Capital One Financial's rewards and marketing may cause some short-term performance issues, but its aggressive posture is necessary in the current environment, Chairman and CEO Richard Fairbank 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," Fairbank said during the company's first-quarter earnings call.

Capital One reported net income of $1 billion, or $1.84 per diluted common share, for the three months, compared with $1.2 billion, or $2 per diluted common share, in the first quarter of 2015. Revenue was flat at $6.2 billion; analysts had estimated revenue would be $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 the McLean, Va., company 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 because of higher loan volumes.

Fairbank generally painted a positive picture of Capital One'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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