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Investing.com -- Capital One Financial Corporation (NYSE:COF) beat Wall Street’s profit expectations for the second quarter, delivering robust adjusted earnings even as it reported a headline net loss tied to the recent Discover acquisition. The $35.3 billion all-stock deal, completed in May, transformed Capital One into the nation’s largest credit card issuer by balances.
Adjusted earnings per share came in at $5.48, well ahead of the $4.03 analysts had anticipated. On a GAAP basis, however, the bank posted a $4.3 billion loss, or $8.58 per share, largely due to an $8.77 billion initial allowance build for Discover’s non-PCD loans.
Revenue climbed 25% from the previous quarter to reach $12.5 billion but narrowly missed the consensus estimate of $12.72 billion. The integration of Discover’s assets also drove sharp increases in both loans and deposits.
Period-end loans rose 36% to $439.3 billion, with credit card balances jumping 72% to $269.7 billion. Total (EPA:TTEF) deposits climbed 27% to $468.1 billion, bolstering the firm’s liquidity position.
“We completed our acquisition of Discover on May 18th. We’re fully mobilized and hard at work on integration which is going well,” said Richard D. Fairbank, Capital One’s Chairman and CEO.
The credit card and consumer lending divisions posted the most dramatic growth, alongside a solid capital buffer: the bank’s CET1 ratio stood at 14.0% at quarter’s end. Net interest margin increased 69 basis points to 7.62%, underpinning profitability in a high-rate environment.
Non-interest expense jumped 18% to $7.0 billion as the bank absorbed one-off acquisition and integration costs. These included $299 million in direct Discover integration expenditures and $255 million related to intangible amortization.
“We’re as excited as ever by the expanding set of opportunities to grow and create value as a combined company,” Fairbank said. The company projects $2.7 billion in deal synergies by 2027, and it continues to invest in its digital infrastructure to drive operating efficiency.