Capital One Financial has been focusing on integrating Discover for over a year now, with investors keeping a close eye on whether this acquisition will lead to accelerated growth and improved returns. The latest data from July paints a mixed picture for Wall Street. While Capital One reported strong credit trends, growth in its domestic card portfolio slowed compared to the previous month.
Bank of America remains optimistic about Capital One’s future. Analyst Mihir Bhatia reiterated a Buy rating and a $253 price target on Capital One stock, representing an 11.3% upside from the current share price. Bhatia highlighted the healthy operating metrics in July, with solid credit performance despite slower card balance growth.
In July, Capital One’s domestic credit card loans totaled $258.9 billion, with an annualized net charge-off rate of 4.12% and a 30-day-plus performing delinquency rate of 3.48%. While domestic card loans increased by 1.92% year-over-year, the growth rate slowed from the previous month. BofA expects a gradual acceleration in card loan growth once the headwinds associated with the Discover integration clear.
The acquisition of Discover, PULSE, and Diners Club International networks in May 2025 has been a significant development for Capital One. CEO Richard Fairbank mentioned that the integration is progressing well, with the company reporting $3 billion in second-quarter net income and a 4% sequential increase in total net revenue.
BofA is particularly encouraged by the positive credit trends at Capital One. In July, the domestic card net charge-off rate decreased by 26 basis points month-over-month, surpassing historical averages. Delinquencies rose slightly, in line with seasonal patterns. The bank is anticipating further improvement in credit quality in the third quarter.
Auto lending also showed promising growth, with period-end auto loans reaching $90.5 billion in July. BofA noted a 12.05% year-over-year increase in auto balances, indicating a positive trend in this segment.
Despite the slowdown in card growth, BofA sees significant upside potential in Capital One stock. The bank highlights expected expense synergies, strong capital-return prospects, and room for valuation growth as reasons to remain bullish on the company. The $253 price target is based on a 10.5-times multiple of the 2027 earnings-per-share estimate.
While there are risks to this outlook, including weaker credit growth and economic uncertainties, BofA believes that the benefits from the Discover integration and the resilient cardholder base at Capital One will drive future growth. Overall, BofA is focused on the improving credit trends and potential synergies from the integration as key drivers of Capital One’s success.
