- Key insight: Capital One managed to buoy its bottom-line growth by managing down expenses and credit costs.
- Supporting data: The company’s net income rose 2% from the prior quarter, despite revenue dropping 2%.
- What’s at stake: Capital One is working to swallow its acquisition of Discover Financial Services, recently completing the conversion of its debit customers to the Discover payments network.
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Capital One Financial got off to a slow start in 2026 due to seasonal dips in business, but CEO Richard Fairbank said that American consumers remained financially healthy and the U.S. economy has been “resilient.”
In the first quarter, tepid revenue put pressure on the McLean, Virginia-based company’s earnings. But the bank managed to keep a lid on expenses, even as it was digesting the two acquisitions it made in the previous year.
Capital One also announced Tuesday that it has finished converting its debit-card customers to the payment network it now owns through its purchase of Discover Financial Services. That acquisition, which closed last year for a value of $51.8 billion, created one of the largest credit card companies in the world.
CEO Richard Fairbank told analysts that his bank’s investments in its in-house technology, in conjunction with the Discover deal, put it in a strong place in the long run.
“We have exceptional opportunities. These opportunities have come to us because we have been the company that’s been willing to invest in longer-term opportunities,” Fairbank said. “Even though one of the things that comes with the territory is sometimes a little less guidance, and a little more investment than maybe happens at the next company.”
Despite a 2% drop in net revenue, to $15.2 billion, Capital One managed to boost its bottom line by 2% from the prior quarter, to $2.2 billion. The results were buoyed by a 9% decrease in non-interest expenses and a 2% drop in provision for credit losses.
John Hecht, an analyst at Jefferies, wrote in a Tuesday note that the lukewarm results were driven by seasonally softer net interest income, but that “when looking through the noise, the quarter looks good.” Net interest income of $12.1 billion was down 3% from the fourth quarter of last year, as the holiday boost to spending petered out in the new year.
The bank’s latest results were not entirely unexpected, but its earnings per share of $3.34 did miss the consensus analyst estimate of $3.84, per S&P Capital IQ.
Still, the Discover transaction should provide a new engine for earnings power. Capital One’s $683 billion of assets are up 38% since the first quarter last year.
And despite underwhelming quarter-over-quarter expansion in the first quarter of 2026, Capital One’s net income was up 55% from the same period in 2025, before the Discover acquisition closed. Revenue was up 52%.
“The Discover integration continues to go well and we continue to build momentum from this game-changing acquisition,” Fairbank said in a Tuesday press release.
He also said that Capital One will soon be able to drive growth in other lines of business.
The bank announced in January that it would buy Brex for $5.1 billion, and it closed the transaction shortly after the first quarter ended. Capital One has said it plans to spend about $950 million on transaction-related costs, including integration and retention compensation incurred over the next three years.
While Capital One’s purchase of Discover was a play for consumer business, the Brex deal marked an effort to expand services for businesses.
Fairbank said Tuesday that he feels confident in the credit outlook of consumers, and about the opportunity to “lean in to origination and credit line growth,” despite possible headwinds to the economy, including the continuation of elevated energy prices.
“The new conflict in the Persian Gulf represents a significant cloud on the horizon,” Fairbank said. “We’ve already seen energy prices spike sharply over the past six weeks. Inflation moved higher in March, largely because of the higher gas prices. … But so far, we’ve not seen any adverse effects on our portfolio, either in our credit or in our spend metrics.”
Capital One declined to give guidance on expenses or efficiency, which has left the market bearish, or at least uncertain, about the company’s prospects.
Capital One’s stock price is down nearly 18% year-to-date, compared with a 2.24% rise in the KBW Nasdaq Bank Index. The market had a sharply negative after-hours reaction to the bank’s earnings’ report, before recovering somewhat.
Brian Foran, an analyst at Truist Securities, wrote in a Tuesday note that while Capital One’s comments about the state of the consumer were encouraging, the bad news is that, “expenses remain a ‘choose your own adventure’ story, no guidance given and didn’t sound like any was coming.”