Third-quarter profit of $5.61 a share and a 13.8% CET1 ratio leave room for buybacks. I model $22.50 of 2027 earnings at 10.7 times, a $240 stock, about 14 percent above $210 including the dividend.
Key points
- $5.61 was third-quarter GAAP diluted earnings; adjusted $6.69 after $1.08 of deal amortization and integration.
- 3.98% was the domestic-card net charge-off rate, down 73 basis points sequentially, with a $225 million allowance release.
- 13.8% CET1 and $2.6 billion of third-quarter buybacks leave capital for more share cuts.
The call
The $210 price needs about $21 of 2027 earnings at ten times, a typical large-bank multiple after a 17 percent year-to-date drop. That treats Discover as unfinished and credit as still normalizing.
I expect $22.50 instead. Discover debit conversion is done, $1.8 billion of annualized synergies are already in the run rate, and remaining cost saves roughly offset likely interchange losses. Charge-offs are lagging better first-half delinquencies.
Diluted EPS by quarter ($)Company filings and Q3 2026 8-K; 2026 Q4–2027 are my estimates
Valuation
| Item | Figure |
|---|
| 2027 earnings (my estimate) | $22.50 a share |
| Multiple | 10.7 times |
| 12-month target | $240 |
| Dividend next 12 months | $3.20 |
| Implied total return from $210 | about 16% |
| Tangible book, Sept 30 | $102.72; 2.0 times at $210 |
Ten to eleven times is what large U.S. consumer banks trade at when losses are stable and capital is excess. Upside is more buybacks and Discover loan growth after the first-quarter 2027 conversion; downside is a credit snap-back or a larger interchange cut than remaining synergies.
Risks
- Card delinquencies rose 35 basis points sequentially; a break from seasonality would force a provision rebuild.
- 2027 marketing is set to rise again, including Discover, and can outrun revenue for several quarters.
- Visa-Mastercard settlement terms could exceed remaining synergies.
What would change my mind
Four consecutive months of rising card charge-offs, or CET1 falling through 12.5% with no buyback pause.