To access the live webcast of this call, please go to the Investor section of Capital One's website, capitalone.com. A copy of the earnings presentation, press release, and financial supplement can also be found on the Investor section of Capital One's website by selecting Financials, then Quarterly Earnings Releases. 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. I want to begin tonight by welcoming our colleagues at Discover to the Capital One journey.
As you know, we completed our acquisition of Discover on May 18, and we're fully mobilized and hard at work on integration, which is going well. As Rich just discussed, we closed the acquisition of Discover on May 18. We have now completed provisional purchase accounting and incorporated Discover's business lines into our reported segments, with Discover's domestic card and personal loans now included in our credit card segment. As part of the acquisition, we acquired $98.3 billion of domestic card loans with a net fair value discount of $220 million.
We also acquired $9.9 billion of personal loans with a net fair value discount of $114 million. We acquired $106.7 billion of deposits with a net fair value discount of $30 million. We also acquired $7.9 billion of home loans, which have been marked as held for sale and are now included in discontinued operations. There were multiple amortizing intangibles created as a result of the acquisition.
| Metric | Period | Current guidance |
|---|---|---|
| Integration costs | over integration window | expected to be somewhat higher than $2.8 billion; no definitive final estimate, spread across many elements (revised higher) |
| Total net synergies | over integration window | on track to deliver $2.5 billion in total net synergies, with line of sight to significant cost savings and real revenue synergies (unchanged) |
| Net interest margin (full-quarter Discover) | Q3 2025 | the full-quarter benefit from Discover is expected to drive an additional ~40 basis point increase to NIM, all else equal (further uplift expected) |
| Reporting realignment effect on efficiency ratio | run rate | run-rate impact of ~90 bps increase to operating efficiency and ~50 bps to total efficiency, all else equal (P&L neutral) (geography shift, bottom-line negligible) |
| Stress capital buffer / CET1 need | effective Oct 1, 2025 | preliminary SCB of 4.5%, resulting in a CET1 requirement of 9%; internal modeling of the combined company's capital need still underway (new) |
| Share repurchase pace | near term | reasonable to assume repurchases step up from recent levels as the capital-need work nears completion; operating with excess capital above the long-term need (expected to increase) |
| Debit conversion to Discover network | Q4 2025 to early 2026 | majority of customers on the Discover network by Q4 2025, with all debit purchase volume on the network by early 2026 (on schedule) |
| Combined earnings power out of integration | post-integration | estimated net earnings power similar to deal-model estimates; net drift of moving pieces so far favorable (reaffirmed) |
| Metric | YoY | Note |
|---|---|---|
| Diluted EPS | — | GAAP net loss of $4.3 billion (-$8.58 per share) from the $8.8 billion Discover allowance build and purchase accounting; adjusted net income $2.8 billion and adjusted diluted EPS $5.48; a one-time $128 million California tax benefit also helped. |
| Domestic card purchase volume | +22% | Includes $26.5 billion of Discover purchase volume; excluding Discover, growth was about 6%. |
| Domestic card ending loans | +72% | Largely the addition of $99.7 billion of Discover card loans; excluding Discover, ending loans grew about 4%. |
| Domestic card revenue | +33% | Largely the partial quarter of Discover revenue; excluding Discover, revenue grew about 8%; revenue margin 17.3% (18.5% excluding Discover impacts). |
| Domestic card net charge-off rate | -80 bps to 5.25% | Impacted by adding Discover (historically lower losses); legacy Capital One would have been 5.50%, down 55 basis points year-over-year. |
| Domestic card 30+ delinquency rate | -54 bps to 3.60% | Addition of Discover and methodology alignment; legacy Capital One would have been 3.92%, down 22 basis points year-over-year. |
| Consumer banking revenue | +16% | Predominantly the partial quarter of Discover plus growth in auto loans. |
| Auto originations | +28% | Overall market growth and Capital One's strong position to pursue resilient growth. |
| Auto charge-off rate | -56 bps to 1.25% | Largely the result of the choice to tighten credit and pull back in 2022; improving on a seasonally adjusted basis. |
| Consumer deposits (ending) | +36% | Largely the addition of Discover deposits; average consumer deposits up about 21%. |
| Total company marketing expense | +26% to $1.35 billion | Addition of Discover marketing, higher direct response marketing, higher media spend, and increased investment in premium benefits and differentiated experiences. |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Discover acquisition close and integration | Pending regulatory close | Closed May 18; provisional purchase accounting completed (goodwill $13.2 billion, intangibles created); Discover businesses folded into reported segments; integration off to a great start | Newly closed, mobilizing |
| Discover card growth | — | Growth muted by Discover's prior originations pullbacks (which improved credit); plan to keep the flagship, student, and secured products and lean into growth on the other side, with some trimming around the edges of high-balance revolvers | Muted near term |
| Network opportunity | — | Revenue synergies come from moving debit and a portion of credit to the Discover network; capturing more scale requires multi-year investment in international acceptance and then a global network brand; debit reissuance began in June pilots | Early-stage investment |
| Investment agenda and efficiency | Significant sustained investment signaled | Broadest, biggest opportunity set in company history (tech stack, network, national bank, top-of-market cards, Shopping/Travel/Auto Navigator); will lean in hard, pressuring near-term efficiency, with earnings power out the other side consistent with the deal model | Leaning in |
| Capital position and returns | Below-target deployment | CET1 at 14% with excess above the combined long-term need; internal capital-need modeling underway (nothing surprising found); preliminary SCB 4.5% / 9% CET1 need; repurchases likely to step up | Toward higher returns |
| Consumer health and credit | Resilient consumer | U.S. consumer in a great place and a source of economic strength (low stable unemployment, real wage growth, stable debt-service burdens); improving delinquencies; watching tariffs and resuming student-loan repayments with no spillover yet | Resilient |
| Guidance philosophy | — | Reiterated that guidance is situational and not how Capital One runs the business; declined to set specific return or EPS targets coming out of the Discover close | Consistent stance |