COF: Better Credit, But Not a Clean Beat

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COF: Better Credit, But Not a Clean Beat

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Capital One Financial

Reiterate Rating: BUY | PO: 229.00 USD | Price: 206.22 USD

Strong credit drives a solid 2Q beat 22 July 2026

Capital One Financial (COF) reported 2Q26 adjusted EPS of $5.81, 25%/21% above Equity

BofAe/cons. at $4.64/$4.81 respectively. The beat was largely driven by lower provision

expense (+$1.27 p.s. vs. BofAe), with a $662M reserve release vs. roughly $220M builds

Key Changesexpected by both BofA and cons. Pre-provision earnings were $6.8B, 2% above BofA but

3% below cons, suggesting a more mixed operating performance than the headline EPS (US$) Previous Current

suggests. Overall, we view the results positively as credit remains strong, NIM should Price Obj. 231.00 229.00

have additional 2H tailwinds and Discover integration remains on track.

Mihir Bhatia

What we liked: Credit and NIM outlook ResearchBofAS Analyst

Domestic Card net charge-off (NCO) rate of 4.71% were below BofAe/Street at +1 415 436 3553 mihir.bhatia@bofa.com

4.83%/4.80%, while delinquency (DQ rate) declined 31bps q/q to 3.39%. COF released

Matthew C. O'Neill

$705M of Domestic Card reserves on favorable observed credit and a modest reduction Research Analyst

in economic uncertainty. NIM increased 14bps q/q to 8.01% with day count, lower BofAS +1 646 855 1681

average cash and retail deposit counts, all contributing. COF expects a further benefit in matthew.c.oneill@bofa.com

3Q as it enjoys a full-quarter benefit of lower cash balances (liquidity). Natalie Howe

Research Analyst

Discover brownout nearing the bottom BofAS+1 415 436 1103

Legacy Discover card loans declined 1.5% y/y as earlier credit actions weigh on growth. natalie.howe@bofa.com

COF expects the card/personal loan brownout to bottom around 4Q.