Capital One Financial has spent more than a year integrating Discover while investors watch whether the massive acquisition can translate into faster growth and stronger returns.
The latest monthly data gave Wall Street a mixed picture. Capital One (COF) posted healthy credit trends in July, but growth in its domestic card portfolio slowed from the prior month.
Bank of America is still sticking with the stock.
In a note given to TheStreet, BofA analyst Mihir Bhatia maintained a Buy rating and a $253 price objective on Capital One, representing 11.3% upside from the $227.34 share price used in the report.
Bhatia said July’s operating metrics remained healthy overall, pointing to solid credit performance even as card balances grew at a slower pace.
Capital One card growth slows in July
Capital One ended July with $258.9 billion in domestic credit card loans, according to a filing with the Securities and Exchange Commission. The portfolio’s annualized net charge-off rate was 4.12%, while the 30-day-plus performing delinquency rate came in at 3.48%.
BofA said domestic card loans were up 1.92% from a year earlier, slowing from 2.58% growth in June. Card balances have grown at around 2% for roughly the past year, according to Bhatia.
The analyst does not expect a meaningful acceleration until headwinds tied to the Discover integration and related borrow-out activity begin to clear. BofA is modeling end-of-period card loans to increase by about 1% sequentially in the third quarter.
That slowdown comes as Capital One continues working through its integration of Discover. The company completed its acquisition in May 2025, adding the Discover, PULSE, and Diners Club International networks to its business.
Capital One CEO Richard Fairbank said in July that the Discover integration was going well, 14 months after the deal closed. The company reported $3 billion in second-quarter net income, while total net revenue increased 4% sequentially to $15.9 billion.
Credit trends give BofA more confidence
While card growth has cooled, BofA sees credit quality moving in a more encouraging direction.
Capital One’s domestic card net charge-off rate fell 26 basis points month over month in July. BofA noted that the decline was better than the 20-basis-point average decrease historically seen in July between 2013 and 2019.
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Delinquencies rose 10 basis points during the month, which BofA said was in line with historical seasonality. Bhatia is currently modeling domestic card net charge-offs to fall another 36 basis points sequentially in the third quarter to 4.35%.
Auto lending also provided a brighter growth signal. Capital One reported $90.5 billion in period-end auto loans in July, with a 1.48% net charge-off rate and a 4.39% 30-day-plus delinquency rate.
BofA said auto balances increased 12.05% from a year earlier, accelerating from 11.62% growth in June.
Bank of America sees upside in Capital One stock
The combination leaves BofA willing to look through slower card growth for now.
Bhatia pointed to expected expense synergies, strong capital-return potential, and room for valuation upside as reasons to remain positive on Capital One. The bank’s $253 target is based on a 10.5-times multiple of its 2027 earnings-per-share estimate.
That multiple sits toward the high end of Capital One’s historical range of roughly 7 to 11 times earnings, but BofA believes the premium is justified by expected synergy realization, an optimistic credit outlook, buyback potential and a resilient cardholder base.
There are still risks to the call. BofA said weaker revolving credit growth, a faltering economic recovery, and rising loan losses could pressure earnings and valuation, while cybersecurity and regulatory issues remain additional concerns.
For now, July’s results leave BofA focused on improving credit trends and the potential benefits still ahead from the Discover integration, even as Capital One’s core card growth remains subdued.
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