CAPITAL ONE FINANCIAL CORPORATION

Red flags

• Discover was excluded from the year-end internal-control evaluation even though it represented approximately 21% of total assets and 20% of 2025 net revenues; management is still incorporating it into internal controls.
• The transaction paid $51.8 billion for net assets valued at $38.4 billion, creating $13.4 billion of goodwill that is not tax deductible and depends on expected revenue and cost synergies.
• Total unfunded lending commitments jumped to $729.6 billion from $458.1 billion, increasing potential liquidity and credit exposure even though many card and consumer commitments are unconditionally cancellable.
• Acquired credit exposure was material: $108.6 billion of net loans, including $3.5 billion of net PCD loans after a $2.9 billion allowance and $8.8 billion of provision for acquired non-PCD loans.
• Funding includes $12.9 billion of estimated uninsured time deposits and $17.4 billion of time deposits with some balances above the federal insurance limit.