COF - Earnings call transcript Q2 2018 | Capital One Financial Corporation

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Operator

Welcome to the Capital One Second Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. [Operator Instructions] Thank you. I would now like to turn the call over to Mr. President Vice Senior Norris, of Finance. Jeff may you begin. Sir,

Jeff Norris

everybody Thanks call. second One's Leanne, welcome, very and to quarter Capital much, XXXX earnings conference

usual, Internet, live the webcasting capitalone.com, and Capital we Internet. links at As access from the To there. One's over website call log please the the follow on to on are

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Scott Blackley

charge Thanks, adjusting are Jeff. billion Capital related three the sale tonight’s I'll which reserve share or quarter. items customer quarter, our was had begin the in portfolio tonight insurance divestitures. Slide category. had earned to on was in per from protection in One UK had $XX slide $X.XX. these mortgage recorded in and previously announced other $X.X million the page We our refund previously XX a which our our announced were of $X.XX events share million There X. for payment We restructuring outlined items, second deck. $XXX $XX million business of we a a build of gain earnings per with adjusting Net

on vendor we items, a credit by adjusting a decreased a segment a XX% basis, driven to releases quarter to the basis year-over-year $X.X million to a on in addition year-over-year our Provision basis which and losses basis and In a allowance non-recurring $XX XX% Pre-provision Auto Domestic around quarter. reduced in billion. primarily by earnings on on had linked Card increased agreement for businesses. and operating GAAP expenses XX% XX% quarter linked the adjustment card our in

release Improving explain in resulted a Table X to in moment million our offs our our ratio. $XX in $XX in charge as the by We our increased quarter allowance the coverage decrease million. sale and Also million in our a businesses, in home sale of increased across of our commercial in Card take of business me transfer the delinquencies which detailed the and Auto to allowance Let and $XX release held supplement. for are the movements a allowance lower business. Domestic allowance impact the $XX portfolio we of reserves loan earnings remaining million resulted

quarter tax the rate was effective in XX.X%. Our

Excluding and would the have quarterly UK of been build, rate PPI XX.X%. the reserve the impact discreet items

items. We around continue to discreet be expect our XXXX corporate tax rate annual before effective XX% to

Slide interest more About Turning after margin reported seasonality X, that basis typically points quarter increased linked card the decrease on offset can this a XX in quarter. having partially by net half you is which as customers decreased see basis. season, tax is payments to one only day

UK by will PPI The factors, continuing other decrease largely portion of a which the forward. deposits, was linked accelerating due revenue a cost cash and quarter portfolio the increase the to contra in balance going temporary believe we be three finally our of reserve driven half of build, mortgage sale the the headwind

Turning was XX.X%. X, the Basel million or basis purchasing XXXX equity full common standardized of Tier XXX our to capital We a common X million III X.X in authorization on Slide quarter. our shares CCAR stock completed ratio

second of the non-objection common is end As per we CCAR the to stock to quarterly board XXXX. our through approval. repurchase $X.XX Reserve’s Board of previously announced, of authorized maintain to XXXX Federal following up of which the quarter And share, expect subject plan, to has of billion our $X.X dividend our

remains view XX% growth current we capital to We at that power Our distribution. sufficient have of CET and X. believe support our around of earnings capital need

frameworks to longer it capital mentioned With that our over quarter, Rich? I may view Rich. As incorporate last capital. CECL term how the ultimately impact of of turn I’ll the effects

Richard Fairbank

with I'll Scott. also for and second in X. balances up X% trends provision results Credit Card growth Credit compared is or loan of on about billion which improvements and significant Domestic revenue business. segment loans posted $X.X growth We performance were to quarter shown year-over-year of second Slide the grew X begin year. driven by last ending loss. driven credit income Average Slide in our the Card Card our are largely on Thanks, X%. by quarter Card Domestic In pretax strong about the business,

about quarter. year of the items million in for points quarter the loans Scott Card was was results. Improving rate increased in from Revenue quarter basis quarter pressure basis prior Domestic benefited $XX Operating down second partially a average was compared volume rate about non-recurring in purchase quarter in margin Non-interest credit the expense that the increased the X.XX%, quarter offset quarter to year X.XX%, decline the XX XX prior was margin. quarter. delinquency the X% from driver for by by year. discussed. XX XXXX, quarter quarter expected margin of points the from prior the a The Revenue Cabela’s the second down prior from Growth was plus X% points Second down from XX% revenue expense year. year-over-year. were significant XX.X%, charge XX quarter off The end driven adding largely for basis the portfolio. from at for the down trends

card loans We’re rational. is guy now and overall booked math. high is our we Domestic Slide in and XX it results This Consumer of quarter and section XX. on a Credit up all but gaining XXXX, opportunity substantially continues to XXXX marketplace to Banking for summarized Supply Card in the on bit the grow on remains although portfolio second for during is completed performance Slide of growth see the Home growth on the our We business. to the traction. has good settle segment card the our growth out summarizes a quarter credit good credit. competitive initiatives In Loans XXXX side, year-over-year. now Pulling commentary are improvement turned surge side of sale we increasing generally improving and intense, loans. the selected results of our impacts

grow. up auto the Auto Growth prior compared basis sale. As increasing, in to X% the Competitive about The second year of point in see grow decreased still loans we in deposit up the was see rate the Ending Slide by were continues portfolio offset year-over-year. deposits business compared XX% on you with prior with intensity to Home a versus can loans quarter XX, X% auto but year. loans ending XXXX. more increase than ending average opportunities attractive to interest is to XX Loans

to second Adjusting our Recall cost. business. by higher auto We average to efforts deposits gain quarter rationalization rate of branch as losses and expect down for continues manage by prior increasing for Non-interest revenue quarter performance that charge decreased interest strong product deposit exit result as banking rates trends compared for strategy still our about the Consumer year competition traction. Auto sale. an to the release. year-over-year credit impact, quarter the from primarily second our in the mix as year with and of X% well year in last improved XXXX, rate rate of year quarter. second quarter prior prior offset portfolio how recognize as Loans the as increases off The auto we bankruptcy of changing a for charge-offs. increased credit the ongoing changes drove market from national charge-off to banking Auto further in elevated Home driven improved growth the for compared quarter the X% by quarter was last by of charge-off in driven quarter. the the discussed related second expense benefits loans Provision tightly Scott mortgage the was modestly and the favorable business, credit in And deposit allowance rate these

the term cycle will the rate to charge-off out. longer gradually the auto Over increase continue we as that plays expect

commercial Slide business. Moving our I'll to banking discuss XX,

attractive increasing decreased X%. choice With driven of down flat driven the the by Ending back of to average were XXXX. these loan about balances many prior Second deposits X% increased several loans from less the were pull our sequential X% half ending from behind business segments second in ending quarter. us, loan quarter were in balances year competition. year-over-year and Both price by trends choices

performing our itself digital credit loans capital non-performing revenue tax of non-interest overall in Provision was million zero. charge-offs. as yields. costs down for lower we the the Second X% revenues the Domestic losses businesses across rate and to as the The managed credit tax second as drive and in lower technology XXXX We loan The of tightly One the charge-off was decline quarter pre-provision and average business was second a by effect earnings. transformation. equivalent essentially strong and our XX% driven Capital for and math on invest The agency Non-interest growth a investments result saw commercial loans, deposits, year-over-year improvement guy in criticized expense growth was rate up up as initiatives. was trends. and good primarily quarter the credit quarter quarter markets to for in quarter loan the rate to quarter offset for X.X%. delivered Card from X.X%. established other was of We rate the bank X% and $XX even continued drive grow In criticized year-over-year income

grow to deposits book continue card, business. our our opportunities attractive see auto consumer in We and banking in to and loans resilient banking commercial to and businesses

technology We work we continue XXXX our significant of to transform be XXXX to with will essentially we year. in increase ratio After expect infrastructure be continue and roughly will net as improvement, in operating the compared XXXX. way change of hard all adjustments, of efficiency XXXX drive to the we operating expect flat second years higher half to we than the of And efficiency two marketing coming the work.

long-term, While the continue to gradual can growth over and improvement driven efficiency ratio be achieve able will believe gain. vary productivity efficiency year, digital to we given by in any we

revolution succeed will improvements franchise to ratio. efficiency to enduringly with up, We an our as build brand, the come great mostly operating the our Pulling ratio efficiency improving scale, continue expect and digital industry long-term and we society. in infrastructure transforms capabilities, from

strengthening technology position marketplace and is digital and rapidly long-term to succeed we’re in changing accelerating a value. our shareholder and Our transformation create

your and answer to will happy Scott I questions. Now be

Jeff Norris

Rich. Thank now you, start Q&A We'll session. the

wish single to and may to who other limit plus please yourself follow-up. investors courtesy a question a to a As analysts question, ask one

after have please If Leanne, Investor questions Relations the session. start Q&A available will the be Q&A session, the you after follow-up the team call. any

Operator

Instructions] Bank you. [Operator question first And Bruce Merrill take Lynch. Thank of from with America we'll our Ken

Ken Bruce

you, evening. in My Thank business. growth US question good the see credit the card that you really to relates

a the the in will suggested that’s opportunities the seeing to sense shift that area what if of and in look again. kind had product us subprime as in give wondering any the like area, quarter. You grow obviously forward you could going prime that sense you’re to I’m you mix

Scott Blackley

let Ken, on the of in first comment Right, all quarter. just shift mix the me

of An is to which that X plus reduction portfolio years. addition our basically portfolio. the important close mix portfolio Cabela’s couple is credit have little bit lower a asset kind been a of XX% percentage minus. is year-over-year. percent subprime And mix points of down prime of about Also our last our historical lines third of that’s heavily a the part the oriented or So

strategy but same. So that - is the our remains

also the opportunity question to across growth that’s turn we I of see the and where your as opportunity, where about spectrum now the we so is And growth play.

context over the there’s last strategic in see where last been think any bit again we and talk growth we the the actually I think always calibration of here a that two that. change marketplace would picture So now we important Capital said as say and the about try growth pretty positive out partly know you picture we don’t has and even modest looking see the a more see I I we we quarter that’s And opportunity. just positive to little we year or we’ve look a as more One’s give

to we’ve vintages, we an enhanced think levels recent So and promise we higher, time. we so already see see innovation we in growth over see said like what our marketing the pipeline be I opportunity expect we performance of in

Ken Bruce

Capital And Thanks. specifically card with speculation and Can Capital the, there’s Capital any Wal-Mart about One? I on would transaction going for private for be be been one the you the of not and just makes some it co-brand. involvement retail you for us to understand comment but particular One’s you’re a what What label lay classic work can partnership would out what specifically One?

Richard Fairbank

know [auction] you an card So business the as business. Ken [ph] partnerships is based

we that believe So time. we in for that a long way and said

all get about we be they discipline We’re growth biggest of frankly process. just auction certainly but context not the love very and emerge go it’s out the of to fit when opportunities the to in course

for do and partner lot struggling there context of card for a a strong out a companies are of look what alignment in We and partner look the and question your partner a strong for in a as where a with brands growth. to certainly for look motivated in environment a retailers to we reasons. commitment we we right So of for look America fit the overall world companies the a an for rapidly changing cultural the program, strong avenue that’s lot

world the build relative and past attractive centrality the really franchise. understand would more the the digital a of of digital should that to a look look and to of we also final capabilities on a the the are of we at think that’s the environment. emerging program a the customer one who other the were partnerships. who there as the card sort view good with digital are table that add see. behind of the view opportunity bring is spectrum a The the is light just to opportunities card kind the consistently of and of end be payments spectrum central underwriting it’s of partners the continuum value e-commerce context the looking is to card partners I not the important card of focus in former economic you of we tried the If partners think really program On physical they’re important means play card and how element and profit in out in a those the side thing end can we card those what in of because grow continuum relationships, to essentially franchise the center, growth partnerships players as for we we that lies we only the especially partnerships and building as have environment for an deal deepening all who however have in partnerships because where in to lot that our better marketing and and to consistent And

partnership years we felt it view things. to been expressed think that’s I discipline is have selectivity what So so the of and thing that those key the that’s saying we’ve for into how about is really window opportunity a and story be we times and a needs many

Jeff Norris

Next question please.

Operator

our Moshe Credit And Orenbuch comes from question with Suisse. next

Moshe Orenbuch

that you can loan a sheet but business QX the for saw consumer impact as any was the the might things interest to of net Great, talk the second the for you that restructuring in result improve of the that thanks. bit might of what you that half about or help that that and year doing - little put interest home through a could and other take? actions balance go bank continue be net as income can I things you margin or it you did

Scott Blackley

the for question. thanks Moshe, Hey

that and preserve around portfolio funding went billion We rest that. our sold so of billion in our that really used that, portion reinvested mortgages $X the into around reduce overall of sale the associated the significant that so investment we right With was with quarter. $XX.X of We’ve requirements. liquidity a to to

dynamics So we that margin already mean we’ve AFS what into all one more book through and if added we’ve gotten loans the securities but balance to on the or so sheet you interest home we the actually maturity them might about out the worked of portfolio. the less of those think of help hand put added net those we that to in

So we pretty fact going in that little do a we given overall see but the a it’s of reinvested be pickup margin the portion. to substantial a terms modest of bit

Moshe Orenbuch

to you that the to in the talking have little payments? bit respect The be the think Rich kind about that investments you lot you importance could Could that respect thanks. follow-up bear to that you and - talked continue with talk area a of partnership about you tools Great, of any technological is payments. how technology with investments a might brought made you’ve

Richard Fairbank

lot partnership really partner a or a franchise. are other very and with has technology build to business. two and sort create looking be build the working custom up capabilities card by business kind - thing our there our partnership within would is that about the I that transformation natural building way can think very to can of happened partners a which one into is on of One are business. a really compatible general bring there’s associated capabilities foundational And with digital particular a tech flexibility who stack are lot hand design technology to the build technology to the Well of of approaches any so

I to So as And can by our and think at go most need technology companies, companies that new and we building. partner about shared we our at that technology of many kind a time. philosophy end path one our around what thing create just the have really a businesses a a of partners day, I’m a are way that opposed the create ride in capabilities that do very in that’s is of what on more help the set path and on we’re path of they struck

should So a be as benefits tech our the ability years better we’ve said one our the investment there. partner that to of out over of be

Jeff Norris

Next question please.

Operator

our question Goldman take Ryan with will from Nash next We Sachs.

Ryan Nash

seen Maybe tailwind. Hey, run business the provision guy. plus rate credit start given to think assuming given range. the look Can the as has the a $X I year-to-date, from are on you plus down we’ve you transition how good that annualized year-over-year on almost to losses business? evening, guys. growth and credit about every next a billion backdrop was in something should math provisioning puts given just so billion transitioned at the we takes that but now and wondering growth consensus the good I billion referred $X.X look If just tough $X in clearly I’ll you math to headwind with which year if I

Scott Blackley

things things there’s a that of is those And about not guy things a of times that that way long being works. said that’s of important very high in way then a accelerate of how charges decline out when the power created that in cost terms So math surge nuance growth as losses and our have for growth vintage retire that about with in earnings on and gradual around dramatic is costs and past of works is of actually is very to all a misses to then course equal. business finally kind the then and I other an we’re all it. over ready there the settle kind There kind joke the the upfront almost last in all math math early growth if kind gradual being other in but year I At think a think as say equal. a good out of gradual growth I

adopted a for of this gradual so turned be why here good of has XXXX surge through language is kind to XXXX guy. And that credit that growth we the

pretty tilt have industry an as period are industry losses to One cetera. of and think rates think guy upward where the Capital as which to and of probably and I growth way credit and think the think losses growth expect the math So the the time. a we the be that I to very other course by and kind credits over to be think But a people’s performance card credit I benign we’ve et long gradually economic competitive respect kind by card cycle, of competitive going is up for of it’s industry about you’ve that, of got the economy. gone reasonable to enjoyed have to the given impacted and good in with then cycle effects outlook is turned seen And pickup

would And overlay card Capital so I with growth the and whatever effect you think basically and about in then math think to in how about industry just how guy to about industry the we outlook. got that good sort fact that’s and our card current the one’s of assumption One of

Ryan Nash

deposit you’re what will deposit and expand about in the and Got for ask if strategically a it for that think changing you business if mix. it on you the you potential the product could talked and just Can one what talk follow-up, overtime? doing mean about you business I

Scott Blackley

a national So we have banking building strategy. talked about years for for really

mix. then talk bit Let me about for just and moment little that just a comment a on

anomalous Capital to So that is institutions our the national biggest in our relative size One Capital do in everything banks that not One they are sense is of really an really the size regional know near are we anywhere though were just you even especially about and quite and that we as institution the a where increases of the think digital the a matters in other I scale, importance and in consumer really we scale, ways. the we’re national really Information in the But business XX% is have so scale banking, scale about scale bank scale in brand direct frankly, local most. operating different a bank of nation customers in XX%.

I is buying think banks. of quest the history while build to of is So history banks banks banking of to the the national other through

a to organically full key We trying in trying lean banking the not suite at bank are metropolitan digital areas for more go building within it of brand a a and by building today in do distribution our going where is with it. go banking to how physical and national works a but basically and digital of products to us capabilities sense forefront

natural for customer think investments a transformation this I our technology leverage and brand. and and One national because digital in is can Capital base our So we national transformation

been out over Capital So for been strategy time this that gradually a One. is playing

to banking call we direct large I National Let money XXX, we local so of couple Capital and relative the seen component mix of market also a our national to expect point, that national what to sense and account me continue strategy banks that now solid this the turn and a think launched the One component. with ago competitive Bank have years in XXX we and the mix our to product the and lean growth we banking into the in

mix see the happening I already will think you inside it One. Capital

the happening in also rates. then with what’s that’s but will capital with point general competitive I a of think the change mix just environment we of more way the course one along have continue the

is will So our a gradual of that that’s National combination thing deposits that of to natural with cost change these rates going is the byproduct growing the and organically our or increasing a to sum up lead fact Bank it mix we the the the are will what a both but and natural very marketplace say of on factors strategy.

Jeff Norris

please. question Next

Operator

our next Sanjay take with KBW. Sakhrani we’ll And from question

Sanjay Sakhrani

on it’s Had portfolio with out discussions else looking Thanks. it of CECL. onerous a with progress onerous anything equal. was there as all going and mission to been a discussions question deals a more asked Had regulators? lot the With get time and obviously this around but ahead CCAR the there, talk more this all and Scott made I you’re guess return on capital in and any past as through onerous

Scott Blackley

for Yeah. question. Sanjay, thanks the

when happened in netter by look driven things. CCAR CCAR was at year-over-year I decrease So primary in three [ph] the the what really in really

itself you just in talked I Reserve’s the not driver. assets an change was prime assets. our also had and so driven that modeling had in thing we an model impact that is by not mentioned that the adjustments the able impact saw of tax you a only those can netter. yes that as kind happened Act a that CCAR. corporate noted the looks more of first had lots some of that know of in component there sense was the the we was the a include that was The and model well NOLs to asset as did auto it what scenario with in caused of of the and deferred Tax incorporate effect CCAR decrease. being and puts were that was that this the include deferred like out that in And primarily overwhelming an significant We and card incorporate in of of Federal which tax your after and impacted really that us increase losses there and modeling effect deferred to our the think modeling we some a about of would decline as it tax so into their mortgage takes biggest was pulling that the that reform the were and sale of of things CCAR severe we’ve done because tax you in we have our in submission we then And the concluded and a that that but significant component gives the that

Sanjay Sakhrani

math side on intermediate just math. to Okay, to additional that the super assume and question alluded tail good then manifests small that credit and term. on short think you to follow-up rate the the going tailwind credit obviously like mix growth forward of an prime. about being metrics? the an of rate improving the a quality, Thanks. to itself charge-off charge-off growth as of that the Is towards it to Will over completely out get now the prime fair had how be Rich, When it you that we is

Richard Fairbank

the about see there for growth improve low there. we the across basis it’s to out quarter. play we enduring the Okay. the actually we that glad subprime starts growth that. across we tail you was bullishness the to was spans and able optimism math, the of the effect in much an going it’s I would But pretty With up the it surge With one mix opportunities the we in as – view actually mean the spectrum surge had good so are think growth. and the other a so level to a of future small slight to that that as that’s clarification growth the what one that that modest I’m modest you growth definitionally really of that what we respect strategies internalize mix, I fairly our the consistency the small growth the being thank surge that the small do spectrum sense change to impact kind That is Cabela’s meant same the mix other tail the is question should the is side will have should respect and to said yes more for earlier, settles not turn got that really as so math now dropped opportunities tail points be at think there. I in several sign be important and we a but in have our asked uptick of credit because all spectrum hundred of math off the moment is related I a charge-offs the any That we on the in guy which look you but out opportunity

CECL how do back So around CECL. they regime a Fed response here this Fed been here. happen capital will impact feedback the might that to there’s from NPR industry what adjusted all the be the see variety of how the may how question we’ve going might submitted I about discussion and and on an to takes come capital just CECL know I a

Jeff Norris

Next question please.

Operator

with our next UBS. question comes from Wasserstrom And Eric

Eric Wasserstrom

may that lending bit but Thanks decreased used the just very much. bank Rich, significant the past one a you have intensity in competitive recently indicated Are player coming the question space, competitive the over players one of the to little conditions seemed math? new seeing and auto that quarters back on any few it in market. exit that with change they’re

Richard Fairbank

me in standing the let I’ve the many in to because who a is the is more see there’s and middle there they business loser card transaction a others formally business that or and hypersensitive there a particular to dealer a has the auto there thing every said kind times, the if whatever even is of the well. when change this underwriting a movement to calibrate more big drive years. as or several just of seeing dealer so try dealers way try are is of just the lender we because aggressive than last auto kind Try to business across Eric, competition

start here an gradually about there. practices over and you’re practices in things and this a pretty had we whole competitors there XXXX, I some that, bunch there and practices there competitive is is were bit think the back there it more thing card but what competitive Scott practices the time of expect but than competition you, quarters a context either is a And I is normal XX, of things a competitive that is to had pulling for part were is cycle look of and still competitive years that to excuse we near know XXXX growth will had of actually quarter so recall let’s that as after competitive we not clear supply that saw of from kind and a should back me, some about then are we again this was significant timing respect supply But concerned expect of competitive and started but started it very we this But that in important along asking. things our only It’s of sometime things going and along increasing of we of the into we’re with ago, return well recession competitive of we that still way origination a that sort the but you opportunities me was moving little practices wake from a it see then player I and were significantly that pulling the of life I would partly the said, think good but situation. was it enjoyed another frequency alarm intensity the that all we more so window usual we the related around XXXX the once way What get time the the the for seeing even describe the I thing. the competitive Jeff. couple half, is returning returning years good this. still about much this that middle of saw so year a I this We issue we is Years is not a would competitive period in significant before we sort or bit to couple a A good flagging, thank cycle more move of anomaly that and the call with XXXX question of to players as be less the decrease help this volume practices. do. growth fans and things direction pretty that see to to is more think of raised now the bells opportunity a we expectation competition moving. became we the opportunities in which more auto will it we middle saw great little XX some maybe environment to retreat a sometime So it’s business competitive economic in cycle there were in business of with that more we around be saw last of we XXXX competitive

Eric Wasserstrom

understand it that sort seems the do if be that level you. mix Thank rate seems just deposit Is run and And from of current of just that that one growth may here, NIM, the I but I biased to level X.X is it on quick card of continues asset to the like follow-up characterization? Scott the phenomenon fair or funding given downside. a this beta

Scott Blackley

I to think things are all kind through that you’ve running unpack the of that now. got

see in back by and going quarter sale impact pattern cost on of said change. the shouldn’t Porsche prior but the additional that QX continue this that talking follow rates quarter the we movement you that’s associated us about to then in a were of from talked a PPR while the we’re talking there a really and the to drop and tax, my then was continue lot some factors, of of of seasonal and been down the if in wouldn’t to half a of is we do effectively for a was offset three kind First decline that that rates wouldn’t we’ve count. then with a respect you seasonal so that seen a payments of about some of of for type which was I really forwards, thought little contour carried in back other a points And neutral historically implied we against the looking on only And climb headwind. also timing I that’s the day mortgage quarterly a will all, rates with the had the be deposits and UK about expect then kind there cash half think NIM we and because obviously accelerating of come one impact that’s the bit new that in quarter, of reserve, I what

be cost but kind you looks to there’s what here. So also the to think the headwind that’s through in continuing when that way on the kind sheet a we’ll you is from terms I about so and that deposits kind one of and thing puts your going should they really that work of to takes where see we going factor him is be the think in ultimately mix business recipe balance describe the of going like would

Jeff Norris

Next question please.

Operator

next question And we’ll with Wells Fargo. Donald our take from Fandetti

Donald Fandetti

and number Rich. bit label little private changes made any area more Two part Hi, complex. question. two in that you a have then One, executive

with there’s they alternatively so do they cetera or need hundred private site could because you and you the a touch be as look let’s sometimes a just tougher high how term is CECL can it et you more that do very execution lower lastly a of at tend the considering parts you’d where people skew be the label and business of your return say how tend look risk at you If cards label you sort over retailer arguably so scale is that obviously pretty type at well? to of longer doing a credit to thing good do and purpose and about deal you private on large other doing fact have on competitive talk weigh more cards general pricing

Richard Fairbank

we partnership partnership business natural so the in often and a sibling and card it’s very business. the think the to I business about talked branded a So having

only to be is purpose of a and out they’re just can where into general have more in one just a really there everything out private to whole thing the just we’re our we we to own opportunities partner than significant opportunities sales very with business label going like relationships win which to customer as to partners also card lean number or build of because harder credit the but the synergy generally with tended well. We store of programs doing sales partner can get leveraging increase not out

of I of that and sibling cards the advantages purpose one label. time. in why private exist businesses them opportunity we some But part over all we next that’s both at a we’re general have right it’s think the what So evaluate structural to do

Donald Fandetti

Okay. I come. And they to don’t were able know if

Okay.

talk If that? to about staffing comment you maybe really can’t you on changes any were able or

Richard Fairbank

talk staffing call. on don’t We about issues

Jeff Norris

Next question please.

Operator

And Richard our from Morgan. comes Shane JP with next question

Richard Shane

question. And you taking related I for really Thanks I Hey, a want essentially if sense the in give $XX true talked implications going to of about something Scott, vendor that any million obviously mean could that guys. can’t us But vendor. a relationship on business nature terms up you that forward? of my of mentioned. to Scott expense follow-up the in

Scott Blackley

Yeah, for Rick. the Thanks question.

outer resulted for of had of the a we size imagine some a quarter large the we vendor adjustments arrangement company a some that release that in to can and during of have number so the You accruals. we relationships negotiation our concluded and

where card put that that our And as so so that’s mentioned you hit a they to came that. thing and and know segment we went onetime

Richard Shane

if perhaps or to storing related I’m it’s Got in particular? it. credit curious reporting

Scott Blackley

something Well. I’m that’s makes that you not continue specific to have let areas to obviously think gas because sense or I’m going to us. for to – not comment going on vendors I that

Jeff Norris

please. question Next

Operator

from Napoli Robert with And question we’ll our take Blair. next William

Robert Napoli

all slightly in health the are a on more growth it I muttered conservative your the is we be at a just you spending consumer seeing spend Are the I appreciate would think with where deceleration that across deceleration. the or economic interesting? cycle views industry any the and views of on your it. is your to from you. slight be in Thank Rich, consumer perspective

Richard Fairbank

Yeah.

cuts the home I over but cuts take tax I the and benefiting strong through tax by will companies. way taxpayers for their on tax benefit business consumers and both are pay certainly some of think and wage pulling investment corporate increases make think course had looks hiring way growth, short think cuts. through large term job increasingly And have the I economy up from and

stimulate. that of that Now, sort things so is of all all just

growth we've some debt is we’ve and I in think revolving debt which intensity growth over growth competitive consumer that impact lending watching growth non-mortgage debt that although a beyond is X.X%. been lending things time down growing it’s that’s installment [ph], and been and recently bit seen the pullback auto X.X%, but still it’s at like a most also closely of that growth down so at the credit of lending bit

total is So growing. what clear consumers is is that the indebtedness of

to you’ve as there up near the issues term So of near the that like indebtedness trade term big got sort sort in addition aligning at in on the good government of pulling are on. issues beyond going just it of we longer are term that consumer that look of a way deficits, growing over demographic and think sort I the gradual shifts planets of the number a economy sort beyond that

how probably benign for that elements for been last economy the number is by structural with in this and We So view is but because what since operate we are things recession. structural a the toward think embrace I which the it should it understand a the long mistake direction. other for it’s that heading of levels that record operate not way

Robert Napoli

in there mean spend the maybe? guess are seeing, that mean be seeing then trends it’s deceleration a shift you to there do to any spend? the mean change seem I you of the with And like a hard on I I any Easter slight have slight Is are but I

Richard Fairbank

One bit quite the development going that of but behavior our cautious think I specific all of our we on of probably more is Capital consumer the that sort business consumers side term as spending consumers decision. note would of near be lately we on make we should and We going I there that things on are no spending growth would I a and result think had

Jeff Norris

question please. Next

Operator

And Morgan. we’ll take with JP our Wharton next Steven question from

Steven Wharton

on time NIM. Good just more evening. follow-up wanted I to one the

for the revenue Does impacted said XQ that? also you of in the impact you away I the would and that the then that reserve happened, sequentially of decline that you go But much that portion how that do mentioned expect UK understand. PPI the seasonality also which So contra the NIM.

Scott Blackley

Yeah.

a of basis revenue point revenue was comes sized So you as of a reduction so some roughly the or it way that X and return that it has revenue the book and will of UK contra range. just actually quarter which PPI in the impact in works

Steven Wharton

of then And you’d also the reinvested the you then mortgages themselves mentioned said you securities. of but sale proceeds the

much be that’s going security run to from So NIM imply pretty that to Is from and in there’s the sequentially the rate. here? change is impacted sequentially thing not the then the mortgage that whole a to that

Scott Blackley

That’s correct.

during And same to another and the putting about work that we which some quarter either. it UK was was cash PPI did we again as as the work NIM so to size the drag through roughly hold higher

Jeff Norris

Next please. question

Operator

And we’ll Betsy take Graseck Stanley. our next with from question Morgan

Betsy Graseck

evening. Hi, good

that in you’re consider the indicated had for capital at obviously was a finalized CCAR for a return where later before mortgage you submission sale Would XX% capital and on so creating you’re for up either now that or question minims been your that capital this you be need de top year? First to with request earnings. you going

Scott Blackley

us Well Betsy would are just to done as the we those are in we’ve and that is certainly available what say past. options I

we’ll really capital us be for of to that’s that’s value to whether looking capitalizing our shareholders of the to that be so We’re a deploy to shareholders all way have our options our drive options all that definitely we distributed forward. growth we look going we’ll at and at important for levers going all recognize

Betsy Graseck

obviously the having try the we verses quarter. was that own then a How Okay. your economy fallen economy drift your the given increasing in you a actions earlier Rich customers mentioned the the to new does just there? here cycle Thanks invest customer’s that above and originating more get obviously improvement that in of that much subprime in positive going question you to Thanks. loans is side or give you the are you Can forward some part of color your in are that room we XXX. that be other to then and likely strong it

Richard Fairbank

wouldn’t I time too been third. would don’t looked much the a with mix That subprime but on at operate a that be precise I short striking target, that over one that. we doubt very I I it have big place could is I if many factor around that Yeah wouldn’t would drift we specifically for any haven’t period years how of

put most all end on it probably is of the impact and whether environment of the it number was I nature it’s us have I XX% or mix way would together opportunities to the we our competitive see and a much is results Capital that think importantly the pretty the what for opportunity we’ve the if different quarters. watch Obviously we So get of lower XX%, main modest thing to of much tables the the in and number normal. is this on that posting the is calibrate I is think pursuit always my spend point vintages that mean just consumer One the done of been league the but what than all don’t and some numbers nature the tests to we of

part and spectrum and opportunity but the some look some think market. choices really as very talked that. probably just at that lower off of from like was is the to variety it of a the term reasons For pulling opportunity across in that of increased see edges the we of on across is base top the way the all of we’ve we things I around about if the opportunity

Jeff Norris

Next question please.

Operator

Donat our from question comes next Sandler with O’Neil. Christopher And

Christopher Donat

taking for my thanks Hi, question.

vehicles one your because the it prospect about what is this auto at business used wanted of on of Just imported lending the wondering mix your of to business the of I’m and of with just tariffs ask point? new side percentage

Richard Fairbank

don’t that have that give Chris, not we we out number.

the captive lenders, relative for toward captive, do not have side can big to number out our auto we auto of is finance a of volumes very partnership a there that some certainly However, with mix a a new partnership loans. banks lead because of to more the significant use

the more used but mix toward marketplace, So that is part side. overall of US to marketplace more business shifted vented of the car we’re taking relative the that non-sub exists the big the in really

exposure your some probably respect might. particular have than with point, to others less So we

Christopher Donat

for me. me Helped the helpful understand That’s risk. Okay.

Richard Fairbank

Yeah.

Jeff Norris

question please. Next

Operator

question Brendler final And Buckingham from our with Chris Research. tonight comes

Chris Brendler

US by it’s how rewards I wanted excuse evening. still me how Hi. and ask Can intensity Thanks, double good especially credit and environment the the business Rich card little your bit, of card business US among Thanks. pretty the growth just digits. success interchange a and comment numbers you you feel at growth competitive to lagged all solid and spending on Thanks, low your about about consumer the affecting there? actors trends but

Richard Fairbank

business. this Yeah, say the products let’s same to it was call months in a not just sort time the most kind at let’s competitive levels Chris. very business say really a years banks the And spender time and the long that rewards ago last of period. also the two And been thing the competition five Co-brand for up reward but The of heavy rewards step for thing marketing over XX the also offerings. in years competition time. are the of think is competitive in for it’s the But intense I very notable talk

they recently to an are be although that high real stable be seemed I it the intense Upfront and to aggressive continues to continue more to of a all stabilize have intense ago. of went over year would think level. also they I at describe bonuses as down

products marketing this this a really is business from servicing small I players there high of has to of brand are I of to there committed committed to digital who build more order think time this the a the equities and than sustain there’s to description a number required needs fit to where is to throwing think So a and think I level that the lot one out else. everything would in be is to succeed over in takes company levels and levels what business there it to this investments and same

very teeth be on competitive been longer of really very and years opportunity good resilient but over quite franchise seen the many fairly opportunities to term profitable into this can and business. posting it franchise the of the years stable grow for of one which and think have building. marketplace for that be cornerstone a We build we numbers we are and that growth a a you’ve believe continues all So this kind I good business see many in to to positive we brand be continuing very a capital

Chris Brendler

some actually power the from aggressive now that market some gain I share getting and share without benefit, brand you think is gains you’re brand investing that decades your be You think actually helping in market would or as brand. rewards of for even this

Richard Fairbank

I don’t over thing. just think win and too game just a this so the place. very by product offerings it’s a can offerings this company brands a important product for of easy now part people match bank more to this there’s all think much think great product I I don’t offerings, there’s

the amount it’s leaned seen and in post and for organic focus priority it’s all about years think literally really a about growth this through been of investment business consistency in and brand I strategy that and we’re overtime. it’s able all and numbers point I leave comprehensive with we’ve all down pretty key business into I in tremendous customer for whole the growth franchise a this and in experience we’ve we and would think the with kinds So our competitive all about a the and been think you’ve of bunch the have I you numbers some of up marketplace optimistic to prospects is

Jeff Norris

call have. evening. us may this any and interest questions a the here answer for continuing relations Thanks team today for evening you in your Capital for will us. One. joining Have great The conference Investor to you Thank you further on joining thank be

Operator

your today's for participation. you conclude does that And Thank conference.

You may now disconnect.

Capital One Financial (COF) 19 Jul 182018 Q2 Earnings call transcript