COF 2Q26 Review: Credit Drives Beat, But Core EPS Trajectory Remains Intact

研报英文原文证据摘录

COF 2Q26 Review: Credit Drives Beat, But Core EPS Trajectory Remains Intact

C O M PA N Y N O T E

J u l y 2 1 , 2 0 2 6

• Management reaffirmed the post-integration earnings-power framework qualitatively,

but did not provide an updated quantitative ROTCE or EPS target. Management noted

that the original ROTCE framework used a 12.5% CET1 level for comparability with Discover

consensus estimates at the time of the deal, distinct from the company's stated 11% long-

term capital need. We maintain our ROTCE trajectory of 16.82% / 19.61% / 22.31% for 2H26 /

2027 / 2028, consistent with a gradual improvement in returns as integration progresses.

• Capital return remained active, but management is not managing mechanically toward

its stated 11% long-term capital need. COF repurchased ~$2.7bn of stock in the quarter,

while CET1 declined 70bps QoQ to 13.7%, reflecting the Brex transaction (~40bps),

share repurchases, and higher risk-weighted assets. Management reiterated that capital

management will remain a function of growth, earnings accretion, regulation, AOCI, and

macro conditions rather than a race to a specific ratio. We model buybacks of $6,000mm /

$11,800mm / $12,000mn in 2H26 / 2027 / 2028, with diluted shares declining 6% / 8% / 8%.

• Discover network volumes continue to grow, though management has not yet

quantified the pace or economics of Capital One credit-card volume migration.

Management confirmed active testing of both new front-book originations directly on the

Discover network and back-book migration of existing Capital One accounts, sequenced by

factors including international travel patterns, card-on-file friction, and card-expiration cycles.

We do not currently embed a distinct network-migration benefit in our model, which we view