, or 8%, sequentially. Provision for credit losses was “roughly flat” at $4.1 billion, including about $3.8 billion of net charge-offs and a $230 million allowance build.
Credit costs and allowance build driven by mix, uncertainty, and select commercial reserves
- Domestic card: Allowance held flat at $18.8 billion, with “favorable observed credit” offset by “greater consideration to downside economic scenarios related to heightened geopolitical uncertainty,” Young said. The coverage ratio rose 23 basis points to 7.4%, largely due to the paydown of seasonal fourth-quarter balances.
- Consumer banking: The company built $155 million of allowance, driven by “strong growth in the auto business,” a “slightly higher subprime mix,” and a “modestly lower outlook for vehicle values,” Young said. Coverage ended at 2.36%.
- Commercial banking: Capital One added $83 million of allowance, primarily due to “a very small number of specific reserves” in its real estate portfolio and “a modest increase in our criticized rate,” Young said.
In the Q&A, Young added that commercial credit can be “a bit lumpy,” attributing the quarter’s reserve build to “a small number of borrowers across C&I” and “worse performance across a handful of specific credits.”
Liquidity rose; net interest margin pressured by fewer days, seasonal dynamics, and elevated cash
Capital One ended the quarter with about $165 billion of liquidity reserves, up roughly $21 billion, with cash up $19 billion to approximately $76 billion. Young attributed the increase to “continued strong deposit growth in our retail banking business and the paydown of seasonal card balances.” The company’s preliminary average liquidity coverage ratio was 166%.
Net interest margin (NIM) was 7.87%, down 39 basis points from the fourth quarter. Young said the decline was driven by “2 fewer days” in the quarter, typical seasonality from lower card balances, and elevated average cash levels. In response to an analyst question, he said cash levels were “particularly elevated” due to the full-quarter impact of the prior quarter’s sale of the Discover Home Loans portfolio, strong retail deposit growth, and tax-related flows, but he expects cash to “trend down over time,” noting about $8 billion of debt maturities in the second quarter and seasonal tax payments.
Capital position: CET1 rose; buybacks continued; Brex acquisition to reduce CET1 in Q2
Young said the Common Equity Tier 1 (CET1) ratio ended the quarter at 14.4%, up 10 basis points from the fourth quarter, as income and a seasonal decline in risk-weighted assets were partially offset by $2.5 billion in share repurchases.
Young also disclosed that Capital One “closed our acquisition of Brex shortly after the quarter closed,” with consideration of approximately $4.5 billion. The transaction is expected to reduce CET1 “by a little over 40 basis points” in the second quarter, he said, adding that purchase accounting marks are still being finalized and will be broken out on the next call.
On regulatory capital, Young told analysts that if the Basel III endgame re-proposal were “enacted on a fully phased-in basis today,” the effect under the standardized approach would increase CET1 “by something like 20 basis points,” reflecting an estimated 8% to 9% decrease in risk-weighted assets offset by a headwind from including accumulated other comprehensive income (AOCI). He said the company does not anticipate electing IRBA, citing the DTA threshold change as a modest negative.
Asked about buyback pace given the capital level, Young said management considers capital and projected capital levels, potential regulatory changes, balance sheet growth, valuations, and the macro environment, and emphasized a “conservative posture to ensure resilience.” CEO Richard Fairbank added that repurchases remain “a very important part of the value creation equation.”
Business trends: card growth aided by Discover; consumer banking gains traction; commercial credit steady
Fairbank said the domestic card business posted “another quarter of top-line growth and strong credit results.” Purchase volume grew 40% year over year, “driven primarily by the addition of Discover purchase volume,” while excluding Discover, purchase volume growth was about 8%. Ending loan balances rose 69% year over year, or about 3.9% excluding Discover.
Fairbank said legacy Discover card loans “continued to contract slightly” and may face “a temporary growth headwind” from Discover’s prior credit policy cutbacks and additional changes made since the acquisition. He said Capital One sees opportunities to grow Discover “on the other side of our tech integration.”
Domestic card credit metrics improved year over year. The charge-off rate was 5.1%, up 17 basis points sequentially “in line with normal seasonality,” and down 109 basis points year over year. Delinquencies were 3.7%, down 29 basis points from the prior quarter and down 55 basis points year over year, with Fairbank noting the sequential trend was “a bit better than normal seasonality.”
Total company marketing expense was about $1.5 billion, up 25% year over year. Fairbank said marketing was seasonally low in the first quarter and was further reduced by timing shifts of planned investments into later quarters. He said the company expects to “increasingly lean into marketing” to support growth in heavy spenders and national checking.
In consumer banking, Fairbank said global payment network transaction volume was steady at about $174 billion as seasonal decline was offset by transaction growth tied to completing the conversion of Capital One debit customers to the Discover network. Auto originations increased 21% from a year earlier, and ending consumer loan balances rose about $8 billion, or 10% year over year. Deposits grew roughly 35% year over year, “driven largely by the addition of Discover deposits,” he said.
Auto credit remained stable: the auto charge-off rate was 1.64%, up 9 basis points year over year and down 18 basis points sequentially. Delinquencies fell seasonally to 4.21%, down 102 basis points from the prior quarter and down 72 basis points from a year ago.
In commercial banking, loan balances were up about 1% sequentially while deposits were down about 1%. Net charge-offs decreased to an annualized 0.29%, while criticized performing loans rose to 4.99%.
Integration and strategic initiatives: Discover milestones, Brex enablement, and travel technology insourcing
Fairbank said Capital One made “expected progress on the Discover integration and synergies,” including the completed conversion of Capital One debit customers to the Discover network, and reiterated the company remains on track to deliver expected synergies. Young later said expense synergies are “more back-loaded” and dependent on technology platform conversions, with full expense synergies expected by completion of those conversions in the first half of 2027. He said debit-related revenue synergies are already showing in results, with the “full portion” from debit expected to be reflected in the second quarter, and reiterated confidence in achieving $2.5 billion of total synergies by mid-2027.
On the card conversion timeline, Fairbank said Capital One has begun originating Discover cards on its platform at “relatively low levels” and expects to fully transition new Discover originations by the end of the third quarter. He said the existing Discover back book is expected to be fully converted to Capital One’s platform by the first quarter of next year through a phased process starting late this year, with loan growth benefits expected to lag “by another couple of quarters” as balances build. He also noted a “brownout” in Discover personal loans during the integration period.
Fairbank said the company also brought the technology behind Capital One Travel in-house, fully owning the technology built with Hopper, with Hopper talent joining Capital One. He said the company launched a new Capital One Travel app and expects to expand its travel experience to more consumers and businesses.
Discussing Brex, Fairbank said Capital One’s approach is to enable Brex to “grow rapidly” rather than rush a deep integration, noting potential benefits such as lower cost of funds, brand credibility, and later marketing and data capabilities. He cautioned that stronger traction could lead to increased investment levels over time.
Management view on the consumer: resilient so far despite energy price concerns
Asked about consumer health amid higher energy prices, Fairbank said the U.S. consumer “remained healthy” and the economy “remained resilient” through the first quarter, pointing to slightly improved unemployment, income growth outpacing inflation, and robust spending. He noted higher tax refunds and lower withholdings versus a year ago due to last year’s budget bill.
However, Fairbank flagged geopolitical risk: “the new conflict in the Persian Gulf represents a significant cloud on the horizon,” citing sharply higher energy prices and a March inflation increase tied to gas prices. He said Capital One has not seen adverse effects in credit or spending metrics so far, but has “judgmentally incorporated elevated macroeconomic risk into our allowance through qualitative factors.”
About Capital One Financial (NYSE:COF)
Capital One Financial Corporation (NYSE: COF) is a diversified bank holding company headquartered in McLean, Virginia. The company’s core businesses include credit card lending, consumer and commercial banking, and auto finance. Capital One issues a wide range of credit card products for consumers and small businesses, and it operates deposit and digital banking services aimed at retail customers and small to midsize enterprises.
Products and services include credit and charge cards, checking and savings accounts (including the online-focused Capital One 360 platform), auto loans, and commercial lending solutions.
