Bank of America keeps Buy rating on Capital One as July credit trends improve

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Capital One Financial has spent more than a year integrating Discover as investors watch to see whether the acquisition can lead to faster growth and stronger returns.

The latest monthly figures presented a mixed picture. Capital One (COF) posted healthy credit trends in July, but growth in its domestic card portfolio slowed from the previous month.

Bank of America remains positive on the stock. In a note provided to TheStreet, BofA analyst Mihir Bhatia maintained a Buy rating and a $253 price objective on Capital One, which implies 11.3% upside from the $227.34 share price used in the report.

Bhatia said July’s operating metrics were healthy overall, reflecting solid credit performance even as card balances grew at a slower pace.

Capital One card growth slows in July

According to a filing with the Securities and Exchange Commission, Capital One ended July with $258.9 billion in domestic credit card loans. The portfolio’s annualized net charge-off rate was 4.12%, while the 30-day-plus performing delinquency rate was 3.48%.

Capital One is one of the few large US lenders that discloses charge-off and delinquency data every month, which makes its filings a closely watched, near-real-time gauge of the health of the American consumer.

BofA said domestic card loans were up 1.92% from a year earlier, down from 2.58% growth in June. Bhatia said card balances have grown at around 2% for roughly the past year.

The analyst does not expect a meaningful acceleration until headwinds tied to the Discover integration and related borrow-out activity begin to ease. BofA is modeling end-of-period card loans to rise by about 1% sequentially in the third quarter.

The slowdown comes as Capital One continues to work through its integration of Discover. The company completed the roughly $35 billion all-stock acquisition, announced in February 2024 and cleared by the Federal Reserve and the Office of the Comptroller of the Currency, in May 2025, adding the Discover, PULSE, and Diners Club International networks to its business.

Discover’s namesake network is one of the four major US card networks alongside Visa, Mastercard, and American Express, and owning it gives Capital One the ability to route more transactions without paying network fees to rivals.

Capital One CEO Richard Fairbank said in July that the Discover integration was progressing 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

Although 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.

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 stronger 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

Taken together, the July figures leave BofA willing to look past slower card growth for now.

Bhatia pointed to expected expense synergies, strong capital-return potential and room for valuation upside as reasons to stay constructive 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 is toward the high end of Capital One’s historical range of roughly 7 to 11 times earnings, but BofA said the premium is justified by expected synergy realization, an optimistic credit outlook, buyback potential and a resilient cardholder base.

BofA also identified risks to the call. The bank 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 keep BofA focused on improving credit trends and the benefits still ahead from the Discover integration, even as Capital One’s core card growth remains subdued. Investors will get the next readings from the August and September monthly filings, followed by third-quarter results later in the year, which will show whether credit trends track the improvement BofA expects.

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This story was originally published by TheStreet on Aug. 20, 2026, where it first appeared in the Investing section.