Capital One Financial NYSE: COF reported third-quarter 2026 net income of $3.5 billion, or $5.61 per diluted common share, as higher revenue and lower expenses lifted pre-provision earnings. Excluding adjustments related to its Discover and Brex acquisitions, earnings per share were $6.69, Chief Financial Officer Andrew Young said during the company’s earnings call.
Revenue increased 3% from the prior quarter while non-interest expense declined 2%, resulting in 10% growth in pre-provision earnings, or 9% on an adjusted basis. Period-end and average loans held for investment each rose 1% sequentially, while period-end and average deposits each fell 1%.
Capital One’s provision for credit losses declined 2%, or $73 million, from the prior quarter to $2.9 billion. The provision included $3.1 billion of net charge-offs and a $225 million allowance release. The company’s allowance for credit losses ended the quarter at $22.7 billion, with its total portfolio coverage ratio declining 10 basis points to 4.92%.
Card business posts volume growth and improving charge-offs
Chairman and Chief Executive Officer Richard Fairbank said the domestic card business delivered another quarter of top-line growth and strong credit performance. Purchase volume grew 11% from a year earlier, led primarily by legacy Capital One volume. Brex and the transfer of a legacy corporate card portfolio provided a modest benefit to volume growth, while legacy Discover purchase volume was a modest drag.
Discover’s card loan-growth “brownout” continued during the quarter, with legacy Discover purchase volume essentially flat from a year earlier and legacy Discover card loans down about 3%. Excluding Discover, Capital One’s ending domestic card loans grew about 6%, while total ending balances increased approximately 2% year over year.
Domestic card revenue increased 5% from the third quarter of 2025, supported by higher legacy Capital One purchase volume and loan balances. The segment’s revenue margin was 17.8%.
The domestic card charge-off rate was 3.98%, down 73 basis points from the prior quarter and 65 basis points from a year earlier. Fairbank attributed the improvement to better delinquency trends during the first half of the year and strong recoveries performance. The quarter-end delinquency rate was 3.74%, up 35 basis points sequentially in line with normal seasonality but down 15 basis points year over year.
Domestic card non-interest expense increased 9% from a year earlier, reflecting technology investments, higher marketing spending and the Brex acquisition. Total company marketing expense reached about $1.6 billion, up 14% year over year, driven by direct marketing, media spending and investments in premium customer benefits.
Fairbank said Capital One expects the percentage growth in marketing from the third to fourth quarter to resemble the seasonal increase seen in the same period of 2025. He also said the company expects to “lean harder” into marketing in 2027 as it pursues growth opportunities, restarts Discover marketing and supports businesses including premium cards, Capital One Shopping and national banking.
Discover integration and network strategy
Capital One said it had achieved approximately $1.8 billion of annualized combined Discover synergies year to date, primarily from the debit-card conversion completed early in 2026 and expense savings. Fairbank said the company is achieving expected synergies ahead of schedule.
He said management views the remaining Discover synergies as roughly offsetting the anticipated impact of a proposed Visa and Mastercard merchant settlement, which Capital One is incorporating into its planning despite uncertainty around final court approval. The company expects the settlement’s potential reduction in interchange revenue to be broadly comparable to the remaining synergies yet to be realized.
Global Payment Network transaction volume was approximately $191 billion, up 25% from a year earlier, largely because Capital One converted its debit customers to the Discover Network. Fairbank said the company intends to grow Discover Network credit volume through Discover-branded cards, new Capital One cards issued on the network, and conversions of existing Capital One customers from other networks.
Unlike the debit conversion, the credit migration will not be a single large conversion, he said. Capital One is testing which customers and products to move and is working to expand acceptance and build the Discover brand.
On Discover’s loan-growth brownout, Fairbank said 100% of Discover card originations were on Capital One’s technology stack as of the end of September. The company expects to complete conversion of the existing Discover card portfolio in the first quarter. Discover card originations rose year over year during the quarter for the first time since the acquisition closed, although management expects loan balances to continue contracting for the next several quarters before returning to growth.
Consumer banking and commercial banking trends
Consumer banking ending loan balances rose about $11 billion, or 13%, from a year earlier, while average loans increased 12%. Auto originations climbed 22% year over year. Consumer banking revenue increased about 17%, primarily due to Discover revenue synergies and auto loan growth.
The auto charge-off rate was 1.59%, up 5 basis points from a year earlier and 16 basis points sequentially. Fairbank said the year-over-year increase largely reflected a gradual return of the company’s subprime origination mix to pre-pandemic levels. Auto delinquencies were 4.64%, up 32 basis points from the prior quarter but down 35 basis points year over year.
Consumer banking deposits declined about 1% from the prior quarter, in part due to Discover integration choices, including the sale of a small acquired IRA portfolio. Young said legacy Capital One retail deposits continued to grow.
In commercial banking, ending and average loans both increased about 1% sequentially, as did ending and average deposits. Revenue rose 6% from the prior quarter, supported by non-interest income growth. The commercial banking net charge-off rate was 0%, while criticized performing loans declined 4 basis points to 4.4% and criticized non-performing loans declined 10 basis points to 1.22%.
Margins, liquidity and capital
Capital One’s net interest margin expanded 40 basis points sequentially to 8.41%, driven by higher domestic card yield, a $13 billion reduction in average cash balances and an additional day in the quarter. Young said the structural effects of the Discover acquisition on margin have largely run their course, and future movements are expected to be influenced primarily by seasonality and changes in the relative growth of assets and liabilities.
Total liquidity reserves were about $134 billion at quarter-end, down $10 billion from the prior quarter. Cash declined by about $6 billion to approximately $49 billion, while the market value of investment securities fell by roughly $3 billion. Capital One’s preliminary average liquidity coverage ratio was 163%.
The company’s common equity Tier 1 capital ratio was 13.8%, roughly unchanged from the second quarter. Net income was largely offset by $2.6 billion in share repurchases, dividends and business growth.
About Capital One Financial (NYSE:COF)
Capital One Financial Corporation is a diversified financial services company headquartered in McLean, Virginia. Founded in 1994, the company operates as a bank holding company through Capital One, N.A., providing financial products and services to consumers, small businesses and commercial customers.
Capital One is best known for its credit card business, which offers a range of consumer and business cards. Its other activities include consumer banking products such as checking and savings accounts, auto loans and retail banking services, as well as commercial banking services for businesses and institutions.
The company primarily serves customers in the United States through digital channels, branches and other distribution networks.
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