INTRODUCTION

Capital One Financial Corporation is a diversified financial services holding company with banking and non-banking subsidiaries. The company offers a broad array of financial products and services to consumers, small businesses and commercial clients through digital channels, branch locations, cafés and other distribution channels.

As of March 31, 2025, Capital One Financial Corporation’s principal operating subsidiary was Capital One, National Association (CONA). The company’s consolidated total net revenues are derived primarily from lending to consumer and commercial customers, net of funding costs, as well as non-interest income from sources like interchange fees and customer-related fees.

Capital One’s principal operations are organized into three major business segments: Credit Card, Consumer Banking, and Commercial Banking. Certain activities that are not part of a business segment are included in the Other category, such as the management of the corporate investment portfolio and unallocated corporate expenses.

Business Developments

On February 19, 2024, Capital One entered into an agreement to acquire Discover Financial Services. The transaction, which includes the merger of Discover into Capital One and the merger of Discover Bank into CONA, received regulatory approvals and is expected to close on May 18, 2025.

SELECTED FINANCIAL DATA

In the first quarter of 2025, Capital One reported:

• Net income of $1.4 billion ($3.45 per diluted common share) on total net revenue of $10.0 billion.
• Common equity Tier 1 capital ratio of 13.6% under the Basel III standardized approach.
• Declared and paid common stock dividends of $236 million and repurchased $150 million of common stock.

Key highlights:

• Total net revenue increased 6% year-over-year, driven by higher net interest income.
• Provision for credit losses decreased 12% year-over-year, primarily due to an allowance release in the credit card portfolio.
• Non-interest expense increased 15% year-over-year, due to continued technology investment and higher marketing spend.
• Loans held for investment decreased 1% from December 31, 2024, primarily from seasonal paydowns in the credit card portfolio.
• The 30+ day delinquency rate decreased to 3.51% as of March 31, 2025 from 3.98% as of December 31, 2024.
• The allowance for credit losses decreased 2% to $15.9 billion as of March 31, 2025.

EXECUTIVE SUMMARY

Financial Highlights

• Net income increased 10% year-over-year to $1.4 billion, driven by higher net interest income and lower provision for credit losses, partially offset by higher non-interest expense.
• Loans held for investment decreased 1% from December 31, 2024, primarily due to seasonal paydowns in the credit card portfolio, while average loans increased 2% year-over-year.
• The net charge-off rate increased 7 basis points to 3.40%, primarily due to the impact of the Walmart program termination.
• The 30+ day delinquency rate decreased 47 basis points to 3.51% as of March 31, 2025.
• The allowance for credit losses decreased 2% to $15.9 billion as of March 31, 2025, primarily driven by an allowance release in the credit card portfolio.

CONSOLIDATED RESULTS OF OPERATIONS

Net Interest Income

Net interest income increased 7% year-over-year to $8.0 billion, primarily driven by higher average loan balances in the credit card portfolio and the impact of the Walmart program termination. Net interest margin increased 24 basis points to 6.93%.

Non-Interest Income

Non-interest income increased 4% year-over-year to $2.0 billion, primarily due to higher net interchange fees from increased purchase volume.

Provision for Credit Losses

The provision for credit losses decreased 12% year-over-year to $2.4 billion, primarily driven by an allowance release of $473 million in the credit card portfolio, partially offset by an allowance build of $117 million in the commercial loan portfolio.

Non-Interest Expense

Non-interest expense increased 15% year-over-year to $5.9 billion, primarily driven by continued investment in technology, an increase to the litigation accrual, and higher marketing spend.

BUSINESS SEGMENT FINANCIAL PERFORMANCE

Credit Card Business

• Net income increased 27% year-over-year to $1.2 billion, driven by higher net interest income and lower provision for credit losses, partially offset by higher non-interest expense.
• Net interest income increased 7% year-over-year, primarily due to higher average loan balances and the impact of the Walmart program termination.
• Provision for credit losses decreased 15% year-over-year, primarily driven by an allowance release.
• Non-interest expense increased 13% year-over-year, primarily due to continued technology investment and higher marketing spend.
• Period-end loans held for investment decreased 3% from December 31, 2024, while average loans increased 5% year-over-year.
• The net charge-off rate increased 24 basis points to 6.14%, primarily due to the impact of the Walmart program termination.

Consumer Banking Business

• Net income decreased 51% year-over-year to $186 million, primarily due to higher non-interest expense and lower net interest income, partially offset by lower provision for credit losses.
• Net interest income decreased 3% year-over-year, primarily driven by lower margins in the retail banking business, partially offset by higher deposits and loan balances.
• Provision for credit losses decreased 29% year-over-year, primarily driven by the auto loan portfolio.
• Non-interest expense increased 27% year-over-year, primarily due to an increase to the litigation accrual, continued technology investment, and higher marketing spend.
• Period-end loans held for investment increased 1% from December 31, 2024, primarily driven by growth in the auto loan portfolio.
• Deposits increased 2% from December 31, 2024, driven by the national consumer banking strategy.

Commercial Banking Business

• Net income decreased 30% year-over-year to $195 million, primarily due to higher provision for credit losses and lower net interest income, partially offset by lower non-interest expense.
• Net interest income decreased 5% year-over-year, primarily driven by lower average loan balances.
• Provision for credit losses increased, primarily driven by an allowance build of $117 million.
• Non-interest expense decreased 6% year-over-year, primarily due to lower operating expenses.
• Period-end loans held for investment remained flat compared to December 31, 2024.

CAPITAL MANAGEMENT

• The company’s common equity Tier 1 capital ratio was 13.6% as of March 31, 2025, up from 13.5% as of December 31, 2024.
• In the first quarter of 2025, the company declared and paid common stock dividends of $236 million and repurchased $150 million of common stock.
• The company submitted its 2025 capital plan to the Federal Reserve in April 2025.

CREDIT RISK PROFILE

• The company’s loan portfolio is geographically diversified across the U.S., U.K., and Canada.
• Credit quality metrics remained stable, with the 30+ day delinquency rate decreasing to 3.51% as of March 31, 2025 from 3.98% as of December 31, 2024.
• The allowance for credit losses decreased 2% to $15.9 billion as of March 31, 2025, primarily driven by an allowance release in the credit card portfolio.
• The net charge-off rate increased 7 basis points to 3.40%, primarily due to the impact of the Walmart program termination.

Overall, Capital One reported solid financial performance in the first quarter of 2025, with growth in net interest income and lower provision for credit losses, partially offset by higher non-interest expense. The company’s credit quality metrics remained stable, and it continued to maintain a strong capital position.