Q4 2025 Capital One Financial Corp Earnings Call

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Q4 2025 Capital One Financial Corp Earnings Call

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Thursday, January 22nd, 2026 at 10:00 PM

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Jeff Norris: Thanks very much, Josh, and welcome, everyone. To access the live webcast of the call, please go to the investor section of Capital One's website at capitalone.com. A copy of the earnings presentation, press release, and financial supplement can also be found in the investor section of Capital One's website, capitalone.com, by selecting financials and then quarterly earnings release. With me this evening are Mr. Richard Fairbank, Capital One's Chairman and Chief Executive Officer, and Mr. Andrew Young, Capital One's Chief Financial Officer. Rich and Andrew are going to walk you through this presentation that summarizes our Q4 2025 results. Please note that this presentation may contain forward-looking statements. Information regarding Capital One's financial performance and any forward-looking statements contained in today's discussion and the materials speak only as of the particular date or dates indicated in the materials.

Andrew Young: Thanks, Jeff, and good afternoon, everyone. Let me begin by saying that we are incredibly excited to announce that we have entered into a definitive agreement to acquire Brex. Rich will talk more about the Brex acquisition in a moment. I'll start tonight's presentation by covering the highlights of our fourth quarter results on slide three. In the fourth quarter, Capital One earned $2.1 billion, or $3.26 per diluted common share. For the full year, Capital One earned $2.5 billion, or $4.03 per share. We completed the sale of the $8.8 billion Discover Home Loans portfolio in the quarter. After refining our preliminary purchase accounting estimates, the proceeds resulted in a net gain on sale of $483 million, which is reported in the results for discontinued operations. You can find the revised Discover purchase consideration walk and amortization schedules in the appendix of tonight's presentation.

Andrew Young: Net of the home loan sales and the other adjusting items, Q4 earnings per share were $3.86. Full year adjusted earnings per share were $19.61. We also had two notable items in the quarter: $200 million of accelerated philanthropy contributions and $37 million of pension termination expense. Relative to the prior quarter, Q4 revenue increased about 1%, and non-interest expense increased 13%. Pre-provision earnings declined 12%, or 10% net of adjustments. Our provision for credit losses was $4.1 billion in the quarter, an increase of about $1.4 billion relative to the Q3. The increase was driven by an allowance build of $302 million in the quarter versus last quarter's release, as well as a $360 million increase in net charge-off. Turning to slide 4, I'll now cover the allowance in greater detail. The $302 million allowance build in the quarter brought the allowance balance to $23.4 billion.

Net of the home loan sales and the other adjusting items, Q4 earnings per share were $3.86. Full year adjusted earnings per share were $19.61. We also had two notable items in the quarter: $200 million of accelerated philanthropy contributions and $37 million of pension termination expense. Relative to the prior quarter, Q4 revenue increased about 1%, and non-interest expense increased 13%. Pre-provision earnings declined 12%, or 10% net of adjustments. Our provision for credit losses was $4.1 billion in the quarter, an increase of about $1.4 billion relative to the Q3. The increase was driven by an allowance build of $302 million in the quarter versus last quarter's release, as well as a $360 million increase in net charge-off. Turning to slide 4, I'll now cover the allowance in greater detail. The $302 million allowance build in the quarter brought the allowance balance to $23.4 billion.

Andrew Young: Our total portfolio coverage ratio decreased 5 basis points and now stands at 5.16%. I'll cover the drivers of the changes in allowance and coverage ratio by segment on slide 5. In our domestic card segment, our coverage ratio declined by 11 basis points and now stands at 7.17%. The $335 million allowance build was largely driven by loan growth in the quarter. The allowance balance in our consumer banking segment was largely flat at $1.9 billion. Growth in the auto business was largely offset by continued observed credit favorability. The coverage ratio ended the quarter at 2.23%, 3 basis points lower than the prior quarter. And finally, in our commercial banking segment, we released $47 million of allowance. The allowance release was largely driven by charge-offs in the quarter. The commercial banking coverage ratio declined 6 basis points and now stands at 1.63%.

Our total portfolio coverage ratio decreased 5 basis points and now stands at 5.16%. I'll cover the drivers of the changes in allowance and coverage ratio by segment on slide 5. In our domestic card segment, our coverage ratio declined by 11 basis points and now stands at 7.17%. The $335 million allowance build was largely driven by loan growth in the quarter. The allowance balance in our consumer banking segment was largely flat at $1.9 billion. Growth in the auto business was largely offset by continued observed credit favorability. The coverage ratio ended the quarter at 2.23%, 3 basis points lower than the prior quarter. And finally, in our commercial banking segment, we released $47 million of allowance. The allowance release was largely driven by charge-offs in the quarter. The commercial banking coverage ratio declined 6 basis points and now stands at 1.63%.

Andrew Young: Turning to page 6, I'll now discuss liquidity. Total liquidity reserves ended the fourth quarter at about $144 billion, up modestly from the prior quarter. Our preliminary average Liquidity Coverage Ratio increased to 173% in the quarter, driven by higher average cash and lower net outflows. Turning to page 7, I'll cover our Net Interest Margin. Our fourth quarter Net Interest Margin was 8.26%, 10 basis points lower than the prior quarter. The decline was driven by lower asset yields and a higher cash balance, as the impact of the sale of the Discover Home Loans portfolio more than offset the typical seasonal decline in cash. Turning to slide 8, I will end by discussing our capital position. Our Common Equity Tier 1 capital ratio ended the quarter at 14.3%, approximately 10 basis points lower than the prior quarter.

Turning to page 6, I'll now discuss liquidity. Total liquidity reserves ended the fourth quarter at about $144 billion, up modestly from the prior quarter. Our preliminary average Liquidity Coverage Ratio increased to 173% in the quarter, driven by higher average cash and lower net outflows. Turning to page 7, I'll cover our Net Interest Margin. Our fourth quarter Net Interest Margin was 8.26%, 10 basis points lower than the prior quarter. The decline was driven by lower asset yields and a higher cash balance, as the impact of the sale of the Discover Home Loans portfolio more than offset the typical seasonal decline in cash. Turning to slide 8, I will end by discussing our capital position. Our Common Equity Tier 1 capital ratio ended the quarter at 14.3%, approximately 10 basis points lower than the prior quarter.

Richard Fairbank: Thanks, Andrew. Slide 10 shows fourth quarter results in our credit card business. Credit card segment results are largely a function of our domestic card results and trends, which are shown on slide 11. In the fourth quarter, the combined domestic card business posted steady top-line growth, strong margins, and stable credit. Year-over-year purchase volume growth for the quarter was 39%, driven primarily, of course, by the addition of Discover purchase volume. Excluding Discover, year-over-year purchase volume growth was about 6.2%. Ending loan balances increased 69% year-over-year, also largely as a result of adding Discover card loans. Excluding Discover, ending loans grew about 3.3% year-over-year. While competitive intensity remains high, we continue to see good traction across our legacy card business, with stronger growth results in our heavy spender franchise at the top of the marketplace.

Richard Fairbank: The legacy Discover card loans continued to contract slightly and will likely continue to face near-term growth headwinds due to Discover's prior credit policy cutbacks and some trimming around the edges that we're doing. We continue to see good opportunities to grow the Discover card business on the other side of our tech integration, where we can implement growth expansions powered by our unique technology and underwriting. Revenue was up 58% from Q4 2024, largely driven by the addition of Discover revenue. Excluding Discover, year-over-year revenue growth was about 6.2%, driven by underlying growth in purchase volume and loans. Revenue margin for the quarter was steady at 17.3%. The domestic card charge-off rate for Q4 was 4.93%, up 30 basis points from the prior quarter and down 113 basis points from a year ago.

The legacy Discover card loans continued to contract slightly and will likely continue to face near-term growth headwinds due to Discover's prior credit policy cutbacks and some trimming around the edges that we're doing. We continue to see good opportunities to grow the Discover card business on the other side of our tech integration, where we can implement growth expansions powered by our unique technology and underwriting. Revenue was up 58% from Q4 2024, largely driven by the addition of Discover revenue. Excluding Discover, year-over-year revenue growth was about 6.2%, driven by underlying growth in purchase volume and loans. Revenue margin for the quarter was steady at 17.3%. The domestic card charge-off rate for Q4 was 4.93%, up 30 basis points from the prior quarter and down 113 basis points from a year ago.

Richard Fairbank: Our domestic card delinquency rate was 3.99%, up 10 basis points from the prior quarter and down 54 basis points from a year ago. On a sequential quarter basis, both our charge-offs and delinquencies moved in line with normal seasonality. Our credit metrics appear to be settling out after almost a year of steady improvement. Domestic card non-interest expense was up 60% compared to the fourth quarter of 2024, reflecting a full quarter of combined operations and Purchase Accounting amortization. Operating expense and marketing both increased year-over-year. Total company marketing expense in the quarter was about $1.9 billion, up 41% year-over-year. Our choices in domestic card are the biggest driver of total company marketing. Compared to the fourth quarter of 2024, domestic card marketing in the quarter included the addition of Discover marketing, higher media spend, and increased investment in premium benefits and differentiated customer experiences.

Our domestic card delinquency rate was 3.99%, up 10 basis points from the prior quarter and down 54 basis points from a year ago. On a sequential quarter basis, both our charge-offs and delinquencies moved in line with normal seasonality. Our credit metrics appear to be settling out after almost a year of steady improvement. Domestic card non-interest expense was up 60% compared to the fourth quarter of 2024, reflecting a full quarter of combined operations and Purchase Accounting amortization. Operating expense and marketing both increased year-over-year. Total company marketing expense in the quarter was about $1.9 billion, up 41% year-over-year. Our choices in domestic card are the biggest driver of total company marketing. Compared to the fourth quarter of 2024, domestic card marketing in the quarter included the addition of Discover marketing, higher media spend, and increased investment in premium benefits and differentiated customer experiences.

Richard Fairbank: Our marketing continues to deliver strong new account originations and to build an enduring franchise with heavy spenders at the top of the market. Slide 12 shows fourth quarter results in our consumer banking business. Global payment network transaction volume for the quarter was about $175 billion. Auto originations were up 8% from the prior year quarter. Increased competitor activity in the quarter drove a slowdown in our originations growth, but we continue to be in a strong position to pursue resilient growth in the current marketplace. Consumer banking ending loan balances increased $6.7 billion, or about 9% year-over-year. Average loans were also up 9%. Compared to the year-ago quarter, ending and average consumer deposits grew about 33%, driven largely by the addition of Discover deposits. Looking through the Discover impact, our digital-first national consumer banking business continues to grow and gain traction.

Our marketing continues to deliver strong new account originations and to build an enduring franchise with heavy spenders at the top of the market. Slide 12 shows fourth quarter results in our consumer banking business. Global payment network transaction volume for the quarter was about $175 billion. Auto originations were up 8% from the prior year quarter. Increased competitor activity in the quarter drove a slowdown in our originations growth, but we continue to be in a strong position to pursue resilient growth in the current marketplace. Consumer banking ending loan balances increased $6.7 billion, or about 9% year-over-year. Average loans were also up 9%. Compared to the year-ago quarter, ending and average consumer deposits grew about 33%, driven largely by the addition of Discover deposits. Looking through the Discover impact, our digital-first national consumer banking business continues to grow and gain traction.

Richard Fairbank: Consumer banking revenue for the quarter was up about 36% year-over-year, driven predominantly by the full quarter of Discover operations, as well as Discover revenue synergies and growth in auto loans. Non-interest expense was up about 48% compared to the fourth quarter of 2024, driven largely by the full quarter of Discover, as well as higher marketing to drive growth in our national consumer banking business, increased auto originations, and continued technology investments. The auto charge-off rate for the quarter was 1.82%, down 50 basis points year-over-year, and up 28 basis points from the third quarter, in line with expected seasonality. Auto charge-offs have been stable near pre-pandemic levels for the past year. The auto delinquency rate increased seasonally in the quarter, up 24 basis points to 5.23%. On a year-over-year basis, our auto delinquencies improved by 72 basis points.

Consumer banking revenue for the quarter was up about 36% year-over-year, driven predominantly by the full quarter of Discover operations, as well as Discover revenue synergies and growth in auto loans. Non-interest expense was up about 48% compared to the fourth quarter of 2024, driven largely by the full quarter of Discover, as well as higher marketing to drive growth in our national consumer banking business, increased auto originations, and continued technology investments. The auto charge-off rate for the quarter was 1.82%, down 50 basis points year-over-year, and up 28 basis points from the third quarter, in line with expected seasonality. Auto charge-offs have been stable near pre-pandemic levels for the past year. The auto delinquency rate increased seasonally in the quarter, up 24 basis points to 5.23%. On a year-over-year basis, our auto delinquencies improved by 72 basis points.

Richard Fairbank: Slide 13 shows fourth quarter results for our commercial banking business. Compared to the linked quarter, both ending and average loan balances were flat. Ending deposits were up about 4% from the linked quarter. Average deposits were up 5%. The commercial banking annualized net charge-off rate for the fourth quarter increased 22 basis points from the sequential quarter to 0.43%. The commercial criticized performing loan rate was 4.68%, down 45 basis points compared to the linked quarter. The criticized non-performing loan rate was down 3 basis points to 1.36%. In closing, fourth quarter results continued to reflect solid top-line growth and strong and stable credit performance. Continuing capital generation and our strong balance sheet powered increased share repurchases of $2.5 billion in the quarter, and we made expected progress on Discover integration and synergies in the quarter. We remain on track to deliver the expected synergies.

Slide 13 shows fourth quarter results for our commercial banking business. Compared to the linked quarter, both ending and average loan balances were flat. Ending deposits were up about 4% from the linked quarter. Average deposits were up 5%. The commercial banking annualized net charge-off rate for the fourth quarter increased 22 basis points from the sequential quarter to 0.43%. The commercial criticized performing loan rate was 4.68%, down 45 basis points compared to the linked quarter. The criticized non-performing loan rate was down 3 basis points to 1.36%. In closing, fourth quarter results continued to reflect solid top-line growth and strong and stable credit performance. Continuing capital generation and our strong balance sheet powered increased share repurchases of $2.5 billion in the quarter, and we made expected progress on Discover integration and synergies in the quarter. We remain on track to deliver the expected synergies.

Richard Fairbank: 2025 was a seminal year for Q1. In addition to delivering strong performance across our businesses, we completed the acquisition of Discover, a singular transaction that's delivering near-term synergies and unlocking significant strategic opportunity and upside over the long term. Our 2025 performance was enabled by years of strategic preparation and our choice to consistently invest to sustain long-term growth and returns. These same choices put us in a strong position going forward. As we enter 2026, I'm struck by the number and quality of the opportunities we have before us. We've been investing in many of our opportunities for years, like building our heavy spender franchise with consumers and small businesses at the top of the credit card marketplace, building a national franchise of primary banking relationships in our retail banking business, and building a modern technology and data infrastructure.

2025 was a seminal year for Q1. In addition to delivering strong performance across our businesses, we completed the acquisition of Discover, a singular transaction that's delivering near-term synergies and unlocking significant strategic opportunity and upside over the long term. Our 2025 performance was enabled by years of strategic preparation and our choice to consistently invest to sustain long-term growth and returns. These same choices put us in a strong position going forward. As we enter 2026, I'm struck by the number and quality of the opportunities we have before us. We've been investing in many of our opportunities for years, like building our heavy spender franchise with consumers and small businesses at the top of the credit card marketplace, building a national franchise of primary banking relationships in our retail banking business, and building a modern technology and data infrastructure.

Richard Fairbank: As we continue to build on foundational tech investments to migrate up the tech stack, we're generating new growth opportunities like Capital One Travel, Capital One Shopping, and Auto Navigator. Our tech stack was built from the outset, working backwards from the AI revolution, and we are now building AI solutions across our businesses. Many of our opportunities are enhanced by the Discover acquisition, which, of course, also brings the new opportunity to grow and scale our own global payments network. To capitalize on these opportunities at this special moment, we need to make significant and sustained investments, and we are leaning into them. Tonight, I'm excited to announce our agreement to acquire Brex for a combination of stock and cash totaling $5.15 billion. We've included slides in the earnings presentation appendix that summarize key aspects of the transaction.

As we continue to build on foundational tech investments to migrate up the tech stack, we're generating new growth opportunities like Capital One Travel, Capital One Shopping, and Auto Navigator. Our tech stack was built from the outset, working backwards from the AI revolution, and we are now building AI solutions across our businesses. Many of our opportunities are enhanced by the Discover acquisition, which, of course, also brings the new opportunity to grow and scale our own global payments network. To capitalize on these opportunities at this special moment, we need to make significant and sustained investments, and we are leaning into them. Tonight, I'm excited to announce our agreement to acquire Brex for a combination of stock and cash totaling $5.15 billion. We've included slides in the earnings presentation appendix that summarize key aspects of the transaction.

Richard Fairbank: Brex is a pioneer in the dynamically changing business payments space, with industry-leading technology and world-class talent. Acquiring Brex accelerates a journey we've been on since our founding days, the quest to build a banking and payments company that's positioned to win where the world is going. The transaction will create Purchase Accounting impacts that we'll need to help investors navigate. Importantly, we expect Brex to have no impact on the Discover integration or expected synergies. And the total consideration for the Brex acquisition is around 3.5% of Q1's market capitalization, so it doesn't change the expected pace or magnitude of our quarterly share repurchases. And perhaps most importantly, we still expect our earnings power on the other side of the Discover integration to be consistent with what we expected at the time we announced the Discover deal, inclusive of Brex. And now we'll be happy to answer your questions.

Richard Fairbank: Jeff? Thanks, Rich. We'll now start the Q&A session. As a courtesy to other investors and analysts who may wish to ask a question, please limit yourself to one question plus a single follow-up. And if you have follow-up questions after the Q&A session, you can get in touch with the investor relations team, and we'll be available to answer them for you. Josh, please start the Q&A session. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. And our first question comes from Sanjay Sakhrani with KBW. You may proceed. Thank you. I want to talk a little bit about the Brex acquisition first. Rich, could you just talk a little bit about the strategic value of adding this capability?

Richard Fairbank: I see how it could really enhance sort of your platform in the small business space, especially with a network. But maybe you could just talk a little bit about how you see it coming together over time. Yes, thank you. Let me just kind of pull up here and talk about the opportunity and Brex holistically. Acquiring Brex builds on and accelerates a journey we've been on since our founding days. It is the quest to build a banking and payments company that's positioned to win where the world is going. We were the original fintech years before that term was coined, and we grew by carefully choosing businesses with attractive industry structures that are at the heart of consumers' financial lives and also that were ripe for transformation by technology and data. As a result, we aren't in all the businesses that other banks are in.

Richard Fairbank: We have focused on a select set of businesses that have relevant scale in the competitive marketplace and which fit together synergistically. A central part of that envelope of activities has been payments. From the founding of the company, we have believed that payments will be the tip of the spear in the transformation of banking and financial services. Over time, we built a payments company encompassing credit cards and banking across consumers and businesses and recently added one of the nation's only payment networks. Business payments have been a growing part of our strategy and investment agenda. We have built the nation's third-largest small business credit card franchise, and we have been investing to grow our small business bank. Our announcement today represents an important step change towards our business payments destination in a broader marketplace that we believe is ripe for reinvention.

We have focused on a select set of businesses that have relevant scale in the competitive marketplace and which fit together synergistically. A central part of that envelope of activities has been payments. From the founding of the company, we have believed that payments will be the tip of the spear in the transformation of banking and financial services. Over time, we built a payments company encompassing credit cards and banking across consumers and businesses and recently added one of the nation's only payment networks. Business payments have been a growing part of our strategy and investment agenda. We have built the nation's third-largest small business credit card franchise, and we have been investing to grow our small business bank. Our announcement today represents an important step change towards our business payments destination in a broader marketplace that we believe is ripe for reinvention.

Richard Fairbank: Let's talk about what's happening in the business payments marketplace. The credit card is an important piece of a bigger customer need. For decades, businesses of all sizes have faced chronic pain points when dealing with payments, including collecting hundreds or thousands of invoices, deciphering what payment vehicles or platforms to use, dealing with approvals, expense budgets, spending policies, booking travel, and tracking employee T&E spending. After all of that, businesses need to reconcile and connect all these transactions with accounting and reporting systems. It's often manual, error-prone, and very time-consuming. I don't know a single business owner who went into business because they were really passionate about managing the complexity of spending and payments. Solutions and tools to help businesses address these issues have been piecemeal. Banks offer business credit cards and bill pay features. Software companies offer accounts payable and expense management tools.

Let's talk about what's happening in the business payments marketplace. The credit card is an important piece of a bigger customer need. For decades, businesses of all sizes have faced chronic pain points when dealing with payments, including collecting hundreds or thousands of invoices, deciphering what payment vehicles or platforms to use, dealing with approvals, expense budgets, spending policies, booking travel, and tracking employee T&E spending. After all of that, businesses need to reconcile and connect all these transactions with accounting and reporting systems. It's often manual, error-prone, and very time-consuming. I don't know a single business owner who went into business because they were really passionate about managing the complexity of spending and payments. Solutions and tools to help businesses address these issues have been piecemeal. Banks offer business credit cards and bill pay features. Software companies offer accounts payable and expense management tools.

Richard Fairbank: While these solutions are valuable, they only address pieces of the pain and are not integrated or comprehensive. Many are built on legacy technology. The pain points remain, and so does the opportunity to provide a truly integrated modern solution. Brex was the pioneer of that modern solution. In 2017, Brex invented the integrated combination of business credit cards, spend management software, and banking together in a single platform. They totally changed the game by delivering breakthrough experiences like customizable credit card limits and controls, automated expense receipt capture, real-time blocks for out-of-policy spend, reconciling spend data with internal budgeting, catching payment fraud and errors by matching invoice data to purchase orders, and enabling businesses to close their books effortlessly through real-time ERP integrations. Brex has grown rapidly with companies from startups to large enterprises.

While these solutions are valuable, they only address pieces of the pain and are not integrated or comprehensive. Many are built on legacy technology. The pain points remain, and so does the opportunity to provide a truly integrated modern solution. Brex was the pioneer of that modern solution. In 2017, Brex invented the integrated combination of business credit cards, spend management software, and banking together in a single platform. They totally changed the game by delivering breakthrough experiences like customizable credit card limits and controls, automated expense receipt capture, real-time blocks for out-of-policy spend, reconciling spend data with internal budgeting, catching payment fraud and errors by matching invoice data to purchase orders, and enabling businesses to close their books effortlessly through real-time ERP integrations. Brex has grown rapidly with companies from startups to large enterprises.

Richard Fairbank: Some of the world's most tech-forward companies use Brex today, including Anthropic, Robinhood, TikTok, Coinbase, Scale AI, Toast, CrowdStrike, Cloudflare, and DoorDash. Brex's heritage began with tech companies, but their solutions are equally valuable to all companies. Over the last two years, 60% of their originations have been to non-tech companies. Business cards represent approximately $2 trillion in purchase volume, split roughly between corporate liability, where the business entity is responsible for making payments on the card, and personal liability, where the small business owner is personally responsible for making payments on the card. That latter space, the personal liability card, is where we primarily play today. Collectively, this business card market is growing at about 9% annually as business payments continue the secular migration from cash and checks to digital payments. Companies like Brex have grown even faster.

Some of the world's most tech-forward companies use Brex today, including Anthropic, Robinhood, TikTok, Coinbase, Scale AI, Toast, CrowdStrike, Cloudflare, and DoorDash. Brex's heritage began with tech companies, but their solutions are equally valuable to all companies. Over the last two years, 60% of their originations have been to non-tech companies. Business cards represent approximately $2 trillion in purchase volume, split roughly between corporate liability, where the business entity is responsible for making payments on the card, and personal liability, where the small business owner is personally responsible for making payments on the card. That latter space, the personal liability card, is where we primarily play today. Collectively, this business card market is growing at about 9% annually as business payments continue the secular migration from cash and checks to digital payments. Companies like Brex have grown even faster.

Richard Fairbank: Brex is taking share from banks and software providers alike. The integrated platform solution they pioneered redefines and expands the market opportunity beyond credit cards to business payments, banking, and spend management software. Brex has been a beacon for us, and we have admired them from afar. As we've gotten closer, we've been even more struck by what they have built. The Brex team has amazing talent. They built a full modern tech stack from the bottom up. Their card and banking businesses run on an in-house, fully modern core. They're 100% in the cloud. While most fintechs we've seen through the years leverage third-party technology solutions to get there faster, Brex has taken the more difficult and rarest of journeys for a fintech. They've invested in a modern technology infrastructure and data ecosystem that's built to last. It powers remarkable capabilities.

Brex is taking share from banks and software providers alike. The integrated platform solution they pioneered redefines and expands the market opportunity beyond credit cards to business payments, banking, and spend management software. Brex has been a beacon for us, and we have admired them from afar. As we've gotten closer, we've been even more struck by what they have built. The Brex team has amazing talent. They built a full modern tech stack from the bottom up. Their card and banking businesses run on an in-house, fully modern core. They're 100% in the cloud. While most fintechs we've seen through the years leverage third-party technology solutions to get there faster, Brex has taken the more difficult and rarest of journeys for a fintech. They've invested in a modern technology infrastructure and data ecosystem that's built to last. It powers remarkable capabilities.

Richard Fairbank: On the shoulders of their technology investments, Brex was able to rapidly develop and launch innovative solutions for a wide range of customers, from startups to large businesses with complex international needs. For example, Brex's technology enables them to issue business credit cards in local currencies in over 50 countries. This automated platform is the foundation for AI solutions on top of it. Brex has built and deployed their own in-house AI agents for expense management and audit, and are on the way to procurement, payments, and accounting agents. Brex has grown from a startup into a thriving business with hundreds of millions of dollars in revenue and tens of thousands of customers. As we got to know this company, we kept asking ourselves, how on earth did a startup pull off building a full tech stack from the bottom up?

On the shoulders of their technology investments, Brex was able to rapidly develop and launch innovative solutions for a wide range of customers, from startups to large businesses with complex international needs. For example, Brex's technology enables them to issue business credit cards in local currencies in over 50 countries. This automated platform is the foundation for AI solutions on top of it. Brex has built and deployed their own in-house AI agents for expense management and audit, and are on the way to procurement, payments, and accounting agents. Brex has grown from a startup into a thriving business with hundreds of millions of dollars in revenue and tens of thousands of customers. As we got to know this company, we kept asking ourselves, how on earth did a startup pull off building a full tech stack from the bottom up?

Richard Fairbank: Brex has made the right choices, the hard choices, to put themselves in a strong position to grow and win in the marketplace and to sustain success over the long term. Along the way, they realized that their exceptional growth opportunity was limited only by their scale and resources, and that brought the two of us together. Several Capital One strengths and capabilities are on the bullseye of what Brex needs to fully capitalize on the growth opportunity. We have a compelling and ubiquitous brand. Brex has found that when they can get in the door with a potential customer, their success rate is impressive. We believe that our brand and our customer scale will open many more doors. Also, we can immediately leverage our marketing machine, bringing massive data scale, targeting models, extensive channels, and a large customer base to enhance the flow of prospects.

Brex has made the right choices, the hard choices, to put themselves in a strong position to grow and win in the marketplace and to sustain success over the long term. Along the way, they realized that their exceptional growth opportunity was limited only by their scale and resources, and that brought the two of us together. Several Capital One strengths and capabilities are on the bullseye of what Brex needs to fully capitalize on the growth opportunity. We have a compelling and ubiquitous brand. Brex has found that when they can get in the door with a potential customer, their success rate is impressive. We believe that our brand and our customer scale will open many more doors. Also, we can immediately leverage our marketing machine, bringing massive data scale, targeting models, extensive channels, and a large customer base to enhance the flow of prospects.

Richard Fairbank: And Capital One's balance sheet, which is primarily funded by federally insured retail deposits, is yet another enabler of growth, returns, and resilience for Brex. And finally, we can bring additional investment capacity in marketing, sales force expansion, engineering, and AI. The striking thing is most of these benefits from Capital One can be brought right away post-close and do not need to wait for fuller integration down the road. So we believe we can accelerate Brex's growth almost from day one. As we integrate over time, there is more value to capture, much of it coming from what Brex can bring to us. Brex brings exactly what Capital One needs to accelerate what we've been building. Brex opens up the opportunity in the corporate liability part of the marketplace where our presence is currently much smaller than it is in the personal liability space.

And Capital One's balance sheet, which is primarily funded by federally insured retail deposits, is yet another enabler of growth, returns, and resilience for Brex. And finally, we can bring additional investment capacity in marketing, sales force expansion, engineering, and AI. The striking thing is most of these benefits from Capital One can be brought right away post-close and do not need to wait for fuller integration down the road. So we believe we can accelerate Brex's growth almost from day one. As we integrate over time, there is more value to capture, much of it coming from what Brex can bring to us. Brex brings exactly what Capital One needs to accelerate what we've been building. Brex opens up the opportunity in the corporate liability part of the marketplace where our presence is currently much smaller than it is in the personal liability space.

Richard Fairbank: Additionally, Capital One can leverage Brex's spend management tools to broaden and enhance our offerings for our existing personal credit card customers. For our small business bank, which has been mostly a local offering in our branch footprint, Brex gives us the capabilities to unlock a national small business banking opportunity. Brex can also help to propel another important growth business at Capital One, which is our travel business. Our travel portal is already on a strong growth trajectory, powered largely by our massive consumer franchise. As we integrate Brex and its spend management platform with our travel portal, businesses will be able to manage their corporate travel expenditures, payments, and travel policies directly on the Capital One Travel portal. This will open up the opportunity to grow business travel revenues as well as consumer travel.

Additionally, Capital One can leverage Brex's spend management tools to broaden and enhance our offerings for our existing personal credit card customers. For our small business bank, which has been mostly a local offering in our branch footprint, Brex gives us the capabilities to unlock a national small business banking opportunity. Brex can also help to propel another important growth business at Capital One, which is our travel business. Our travel portal is already on a strong growth trajectory, powered largely by our massive consumer franchise. As we integrate Brex and its spend management platform with our travel portal, businesses will be able to manage their corporate travel expenditures, payments, and travel policies directly on the Capital One Travel portal. This will open up the opportunity to grow business travel revenues as well as consumer travel.

Richard Fairbank: Beyond the remarkably compatible technology and vision of where the world is going, we've also found amazing cultural alignment. We are both founder-led companies with a heritage of innovation and entrepreneurship. We've both disrupted the status quo to reimagine markets and drive transformation. Our strategic choices along the way have been guided by strikingly similar core tenets: to invest to sustain growth and returns over the long term, to work backward from where the world is going, to build from the bottom of the tech stack up, and to search the world to find and hire great people and give them a chance to be great. Pulling way up, acquiring Brex and joining forces to win in the business payments marketplace fits squarely into our more than three-decade quest to build a banking and payments company that's positioned to win where the world is going.

Beyond the remarkably compatible technology and vision of where the world is going, we've also found amazing cultural alignment. We are both founder-led companies with a heritage of innovation and entrepreneurship. We've both disrupted the status quo to reimagine markets and drive transformation. Our strategic choices along the way have been guided by strikingly similar core tenets: to invest to sustain growth and returns over the long term, to work backward from where the world is going, to build from the bottom of the tech stack up, and to search the world to find and hire great people and give them a chance to be great. Pulling way up, acquiring Brex and joining forces to win in the business payments marketplace fits squarely into our more than three-decade quest to build a banking and payments company that's positioned to win where the world is going.

Richard Fairbank: It's a hand-in-glove fit that will accelerate and enhance a path that we were already on, propelling us to the frontier of business payments. Capital One and Brex have been on separate paths working toward the same business payments destination, an integrated platform that combines business payments, spend management, and banking powered by a modern tech stack that's built for and powered by AI. Combining our businesses and capabilities onto one shared path will accelerate the journey for both of us. Thank you. Thank you, Rich. That was very interesting, and I appreciate it. Maybe just a follow-up question on the 10% credit card cap topic. Obviously, the industry has been quite vocal about the explicit and unintended consequences of it. I'm just curious to hear your view and if you've had any discussions with the administration on the issue.

Richard Fairbank: We appreciate the energy to help consumers with affordability on many aspects of their spending. Let's talk about credit cards. Let me start by saying that we have built a company focused on providing Americans with products that are simple to understand and are accessible. All of our banking products have no minimum balance requirements and no fees, including no overdraft fees. We offer many credit cards with no annual fees. The credit card industry is intensely competitive as thousands of banks and credit unions compete directly based on product pricing and other features. Putting a price control in place, such as the proposed rate cap, would not make credit more affordable. It would make credit much less available for consumers up and down the credit spectrum. This is far more than a subprime issue.

Richard Fairbank: This would happen because we and the industry would be compelled to immediately slash credit lines, restrict accounts, and limit new originations to a very small subset of consumers. Consumers are the backbone of the American economy. 70% of GDP is driven by consumer spending, and $6 trillion of that spending is on credit cards. A material contraction in available credit would likely cause multiple shocks throughout the economy, as the lack of credit would result in greatly reduced consumer spending and would likely bring on a recession. Let's not forget about the impact of businesses beyond lost sales. Other parts of the economy beyond banks are highly dependent on card programs, from retailers to airlines to hotels. In addition, credit cards are many consumers' initial entry point into building a credit history.

This would happen because we and the industry would be compelled to immediately slash credit lines, restrict accounts, and limit new originations to a very small subset of consumers. Consumers are the backbone of the American economy. 70% of GDP is driven by consumer spending, and $6 trillion of that spending is on credit cards. A material contraction in available credit would likely cause multiple shocks throughout the economy, as the lack of credit would result in greatly reduced consumer spending and would likely bring on a recession. Let's not forget about the impact of businesses beyond lost sales. Other parts of the economy beyond banks are highly dependent on card programs, from retailers to airlines to hotels. In addition, credit cards are many consumers' initial entry point into building a credit history.

Richard Fairbank: A reduction in available credit could significantly impact their ability to get auto loans, mortgages, and other forms of credit. And for many consumers, a credit card is their only access to credit. So while we can't predict what will happen next, we feel strongly that a cap on interest rates would catalyze a number of unintended consequences. Next question, please. And our next question comes from Erika Najarian with UBS. You may proceed. Yes. Thank you for taking my question. Rich, pulling up again, another point of discussion that was heavily debated in the past few weeks has been the Credit Card Competition Act. And given your acquisition of Discover and what the opportunity set could be, maybe help us think through what you think the consequences could be of passing CCCA.

Richard Fairbank: And also, maybe the broader question is, as we think about the strategic imperatives over the next year or two, where would you put increasing global acceptance? So, Erika, interchange has been around for a long time because it's part of a well-established payments ecosystem in the United States that benefits both retailers and consumers alike. We believe that there is substantial competition in the payments industry already, with banks like Capital One taking a big portion of its interchange revenue and giving it to the consumer in the form of rewards. And that then stimulates consumer spending, and the ecosystem thrives. So pulling up, we believe this is a system that is working well. I think government intervention in this marketplace in this manner may have unintended consequences that could harm market participants, including consumers. Could you ask again your global acceptance question, Erika? Yes.

Richard Fairbank: So I guess I'm asking where on your strategic imperatives would increasing global acceptance rank, as investors were thinking that if CCCA goes through, that given that you have a Discover Network, that you potentially could be a beneficiary as a second network on the card. But of course, the limitation currently would be global acceptance. So, Erika, as we have talked about since we announced the Discover deal, the network is a crown jewel in that acquisition. And when we looked at every strategic opportunity to leverage the network, every single one of them we found to capitalize on those opportunities had the same exact shared path. And that shared path was to raise international acceptance and to build the network brand. And so that is a path that we are already going down that path. It's a long journey to build acceptance all over the world.

Richard Fairbank: And along the way, we are, to use a phrase we always use internally, we're sloping the work to put the highest emphasis on the places that Americans travel. So we believe this, and so there are so many different types of opportunities that we have that all sort of need that same double set of solutions. And that's why we're investing in that. And I'm struck. It's rare in business where every single thing that you hope to be down the road has the same shared path to get there. So it's why we're really leaning pretty hard into this network opportunity. Next question, please. And our next question comes from Ryan Nash with Goldman Sachs. You may proceed. Hey, good evening, Rich. Hey, Ryan. So maybe putting aside all the macro stuff, we've spent the last few quarters talking about investing in the business.

Richard Fairbank: And these investment areas include Discover and, as we just talked about, leaning into international acceptance and building the network brand. We, of course, continue as we have for many years to lean into the premium credit card space. And there is just so much opportunity in building a franchise of heavy spenders. I do want to comment there that it's very clear that the biggest players in that space are leaning even harder into that, and they're investing. And so we are doing so as well. I think the flip side of all that investment is it's going to be a higher hill for maybe other competitors to climb. But we're climbing that hill and seeing a lot of traction. In fact, our growth in our credit card business and purchase volume, the highest growth is at the very top of the market.

Richard Fairbank: And now, with Brex, we have a chance to massively accelerate and advance our journey with corporate liability, personal liability, the small business bank, as we talked about earlier. So let me go back to your question about Efficiency Ratio. In recent quarters, we've talked about these opportunities, and we have indicated that collectively, these investments will put upward pressure on Efficiency Ratio in the near term. And we continue to lean into those. With the acquisition of Brex now, we have additional investments. And those investments we are making are directly in service of driving growth. But it's also the case that we already had investment dollars set aside for pursuing this market organically, which will be replaced by the Brex investment. So there is some offset there. And we've also tightened up in some other areas.

And now, with Brex, we have a chance to massively accelerate and advance our journey with corporate liability, personal liability, the small business bank, as we talked about earlier. So let me go back to your question about Efficiency Ratio. In recent quarters, we've talked about these opportunities, and we have indicated that collectively, these investments will put upward pressure on Efficiency Ratio in the near term. And we continue to lean into those. With the acquisition of Brex now, we have additional investments. And those investments we are making are directly in service of driving growth. But it's also the case that we already had investment dollars set aside for pursuing this market organically, which will be replaced by the Brex investment. So there is some offset there. And we've also tightened up in some other areas.

Richard Fairbank: But the net effect of all these investments across Capital One in pursuit of opportunities that collectively are really as good as I've seen in my journey of founding Capital One and being there for all these years, the net effect will be some upward pressure on Efficiency Ratio in the near term. Now, importantly, we still expect our earnings power on the other side of the Discover integration to be consistent with what we expected at the time we announced the Discover deal, inclusive of Brex. Next question, please. Our next question comes from Terry Ma with Barclays. You may proceed. Hey, thank you. Good evening. Maybe a question for Rich. Credit card delinquencies are now down year-over-year, 13, 14 months in a row. There's consumer stimulus in the form of tax refunds this spring.

Richard Fairbank: You re-highlighted some of the comments you made around the loan growth brownout. Maybe just help us tie all that together and just kind of talk about how you think about the outlook for consumer health and growth at Capital One and any color you can provide on how long the brownout will kind of persist for. Thank you. Okay, great. Let me actually start with the brownout. So the brownout that we flagged in prior earnings calls, just to remind ourselves what's driving that is, first of all, following Discover's credit expansion in the 2022 kind of time frame, they ran into some issues. So Discover dialed back their origination programs by a fair amount toward the end of 2023 and continued to run it at a scaled-back level. As a result, they've had some pretty darn good credit.

Richard Fairbank: But the flip side of that is they put a whole bunch of vintages in place that are just smaller than prior vintages were. And that just has an extended impact on the growth. And so that's kind of factor number one. We also, as we—and this is not surprising that we find this—but as we look over Discover's shoulders at their credit policy and things that are now being implemented fully still on the Discover system, we are doing some trimming on the margins of their origination in areas, particularly around higher balance revolvers, which, as we've said for way more than a decade, that's an area that we probably, relative to the industry, are more trying to avoid. So there's been some trimming around the edges that we're adding on top of their dial-back that they did that collectively leads to this brownout that we flag.

But the flip side of that is they put a whole bunch of vintages in place that are just smaller than prior vintages were. And that just has an extended impact on the growth. And so that's kind of factor number one. We also, as we—and this is not surprising that we find this—but as we look over Discover's shoulders at their credit policy and things that are now being implemented fully still on the Discover system, we are doing some trimming on the margins of their origination in areas, particularly around higher balance revolvers, which, as we've said for way more than a decade, that's an area that we probably, relative to the industry, are more trying to avoid. So there's been some trimming around the edges that we're adding on top of their dial-back that they did that collectively leads to this brownout that we flag.

Richard Fairbank: Now, everything we're talking about is temporary in nature. And the thing that will change that trajectory is getting on the other side of the tech integration of Discover into Capital One because now when Discover is entirely on our platforms and we're able to leverage all of our data, credit policies, the marketing machine of Capital One connected to the technology and everything else, we look forward to being able to resume growth. And we've already identified a bunch of growth opportunities that are natural for Discover's really quite remarkable brand and business position. So we look forward to that on the other side. So that's the brownout, but that will continue until the card integration is done. Let me turn to your other question on the health of the consumer. The US consumer and the overall macroeconomy remain resilient.

Now, everything we're talking about is temporary in nature. And the thing that will change that trajectory is getting on the other side of the tech integration of Discover into Capital One because now when Discover is entirely on our platforms and we're able to leverage all of our data, credit policies, the marketing machine of Capital One connected to the technology and everything else, we look forward to being able to resume growth. And we've already identified a bunch of growth opportunities that are natural for Discover's really quite remarkable brand and business position. So we look forward to that on the other side. So that's the brownout, but that will continue until the card integration is done. Let me turn to your other question on the health of the consumer. The US consumer and the overall macroeconomy remain resilient.

Richard Fairbank: Some consumers are feeling pressure from the cumulative effects of price inflation, higher interest rates, and many of those relying on the Affordable Care Act for their health insurance will see their premiums going higher, quite sharply in some cases. So I think these uncertainties will hang over the economy and hang over the choices that consumers make. Let me make a comment before I turn to our portfolio, just to comment on tax refunds. Tax refunds are an important driver of the seasonal improvements in delinquent payments that we see around March and April of each year in both card and auto. In 2026, the total amount of tax refunds is expected to be higher than in 2025 because some of the tax cuts in the big beautiful bill last summer were made effective retroactively to the start of 2025. Tax withholdings will also be lower in 2026.

Some consumers are feeling pressure from the cumulative effects of price inflation, higher interest rates, and many of those relying on the Affordable Care Act for their health insurance will see their premiums going higher, quite sharply in some cases. So I think these uncertainties will hang over the economy and hang over the choices that consumers make. Let me make a comment before I turn to our portfolio, just to comment on tax refunds. Tax refunds are an important driver of the seasonal improvements in delinquent payments that we see around March and April of each year in both card and auto. In 2026, the total amount of tax refunds is expected to be higher than in 2025 because some of the tax cuts in the big beautiful bill last summer were made effective retroactively to the start of 2025. Tax withholdings will also be lower in 2026.

Richard Fairbank: So all else equal, higher tax refunds will likely be a good guy for consumer credit, especially, and I think this is a really important point, especially when they are higher than consumers expect. But we believe that this will probably be a one-time benefit because tax withholdings will be lower in 2026, so we won't see another round of higher refunds in 2027. And I think consumers will set their expectations, hopefully not counting on too big a refund coming in 2027. So I think we're looking at a one-time effect. That is our view there. Let me turn to our own portfolio. We talked about the improvement in our charge-off rate. It's steadily improved, really, through most of 2025. And in fact, in Q4, it was 113 basis points lower than a year ago. And our front book of new originations continues to perform well.

So all else equal, higher tax refunds will likely be a good guy for consumer credit, especially, and I think this is a really important point, especially when they are higher than consumers expect. But we believe that this will probably be a one-time benefit because tax withholdings will be lower in 2026, so we won't see another round of higher refunds in 2027. And I think consumers will set their expectations, hopefully not counting on too big a refund coming in 2027. So I think we're looking at a one-time effect. That is our view there. Let me turn to our own portfolio. We talked about the improvement in our charge-off rate. It's steadily improved, really, through most of 2025. And in fact, in Q4, it was 113 basis points lower than a year ago. And our front book of new originations continues to perform well.

Richard Fairbank: But pulling way up, we think the health of the overall macroeconomy and of the US consumer; it's really in a pretty good place. And as a result, we continue to lean into our growth opportunities. Next question, please. Our next question comes from John Pancari with Evercore. You may proceed. Good afternoon. I wanted to see if you could provide some additional detail just around the financial impacts of the Brex deal. Could you possibly share some detail around the tangible book dilution and earnings accretion, and maybe book value earned back from the transaction? And then just separately, I totally understand the merits of the transaction and the commercial capability addition to your product suite that it provides. But anything just around the timing? Why now pursue the deal at this point, just given the ongoing effort around the Discover integration? Thanks.

Richard Fairbank: Hey, John, why don't I first take your question about the metrics? Given the relative size of Brex to Capital One, we don't intend to provide additional metrics. We're providing the purchase price and the associated balance sheet marks and integration costs as we're intending to break those out in our financial statements over the coming quarter. So we're providing our current estimates now, and we'll provide revised marks and the quarterly amortization schedule after close. And then I'll turn it to Rich to talk about your second question. Yeah. Thank you, John. To your question of why now, obviously, not long ago, we did the Discover deal, and we are well down the path of what I think is a very successful integration. We very carefully looked at the impact that doing a deal like this might have on the resources and anything related to the Discover acquisition.

Richard Fairbank: That's an important reason that Capital One. It's an important value that Capital One could add in the near term relative to sort of where they were on a standalone basis. So it's a synergy that can happen, be created right away, even without the full integration. Financially, it does offset some spending that we were otherwise doing, investing in similar kinds of solutions at Capital One. And also, around the company, we've really just been managing things tightly so that we're in a, so that, as we've talked about for the last few quarters, we're in the same position that we were before relative to the earnings power coming out the other side of the Discover integration. So even as we lean more into the Brex investment, our view of the earnings power out the other side is the same view that we've had all along. Next question, please.

That's an important reason that Capital One. It's an important value that Capital One could add in the near term relative to sort of where they were on a standalone basis. So it's a synergy that can happen, be created right away, even without the full integration. Financially, it does offset some spending that we were otherwise doing, investing in similar kinds of solutions at Capital One. And also, around the company, we've really just been managing things tightly so that we're in a, so that, as we've talked about for the last few quarters, we're in the same position that we were before relative to the earnings power coming out the other side of the Discover integration. So even as we lean more into the Brex investment, our view of the earnings power out the other side is the same view that we've had all along.

Richard Fairbank: I think just pulling up for a moment on our philosophy and maybe distinguish it from, I think, a number of banks, as they drive efficiency, first and foremost, do it by really trying to dial back and manage expenses extremely tightly. We try to manage expenses very carefully too. But our efficiency journey, which we've said is an important part of the value proposition for Capital One for investors, is first and foremost, the engine of that is growth, revenue growth. And so what we have done since the founding of the company is to absolutely focus on where are the structurally good opportunities in the marketplace, make sure that we understand where the not good opportunities are, and avoid those even if other banks are chasing them. But then where we see the good structural opportunities, we work backwards from how can we capitalize on those.

Richard Fairbank: But while we don't give specific efficiency ratio guidance, all of these investments are in service of driving future revenue growth, which is the engine for efficiency ratio improvement and value creation in the long term. Next question, please. Hey, Rick. Yeah. Go ahead. Yeah. You still there, Rick? Go ahead. Rick has left the stage. Oh, sorry, Rick. Our next question comes from Mihir Bhatia with Bank of America. You may proceed. Hi. Good afternoon. Thank you for taking my question. I was wondering if you could provide us with an update on how the debit transition to Discover is going, any learnings from that process as you think about which and when to transition the credit portfolio. And also just related to that, any initial thoughts on if there's an opportunity to move Brex cards over to Discover? Thank you. Yes.

Richard Fairbank: The housekeeping question, Andrew. I appreciate that Brex is small relative to Capital One, but could you size for us the size of the small business card portfolio at Capital One, the small business banking, and perhaps maybe revenues from the travel portal that you would expect to affect, if you will, through the Brex acquisition? I appreciate the interest there, but those just aren't metrics that we break out in our reporting, and we're not intending to do so at this point either. But just to sort of generally give you an, as I mentioned earlier, small business card portfolio is number three in purchase volume on the personal liability in the personal liability marketplace. Our small business bank is still mostly a local bank that was built on the shoulders of the local banks that we bought, which are in about 18% of the US.

Richard Fairbank: We have strategically, for quite a while, Moshe, felt that the tremendously successful building of our national retail bank, in that there's a parallel opportunity to go national and build our small business digital-first small business bank, leveraging the capabilities that we now have in the small business space. But what we have lacked in many ways is the business tech platform on which to build that. We didn't have enough scale in our small business bank business. We didn't feel that we had the scale to build the sort of tech stack fully necessary for that. But that comes along with the Brex acquisition, so it gives us a chance now to have shoulders to stand on to accelerate the growth of our small business bank. Great. Thanks. And Rich, you had talked about the broad number of opportunities.

Richard Fairbank: Could you just talk a little bit about how both the Discover acquisition and the Brex acquisition might change kind of the priorities and where what are the could you just talk a little bit about what the highest priorities in those investment opportunities are? Thanks. Discover and Brex both expand the number of opportunities, and we already had a pretty good list of opportunities that it was not an accident we had the opportunities we've had at legacy Capital One because we were working backwards from those opportunities for years as part of the benefit of transforming our technology platform. So along came Discover, and that brings the network opportunity, but also the network investments that we've talked about, and along comes Brex, and that brings the very near-in growth opportunities, but the investments required that go along with that.

Richard Fairbank: So what we are working to do is to try to really manage the company efficiently, even as we pursue a large list of opportunities. But these opportunities are opportunities that are opportunities in a particular moment, and that's why we're investing quite a bit to pursue them. Next question, please. Our next question comes from Don Fandetti with Wells Fargo. You may proceed. Hi. Good evening. Rich, as I looked around at the card industry, it seems like every big bank is trying to grow market share, leaning into regional fintechs. And I was just curious how you think this plays out if the industry is going to remain disciplined, and do you think you can grow your card loans in that type of environment, or could you consider sort of jagging and slowing things down a little? Thanks, Don.

Richard Fairbank: I think it is pretty much a certainty that every time the economy is in a pretty good place, the card industry will have more competition, and that competition is really coming from the big players. That competition is coming from fintechs, and it is striking how much the card players are leaning into things. You can see it by turning on TV and see the advertisements that are being made. You can look at the products that people are refreshing at the very top of the market, and you can look at some of the early spend bonuses and other things going on. So it is clear that the existing players and the fintechs coming from the side all believe that there is a good opportunity here. But I want to give you, Don, a calibration that I share with you from 30-some years of building Capital One.

Richard Fairbank: I feel this is a rational marketplace. It is definitely striking to see how much competitors are leaning in, but when I look at the choices they're making, when I look at the thing I fear the most, is reckless credit. I don't see that. I think that this is a market with opportunity for someone like Capital One, but we have our eyes open with respect to the competition. I think the investment, the table stakes of investment, to your point, I think are higher than they might be at other times. But all of that notwithstanding, I really believe this is a good marketplace, and we are leaning in to capture the opportunities. Next question, Don. I'm sorry. Go ahead. Almost there. Next question, please. Our next question comes from Jeff Adelson with Morgan Stanley. You may proceed. Hey, good evening.

Richard Fairbank: Rich, appreciate all the color on the Brex acquisition. I'm also just curious how you're thinking about the specific benefits and synergies to your commercial banking franchise. I mean, is this as you start to bring everything under one roof for your business customers, is this really something that could meaningfully accelerate your growth of lending and deposits within that segment, as you maybe attract more of those customers, or just you're able to do more for those customers under one roof over time? So yes. Jeff, I really appreciate that question. I can't remember an acquisition we've done in our history that has had so many connection points to our own business model and the ability to lift so many different parts of the company. And you mentioned one that I didn't even list in my list, which was a benefit to the commercial business.

Richard Fairbank: And then the second is we are likely to have higher levels of lower-yielding cash because average cash levels just tend to be elevated in Q1 as a result of takedown of seasonal loan balances. We have the added effect this year of the cash proceeds from the home loan sale that are unlikely to come all the way down in the immediate term with respect to the tax effect, efficacy, and how consumers behave, which is earlier comment. So I think that's a little bit more of a wild card. Then more structurally, I'll point to a couple of things. One is deposit pricing often lags as Fed funds move, so we could see brief periods of pressure after Fed moves if we were to see them in the coming quarters. But over time, given the relatively neutral position of our balance sheet, that largely corrects itself.

Richard Fairbank: And I think they know they had opportunities to go raise more capital, and they certainly weren't at all looking to go sell a company. But I think what captivated them about the unique opportunity of Capital One is that we, as a tech company ourselves, with a modern tech stack and the entrepreneurial heritage of having been an original fintech, that we could be a unique opportunity to bring a lot more resources and capabilities to them while still enabling their dream to stay alive and the entrepreneurial spirit that sometimes, when one thinks about large companies, might otherwise be hard to maintain. But I think they were pretty excited about the ability to have our brand to open doors all over the place. And not just open the doors, but also just for people to know that they're part of one of the biggest banks in America.

And I think they know they had opportunities to go raise more capital, and they certainly weren't at all looking to go sell a company. But I think what captivated them about the unique opportunity of Capital One is that we, as a tech company ourselves, with a modern tech stack and the entrepreneurial heritage of having been an original fintech, that we could be a unique opportunity to bring a lot more resources and capabilities to them while still enabling their dream to stay alive and the entrepreneurial spirit that sometimes, when one thinks about large companies, might otherwise be hard to maintain. But I think they were pretty excited about the ability to have our brand to open doors all over the place. And not just open the doors, but also just for people to know that they're part of one of the biggest banks in America.

Richard Fairbank: And I think their customer base includes like 1/3 of tech companies. Kind of thing. That's not a statement I'm fully grounded, but let's just say it's been a tremendous success with startups. But they also, on top of this amazing tech stack that they have built, were able to build a lot more capabilities that then made their product attractive to middle-market companies and, in fact, pretty large middle-market companies and companies that have business all over the world and their employees traveling all over the world. So I believe that they are set up for success with small companies, with medium-sized companies, and in fact, pretty large ones because their solution spans the needs of that broader range of customers, and the elegance and simplicity of the solution make it something that small and large can implement. Next question, please.

And I think their customer base includes like 1/3 of tech companies. Kind of thing. That's not a statement I'm fully grounded, but let's just say it's been a tremendous success with startups. But they also, on top of this amazing tech stack that they have built, were able to build a lot more capabilities that then made their product attractive to middle-market companies and, in fact, pretty large middle-market companies and companies that have business all over the world and their employees traveling all over the world. So I believe that they are set up for success with small companies, with medium-sized companies, and in fact, pretty large ones because their solution spans the needs of that broader range of customers, and the elegance and simplicity of the solution make it something that small and large can implement.

Richard Fairbank: So, Saul, in isolation, Brex will result in earnings dilution initially as we're buying a business with a growth rate that is multiples of industry growth rates. We believe this growth dynamic will lead to significant accretion over time. Okay. All right. Fair enough. And I guess just to follow up here is you mentioned you don't expect to change in the expected base of your quarterly share of purchases, which was $2.5 billion. Is that a fair assumption? Is it fair to think that that's sort of a decent cadence for buybacks, at least as we stand here today? Well, Saul, let me clarify the language a bit, which is we're saying that the Brex transaction itself will take down our capital by, I think, a little more than 40 basis points. So a meaningful amount, but certainly not enough to influence our thinking about near-term repurchases.

Richard Fairbank: So the point we were making is it's just not going to alter our approach to repurchases. And so we said last quarter that our long-term need is 11%. Given our current capital position, you saw this quarter we accelerated our returns, upping the repurchases to the $2.5 billion you cited, increased our dividend 33% to $0.80. So with respect then to the pace of future buybacks, we're really going to look at a variety of things, just current and projected capital levels and our balance sheet growth opportunities, the economy, the regulatory environment. And it's not just a point estimate for those variables. We're going to think about a range of outcomes around them. But given all of that, we have healthy capital levels. We've got $14 billion of remaining authorization, and we've got flexibility under SEC.

So the point we were making is it's just not going to alter our approach to repurchases. And so we said last quarter that our long-term need is 11%. Given our current capital position, you saw this quarter we accelerated our returns, upping the repurchases to the $2.5 billion you cited, increased our dividend 33% to $0.80. So with respect then to the pace of future buybacks, we're really going to look at a variety of things, just current and projected capital levels and our balance sheet growth opportunities, the economy, the regulatory environment. And it's not just a point estimate for those variables. We're going to think about a range of outcomes around them. But given all of that, we have healthy capital levels. We've got $14 billion of remaining authorization, and we've got flexibility under SEC.

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