Capital One's rewards and marketing may cause some short-term performance issues, but the institution's aggressive posture is necessary in the current environment, the company's CEO said Tuesday.

"It's a very competitive space and it's intensified over the past year as issuers introduce new offers, and bonuses are increasing," said Richard D. Fairbank, chairman and chief executive of Capital One during its first-quarter earnings call.

Capital One Financial Corporation reported net income for the first quarter of 2016 of $1.0 billion, or $1.84 per diluted common share, compared to $1.2 billion, or $2.00 per diluted common share a year earlier. Revenue for the quarter ending March 31 was flat at $6.2 billion in the first quarter 2016, compared to the analyst estimate of $6.16 billion.

Fairbank addressed investor questions about pressure on net interchange, and the possibility of interchange growth lagging card revenue growth.

Capital One has long had a substantial marketing and rewards tie in strategy, including pacts with companies like Uber and ads starring Samuel L. Jackson and other celebrities. More recently, Capital One has expanded cashback and other rewards incentives. Capital One attributed part of its growth in card payment volume to its rewards programs.

"We're building a long-term franchise by upgrading rewards and extending rewards to consumers that don't already have them," Fairbank said, adding large merchants have negotiated custom interchange deals. "There may be some near-term cannibalism, but we're building a stronger franchise."

Capital One has been gradually boosting its reserves in anticipation of higher loan losses, in part due to an increase in loan volumes.

Fairbank generally painted a positive picture for the McLean, Va.-based based institution's financial performance, noting domestic card growth in both loan balances and purchase balances. Domestic card average loans increased 2% to $85.1 billion from $83.8 billion. Capital One additionally reported 20% growth in card purchases

Capital One will also increase reserves to cover loss risk in energy loans, and would increase its investment in branch automation to accommodate expanded digital financial services, Fairbank said.

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