CAPITAL ONE FINANCIAL Q1 FY26 earnings call COF

Capital One earned $2.2 billion, or $3.34 per diluted share, and $4.42 adjusted for Discover integration and purchase-accounting items. Revenue declined 2% sequentially while noninterest expense fell 9%, lifting pre-provision earnings ~$530M / 8% QoQ (adjusted +$430M / 6%). Provision was roughly flat at $4.1 billion, comprising ~$3.8 billion of net charge-offs and a $230 million allowance build. The build lifted the allowance balance to $23.6 billion and the total portfolio coverage ratio 12 bps to 5.28%, with the build reflecting greater weight on downside scenarios given geopolitical uncertainty^🌐.

By segment: Domestic Card allowance was flat at $18.8 billion (favorable observed credit offset by downside-scenario weighting), coverage up 23 bps to 7.4% on seasonal paydown. Consumer Banking built $155 million on strong auto growth, a slightly higher subprime mix and modestly lower vehicle-value outlook, coverage up 13 bps to 2.36%. Commercial Banking built $83 million on a small number of real estate specific reserves and a higher criticized rate, coverage up 7 bps to 1.7%. Management characterized commercial losses and reserves as inherently lumpy across a handful of C&I credits.

First-quarter NIM was 7.87%, down 39 bps QoQ, driven by two fewer days (~18 bps), seasonally lower average card balances, and elevated low-yielding cash. Cash was pushed higher by the full-quarter impact of the late-November Discover Home Loans portfolio sale, unusually strong retail deposit growth, and more favorable tax refund flows. Total liquidity reserves ended at ~$165 billion (up ~$21 billion), cash at ~$76 billion (up ~$19 billion), and preliminary average LCR at 166%. Management expects cash — and thus part of the NIM drag — to trend down, with the post-Discover structural NIM level persisting.

Domestic Card purchase volume grew 40% YoY (about 8% ex-Discover) and ending loans grew 69% YoY (about 3.9% ex-Discover), with revenue up ~58% (about 6.8% ex-Discover) and a 16.9% revenue margin. Legacy Discover card outstandings fell 1.2% YoY, a 'brownout' expected to deepen near term due to Discover's prior credit-policy cutbacks plus additional trims Capital One made to high-balance revolvers. The flip side has been strong credit. New Discover originations move fully to Capital One's platform by end of Q3 2026, and the back book converts by Q1 2027, after which Capital One can lean into origination and credit-line growth (with loan benefits lagged a couple more quarters). Discover personal loans are similarly in a temporary brownout during integration.

Consumer Banking revenue rose ~37% YoY on Discover operations, revenue synergies and auto growth; noninterest expense rose ~26%. Auto originations were up 21% YoY amid high competitor activity, ending loans up ~$8 billion / 10% YoY. Global Payment Network transaction volume held steady at ~$174 billion as seasonal decline was offset by the completed conversion of Capital One debit customers to the Discover network. Auto charge-offs of 1.64% remain near pre-pandemic levels and delinquencies improved to 4.21%. Ending consumer deposits grew ~35% YoY, largely from Discover.

CET1 ended at 14.4%, up 10 bps QoQ, as earnings and a seasonal RWA decline were partly offset by $2.5 billion of buybacks; nearly $12 billion of authorization remains. Management estimates the Basel III Endgame reproposal would add ~20 bps to CET1 fully phased-in on a standardized basis (RWA down 8–9% / +140 bps, offset by ~120 bps AOCI headwind on $5.2B AOCI), and does not plan to elect ERBA. The firm is ~$680 billion in assets, ~$20 billion below the $700 billion Category 2 threshold, and has begun using held-to-maturity classification to insulate capital from AOCI volatility. Management defended a conservative buyback pace, citing the asymmetrical value of capital.

Capital One closed the Brex acquisition on April 7, 2026 for ~$4.5 billion, pursuing an enablement (not rapid-integration) strategy to accelerate Brex growth via lower cost of funds, brand credibility, shared leads and its marketing machine — a phased 'just add water' approach that defers vertical financial benefit as investment scales. It also brought Capital One Travel technology in-house from Hopper (acquiring Hopper talent) and launched a new travel app. Fairbank framed the company as being in the 14th year of a bottom-up tech transformation built to embed AI in its ecosystem, and positioned future M&A around small tech companies rather than banks.