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DATE
Tue, Oct 20, 2026
CALL PARTICIPANTS
- Senior Vice President of Finance – Jeff Norris
- Chairman and Chief Executive Officer – Richard Fairbank
- Chief Financial Officer – Andrew Young
TAKEAWAYS
- Net Income — $3.5 billion, representing $5.61 per diluted common share compared to $3.2 billion in the prior year quarter.
- Adjusted EPS — $6.69, excluding adjusting items of $0.60 per share for acquisition amortization, $0.42 for Discover integration, and $0.06 for Brex integration.
- Total Net Revenue — $16.3 billion, an increase of 3% over the prior quarter driven by higher yield in the domestic card business.
- Non-interest Expense — $8.9 billion, a 2% decline from the prior quarter reflecting lower marketing and operating expenses.
- Pre-provision Earnings — $7.5 billion, growing 10% sequentially due to the combination of revenue growth and expense reduction.
- Net Interest Margin — 8.41%, an increase of 40 basis points from the prior quarter driven by higher card yields and a $13 billion reduction in average cash balances.
- Provision for Credit Losses — $2.9 billion, including $3.1 billion in net charge-offs and a $225 million allowance release.
- Domestic Card Purchase Volume — 11% growth year over year, primarily driven by legacy Capital One volume while legacy Discover volume remained essentially flat.
- Auto Originations — 22% growth year over year, as the company reported a strong position to pursue growth in the current marketplace.
- Common Equity Tier 1 Capital Ratio — 13.8%, remaining flat to the previous quarter as net income was offset by $2.6 billion in share repurchases and dividends.
- Domestic Card Charge-off Rate — 3.98%, a 65 basis point decline year over year reflecting steady improvement in delinquencies and strong recovery performance.
- Consumer Banking Revenue — 17% increase year over year, driven by Discover revenue synergies and growth in auto loans.
- Global Payment Network Transaction Volume — $191 billion, an increase of 25% year over year following the conversion of debit customers to the Discover Network.
- Marketing Expense — $1.6 billion, up 14% year over year reflecting increased media spend and higher direct marketing in the domestic card segment.
- Total Liquidity Reserves — $134 billion, a decrease of $10 billion from the prior quarter as ending cash fell to approximately $49 billion.
- Commercial Banking Charge-off Rate — 0.00% for the quarter, while the criticized performing loan rate declined 4 basis points to 4.4%.
- Period-end Loans — $462.5 billion, an increase of 1% or $5.4 billion during the quarter.
- Period-end Deposits — $480.7 billion, a 1% decline sequentially driven by choices related to the Discover integration and the sale of an IRA portfolio.
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RISKS
- Fairbank warned that the company expects a negative impact on run rate earnings from the lost interchange revenue likely resulting from the Visa and MasterCard settlement.
- Young stated that the allowance release in the card business was partially offset by “greater consideration to downside economic scenarios related to geopolitical risks.”
- Fairbank noted that the Discover card loans shrank 3% from the prior year due to a “temporary brownout of Discover loan growth” as the company trumps credit policies in certain resilient segments.
SUMMARY
Capital One Financial Corporation (COF +0.87%) reported its financial results for the third quarter of 2026, emphasizing the integration of Discover and the acquisition of Brex. Management reported $1.8 billion in annualized combined synergies year-to-date, achieving these targets ahead of schedule through debit network conversion and expense management. The company indicated that its current performance levels reflect the anticipated earnings power of the combined entity, adjusted for seasonal marketing and the expected impact of industry-wide interchange settlements. Management stated that the company will increase marketing investment in 2027 to capture organic growth opportunities across its national banking and premium card segments.
- Management indicated that 100% of new Discover card originations are now on the Capital One technology stack, with the full back-book conversion expected by the first quarter of 2027.
- Fairbank stated that the company is focusing on organic growth for its national bank through marketing rather than following the industry trend of acquiring other institutions.
- The company reported that its credit card volume migration to the Discover network will be gradual, contrasting with the rapid execution observed in the debit card business.
- Management stated that the company is integrating the Brex spend management platform with the Capital One Travel portal to enhance corporate travel offerings for small businesses.
- Fairbank noted that recovery rates are benefiting from an inventory effect of higher charge-offs in previous periods and sustainable improvements in recovery strategies enabled by technology.
- Management indicated that while the company did not specifically anticipate generative or agentic AI, its long-term technology transformation was designed with a general focus on artificial intelligence.
INDUSTRY GLOSSARY
- Allowance for Credit Losses: A reserve established to cover estimated credit losses in the loan portfolio.
- Brownout: A term used by management to describe a temporary period of intentional loan growth contraction due to tightened credit policies.
- CET1 Ratio: Common Equity Tier 1 capital ratio, a key measure of a bank’s financial strength and capital adequacy.
- Net Charge-offs: The dollar amount of loans a bank determines it is unlikely to collect, minus any recoveries from previously charged-off loans.
- Net Interest Margin (NIM): The difference between the interest income generated by a bank and the amount of interest paid out to its lenders, relative to the amount of its interest-earning assets.
- Synergies: Financial benefits, such as cost savings or increased revenue, expected from the combination of two companies.
Full Conference Call Transcript
Operator: Good day, and thank you for standing by. Welcome to the Capital One Q3 2026 earnings call. Please be advised that today’s conference is being recorded. After the speaker’s presentation, there will be a question and answer session. To ask a question, please press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one again. I would now like to hand the conference over to your speaker today, Jeff Norris, Senior Vice President of Finance. Please go ahead.
Jeff Norris: Thanks very much, Josh, and welcome everybody. To access the live webcast of this call, please go to the investor section of capitalone.com. A copy of the earnings presentation, press release, and financial supplement can also be found in the investor section of capitalone.com, by selecting financials and then quarterly earnings releases. With me tonight are Mr. Richard Fairbank, Capital One’s Chairman and Chief Executive Officer, and Mr. Andrew Young, Capital One’s Chief Financial Officer. Rich and Andrew are going to walk you through the presentation summarizing our third quarter results for 2026. Please note that this presentation may contain forward-looking statements.
Information regarding Capital One’s financial performance and any forward-looking statements contained in today’s discussion and the materials speak only as of the particular date or dates indicated in the materials, and Capital One does not undertake any obligation to update or revise any of this information, whether as a result of new information, future events, or otherwise. Numerous factors could cause our actual results to differ materially from those described in forward-looking statements. For more information on these factors, please see the section titled Forward-Looking Statements in the earnings release presentation and the risk factors section of our annual and quarterly reports accessible at Capital One’s website and filed with the SEC. Now I’ll turn the call over to Mr.
Young. Andrew?
Andrew Young: Thanks, Jeff, and good afternoon, everyone. I will start on slide 3 of tonight’s presentation. In the third quarter, Capital One earned $3.5 billion, or $5.61 per diluted common share. The results for the quarter included several adjusting items related to the Discover and Brex acquisitions, which are outlined on the slide. Net of these adjusting items, third quarter earnings per share were $6.69. Relative to the prior quarter, both period end and average loans held for investment increased 1%, while period end and average deposits decreased 1%. Linked-quarter revenue increased 3% and non-interest expense declined 2%, resulting in pre-provision earnings growth of 10%. On an adjusted basis, pre-provision earnings grew 9% quarter over quarter.
Our provision for credit losses decreased $73 million, or 2%, to $2.9 billion in the quarter. The provision reflects $3.1 billion of net charge-offs and an allowance release of $225 million. Turning to slide 4, I will cover the allowance in greater detail. The $225 million allowance release in the quarter brought the allowance balance to $22.7 billion. Our total portfolio coverage ratio decreased 10 basis points and now stands at 4.92%. I will cover the drivers of the changes in allowance and coverage ratio by segment on slide 5. In our domestic card business, we released $250 million of allowance.
The allowance release was driven by continued favorable observed credit in the quarter, partially offset by greater consideration to downside economic scenarios related to geopolitical risks. The coverage ratio decreased by 13 basis points and now stands at 6.86%. In our consumer banking segment, we built $41 million of allowance. The allowance build was primarily driven by strong growth in the auto business, partially offset by an improved outlook for vehicle values. The coverage ratio ended the quarter at 2.34%, 5 basis points lower than the second quarter. Finally, in our commercial banking segment, the allowance balance was flat at about $1.5 billion, and the coverage ratio declined by 2 basis points to 1.6%.
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