COF - Earnings call transcript Q1 2019 | Capital One Financial Corporation

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Operator

Welcome to the Capital One First Quarter 2019 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. first 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

access To any and note first and Richard with forward-looking release press With presentation in our accessible earnings website One's me discussion information may factors, click in results. presentation. filed the please these Quarterly Scott the the to of we've of Fairbank, information, addition Reports One's events website, in on actual and press as for and Officer. as XXXX could Investors and Information results or One's materials see Factors on indicated described or and today's revise dates in materially titled to financial the Capital does financials, materials. Chief of contain Officer; our through those any included Rich at more will then Capital performance particular forward-looking or One are that quarter any otherwise. statements. Mr. Chief section release, Forward-looking this forward-looking SEC. date a Blackley, One and Numerous only of this not Capital statements. In result and update from Quarterly future release this presentation presentation regarding Please Information And in Mr. the the and please Annual walk a the a the click undertake Capital section Chairman speak new cause the Capital statements information, obligation whether presentation Risk factors to to summarizing differ Release. One's Executive copy our go Financial today in you Capital on contained the Earnings Scott

Blackley. Mr. call I'll over Now, Scott? to the turn

Scott Blackley

Thanks, larger On Provision allowance cost a QX increased flat. by XX%, flat our by the charge-offs there business. Compared an in provision by relatively changes offset build spending. partnership. than financial adjusting XX% allowance largely of X.X credit quarter. quarter Revenue billion Slide per earnings basis X. quarter. from Capital remained the auto Walmart prior a items on impacts the seasonal partially the expense X% spend Slide card offsetting The of 'XX per prior in billion. XX with year-over-year, higher earned and as by linked Pre-provision integration X.X the modestly were of a and Charge-offs lower was Jeff. first marketing in basis basis driven outlines X%, of Relative adjusting I'll X% XX with ago. GAAP a higher this operating linked year-over-year Net build year, items down $X.XX. One domestic in was $X.XX earnings or our expenses item. X% QX to was year associated only a businesses. on in driven of card in were were costs launch seasonal had were X% we billion higher a higher non-interest increased as by the lack domestic adjusting begin to the losses quarter a quarter our to tonight expense quarter, million increased share and than X% was quarter non-interest for share by X.X in driven

specific business XX our establishment credits in increased by to to growth. a reserves me quarterly a of detailed our earnings Reserves million, Table Let allowance in our related are the across in commercial take explain by businesses, few movements of the moment which X and supplement. loan driven

driven build build card. million, XX XX was of in a in offset increase there our a card, and In allowance partially international domestic auto our business. mix business, an saw by of by release consumer business driven a million cards credit in small portfolio growth Our by

X, XXX interest to down was X strong increase growth Slide X.XX%, deposit year-over-year. net costs, our drove margin decrease points interest products in Capital in year-over-year deposit basis of driver The average in our was Turning key the an which Ones net the margin.

seasonality. also to normal be margin by net interest expect to was factors. throughout around decline to half I about points deposit NIM seasonal of QX year cost QX XXXX. a QX from want We basis declined to attributable a and XX that NIM to headwind Recall, reminder provide to last continue the

X X, Slide XX.X%. III to standardized Turning Basel a capital our is Tier on common ratio equity basis

to around continue be need CETX. view to our XX% capital We

how We could CCAR will are which a impact eye need. close stress on future keeping view of our impact our CECL testing, capital

an course, believe have support the We later XXXX impact January X, CECL regulatory to adopting power Walmart earnings as of XXXX distribution meaningfully which growth. acquisition continue a capital and than as to is request subject in to higher CCAR this year that we of well sufficient portfolio XXXX, capital on phased The is approval.

the one turn Rich, at for around update Adjusting XXX to this now we a moment $X take the me of you call on allowance portfolio expect billion We acquired our be day range will the be partnership. build to portfolio size, Before, let the low million. now closing. expect in Walmart I

course, the performance on actual and program one now build Of close. depend the the day between and balances acquired will allowance

overall card and XXX expect business. inclusive Rich. our return with And line continue watch we credit domestic that turn integrate will incur that new to call with and costs the Walmart I'll of in the one-time that, XXXX, to resilience We partnership in to acquired have originations program to will over expenses those the in million the portfolio,

Richard Fairbank

evening. Thank our you, credit Scott, summarizes X and for business. first results good card quarter Slide

Average X% higher domestic quarter results is are partially Slide expense. up First In quarter which of the losses of trends about XX loans performance to points first the up or X% Non-interest compared by volume up by quarter non-interest to growth. ramp quarter. lower X% prior non-interest first marketing. as last higher ending XXXX, card grew driven basis credit the up was the increased positive year, offset later expense the impact X. year. segment and on of loan Operating as the this revenue began increased shown increased smooth prior for business, domestic compared capabilities from driver growth were year. to quarter. from conversion $X.X for largely operational by we and the the the of to first pretax Walmart income X% about balances Credit larger was about increased a margin purchase for quarter, Revenue growth card The provision X%. expenses year were card expense was of billion and loan Revenue XX.XX% driven our and launch

brand. and be from balances They low Great be very to are very For digital that end years, story. Heavy have. pay interchange highest of capabilities heavy a we spenders at with tells loan trusted with great can't revolving, line and with leading have the occasional revenue, earned marketplace, have low the customer marketing then worked tirelessly build bottom bought experience, to the but exceptional a the products and long-term to exceptionally spenders. to attrition. marketing. off valuable get, on just charge-offs strong They hard franchise annuities are They

originations last heavy seeing our levels accelerating traction card record the quarters. spender domestic over to spenders, have growth Led Account are two by purchase was grown franchise. We volume X.X% growing heavy XX% year was the of first by aided prior XXXX. growth rewards adjustment. if the fewer favorable quarter from processing quarter or Net for liability interchange normalized two XX.X%, days in a

line in we've with Notably, that, been our growth without spender purchase Excluding revenue interchange margin. franchise volume to was grow able net growth. sacrificing

banking quarter, the results X% Auto year strong and card card credit and intensity XXXX results in loan stable sale up from be were mix year-over-year, to In of not XXXX. marketplace has business. a in the exclude loans average quarter the be quarter the banking first to the continues Capital continued auto the quarter, the off XX% cautious to branded in business was was picking for originations Slide consumer quarter. card growth partnerships. point X.X% with excuse Domestic in branded X.XX%, originations overall bank even in prior XXXX. our me, strategy, experience, all card quarter with higher Ending towards up the year-over-year. Branded our home some growth average label our shift rate loans during was The driver results delivered surge booked for digital line. loans gain the and X% first in by easy XX also cobranded Loan compared and increase as guy. on our auto Both first credit credit the -- increased We're the with in the improvement overall domestic prior rates to competitive rational in domestic continue down versus be products. on driven deposit math a our growth Strong shrinkage rate. Pulling quarter. growth declined card of national Growth quarter banking powered loans points growth XX decreased loans card account growth relatively our down to XX% continued deposits product consumer banking XXXX, XXXX improve basis performance year-over-year good by year ending grew in business momentum. heavy was charge-off. in in X% performance summarizes were One loans including award-winning card charge up, year-over-year. products, Our offset about by and mobile we in decelerated in the domestic loan Ending out deposit growth and rollout Credit a just drove XX as XXX private of and a our driving in first quarter, is been strongest the and deposit competition first basis year-over-year making interest the portfolio cards. is spenders. cards

Over change competition rates the product the deposit past increasing put pressure interest on rates. rising mix, upward in have and year,

Non-interest ahead, loans product for quarter. portfolio charge-off flat values deposits faster flat credit. further was from in first mix. support by Consumer interest to essentially compared compared retail prior sale. auto higher the strong a the year rate the Better banking to quarter allowance of and essentially was quarter, Looking of XXXX. revenue year expected loans change auto auction The to improved last average rate, the partially the from deposits expect had than in the rate about first Provision to quarter. first build from losses in deposit we X% our the continues was revenue as prior increases offset reduction we credit in year. increased home growth continue expense Growth also and modestly modest auto quarter

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

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

First up with Growth X% prior X% Linked quarter Commercial loan more ending growth balances up was ending XX%. bank from year. X% X%. loans up down loans about quarter and deposits loans about average ending were year-over-year. in were modest the average was

deposits commercial of in environment. yielding rising year, out customers deposits and rotated past into the higher rate Over have interest investments the

lending was net technology lower because related from a we release. in First credit charge-off and The of establishment allowance the average a quarter, down higher was conditions Pulling and Provision less The year, market posted non-banks to to and our by The to deposit year our XXXX all invest balances. posted non-interest the in the increased. performance as In driven lower quarter our marketplace. by average The quarter bank to by quarter X% rate performing from choices. driven allowance an terms the year grow rate disciplined pre-provision the prior an specific essentially credit compared quarter, X.XX%. X.X%. first XXXX, flat. increasing to keeping credit in few prior drive loan was earnings for to strong. the losses credit share to margins. and other credits. up, underwriting performance large was build initiatives. from commercial of up reserves was criticized per offset increased on continue revenue when remains the was quarter Non-interest for We're drive quarter the of for criticized expense first business compared quarter, first This benefit rate actually X% staying loan benefit loan and for business loan balances and results favorable of we a the eye commercial continues Compared growth One watchful competition in of unusually X.X% was to we loan revenue continued to banking we commercial the and of post transformation. Provision earnings the expense, first quarter, origination losses revenue, digital solid Capital as non-performing invest

from elevated but was level marketing expense the to prior quarter, the fourth year quarter. quarter up declined in First unusually the compared

are revenue. post investments without industry in creating business, new interchange heavy our marketing great customer year-over-year our growth growth franchise Our spenders and strong marketing our building is banking card and domestic strengthening advertising, In to accounts, compelling strong our and volume purchase In value. our net and momentum brand the business, digital us being experience price enabled deposit national leader. retail consumer driving

of always Turning XXXX, opportunities as depend assessment to in the marketplace. marketing our competitive will on continuous

year. expected our on envision look we in longer In aspects financial When on seasonal transformation momentum context full year works I'd to up the the we banking, banking higher patterns have, our are impact and digital is the With with technology performance. we lives. the to of tonight, how with we banks provide how try future patterns or modestly don't pull key year of marketing start and expect to XXXX our changing doing. than exaggerated at We be like than to closing what term normal we other we have more some last for full saw XXXX,

of machine company you the that? banking, the the Consumers will instead at it. for day. and are will uses aren't on destination. look banks built stack, to challenge necessitate to it. headed Tech all modern in What they Capital to same data learning a capabilities. One of use is of deliver demand is is applications technology What Just companies with common you. is Banking technology bank those the that competition technology. provide built at time. Technology real you doing and The powers does that them What customized a we're building just technology solutions instant every that power leveraging big is

One. transformation Our XX-year our journey shoulders the Capital stands built in everything at of on we have

While we company changed to declared the striking was our is the has that build that the didn't cry is same we we world use years build so were at tech that battle realized needed infrastructure that capabilities that cry that It the again ground from term we reason six sweepingly company does The ago yet and much original of fin-tech. banking. back our the new we up. battle in to then founding the

technology six transformation. now are We years into this latest

Our progress scale thousands We've engineering engineers hired the of organization. is and built accelerating.

We We data to our have deeply product software. embedded power harness and We micro deploy and scientists deliver APIs designers, the highly into managers business. work in services and flexible agile. of

We are our have migrating and way data cloud. cloud the and well embraced to our the to on public applications

the world. now considered are forward in of cloud one the most We companies

products, motivated by experience, is effective Faster transformation technology better risk management, customer better market, many beyond better more things more operations, growth. Our cost. the

our will to are leverage. be began, Since have journey benefits significant productivity as seeing improved our operating transformation. important already invest of Digital efficiency beneficiary ratio points, even business. has our by an we gains basis are Company. We continued the in XXX across driving the But economics operating

with We are foot in in one one work the complete center we journey. cloud our environment the legacy cloud as operating today data foot to and

until an As the those our time costs we we and to increasing centers. same and our percentage applications the will exit at data fully migrate all have we data of cloud,

well. as significant the bear legacy cost also We

improvements XXXX, operating to we which expect opportunities continue centers XXXX. the straddling and environments. cost our We for end complete both even with should improvement efficiency then, of cost Until beginning the elevated to will efficiency by data the exit significant drive in of of generate

full-year Adjusting integration in modest items one-time and include both in launch ratio, We XXXX operating of Walmart efficiency XXXX. net expect achieve XXXX and adjustments in expense. improvements to

one technology efficiency expect We to we ratio. technology efficiency adjustments operating to the and significant improvements of continuing by our Net benefits total in efficiency The innovation to data year in full will many enjoy improve and our XXXX are transformation. this drive expect exit in of we powered ratio by improvement but well. Walmart, operating XX% from XXXX, improvement as centers, efficiency of

marketplace a create changing in well long-term value. and shareholder positioned rapidly are to We succeed

Now, and be answer happy I to Scott your questions. would

Jeff Norris

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

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

any Q&A the have will after Q&A. you available be after the session, call. investor questions follow-up let's If team the the start relations Leanne,

Operator

Thank you. [Operator from Instructions] Wasserstrom Our Eric first question with comes UBS.

Eric Wasserstrom

lines that keeping the acquiring there just low future the still on is follow commentary, accounts environment, the to you you quarter marketing any approach? strategy? are signaled some that that Is to Or last but date. flexibility potential in change Rich, up in but would increase to on anticipation lines in of credit at give maybe focusing you the change a you,

Richard Fairbank

Eric, we online. are cautious being

to Let me more we how with in extensions And It increasing tell augurs works. validation before the recent this over well we are seeing you want extending month, of for line time. fact, line. vintages, that means that about and performance more see validation more passing in every

Eric Wasserstrom

on We've subpopulations deteriorating data weakening Great, cohorts. and follow evidence is where asset income broadly, Are particular anything than some in kind median any that maybe are you Or quality? just there that. credit some information to seeing of that? of just mid-FICO to you more up modestly like of points in seen seeing better

Richard Fairbank

performance given seen I origination but is really the we Eric, this, a isn't for just how One can And given we're hypothesized of some for the hypothesis we derogatory is, this that data sort thing the over have the say this derogatory thing sort that the few has for the been that great seen off. lookout a all in the industry This rolling growth. even FICO see from but way to a, stays data let Capital long at that it fact consumers isn't thing. well, me it a is noticed is This of hindsight credit looking we of on our of with kind on now modest of the last important benefit we've and effect, recession of note reason it degradation think the we bureaus, an years bureau data.

we our are not full And looking has a data conservatism for sort do been our so, own one the be and picture of credit been, that paying consumers history. for at of might has hypothesis reasons of may

that. for on So, the we've lookout been

score. seen have FICO the effect hypothesis We a effects. by certain for the different have people Different did

what credit models we of of we that we, beyond snapshot built terms far score. of bureau are a do comprehensive in sort just Now,

And so same the for I validation time our our information performance period caution our not credit deeply the is information this the was point. but of has recent of with we they only comments as there that the are sort respect the they bureau performance, on indicative earlier context of think increases credit comfortable about with that we need feel to very of making decisions. us more when good been line values, FICO, in to about part some But of fact, vintages make once consumers a careful how we and be of are our also less than all my

Operator

our Sakhrani with Sanjay from will next And question take KBW.

Sanjay Sakhrani

the the be centers. Appreciate that? the from moving could And to to the and you the in on expansion cloud then sort on because greater that competitive migration of leverage there? address than cloud color can it two XX% you maybe you from I talk an questions you there on more is got the off assume that's normal functionality One, what in that about advantage XXXX, just could the closing cost future Scott that. have secondly, Rich, the guess it fair gives data reductions and

Richard Fairbank

are I benefits, for to and costs there talked really the about going ironically benefits of years top are think the many and cloud of So, the the not we've at the list.

much and along we greater ability it hypothesis environment is of provision. that, and Our, to is the benefit software what going faster. and and are that, as we The well. also ability innovation in way A basically there tap security that things faster. segment kind scalability scale world's to benefits to the up that in and on is much takes in economic demand, on are finding hardware the to The down the And reliability. is

the companies, cloud? compelling there earth issue you know really big going of is, pretty American issue from they benefits The we news is for decades So, issue is it That's is is of are, journey. to that decades that culture to heritage from the bigger announcing requires that faced is in of works, it's the are the G know And completion on the corporations The tech sense. terms we infrastructure, completion you and a of our how paper therefore, lot confronting line the -- there One Company we're of that, transformation the who way going not and the question get Capital here? case. and that big are most the not in on And a all entire to talent, the big of journey. for sight the have

world is We they to respect a you always have you tech XX% because be arrive milestone will the to them when be of technology way to they to said but confront want probably question in view. really decide as of companies but a that their own With that's it's And again are a they a it's expand. this explain point is going important Capital very of American up when at just One what will journey. what from to really destination, your story each grow that know, one, transformation in for in

Sanjay Sakhrani

Yes, off you're I you that cloud as because not data are intensive. center to physical ability guess, the is moving there and more XX% leverage

Richard Fairbank

and I being are the run of out of on reflected very think No, fully number. XX straddle in year the cloud rate the benefit getting full the

there getting said, digital to centers the data accrue comprehensively environment two. into out With the of I in the over of terms and company, being benefits the that number in the can respect benefit reflects not think one transform of basically, a and think from have of the the, business. we I time we full economics more always the more

One one digital drive, our to is journey drive longer of should going continue that one of the company we to the manifest which our to you economics think to to many I know Capital I benefits drive continue and where continue and is be digital themselves. customers cited to

Operator

we'll And Wells Fargo. with Fandetti question take Don from our next

Don Fandetti

mentioned return the would a capital you where of targeted XXXX. meaningfully sort can dividends, if you'd terms you buybacks, that target in little be that higher Scott, better that Can in of elaborate priorities, ratio on your payout quantify and bit maybe might go?

Scott Blackley

Yes, question. Don, We're out QX easy thanks closing the one. XX.X% for the at around

a recall, we're So, where position capital that XXXX above our and you repurchase would going we've need because may our CCAR expect already capital as QX, program. completed accrete in we're' I we're share to XX% in more

then So, that. made get you taking a just of that going going be we feel release, position I to ahead talking give good we I'm to but our is all to we're this not looking first fed would the have some in We in able year before the of just that not want plan. than power we're I'm the to things reiterate general good going I'll point. details are phase I'm fed and to organic I in going in last about position. those capital a going today, at capital a approval and capital. points, distributing points. I growth really And on a so CCAR distribution, I believe got you acquisition. -- to our were more going pretty had our XXXX, of Walmart which we in the we I not coming the my in earnings say to what comment be more fund need any distribution CECL XXXX that higher have to of support position to plan. at quite don’t fund on know, new get to CCAR capital to and

Don Fandetti

talk Can it Lastly, up like rate each little creeping you sort about delinquency your forward? domestic is bit going basis, a a on month. year-over-year a cards expectations little looks of the

Scott Blackley

so, -- let with our Yes, losses. Don, me credit our start

the some a X% year-over-year you basis, idiosyncratic of are than delinquencies drivers are higher as There losses about were on Our our increase. point out still quarter. improving while year-ago that

For delinquency align metrics points, of practices we comparison the percentage loss year-over-year recognition This One to by back a XXXX. but only to Capital in change interestingly. October slight effect with it few for a example, impacts credit Cabela's portfolio our timing had the overall

some including quarter delays also credit metrics government contribute First in may time payments, have our year. some to seasonal shutdowns, tax movements from refund effects to of the which this

So, been dominant growth math I some Pulling much quarter. this unique dynamics our in wouldn't read into of slightly delinquencies time. noisy up have the too credit driver our performance for

First, losses and down and guy. growth good then be to up driving our a credit continues math

by growth Of the also impacted The cycle course, our other competitive credit economy. is our choices and industry effects.

terms So, we of performance industry normalization would current overtime. in a little expect overall

couple growth guy continue drivers direction. credit, in a be of math likely have that will we offsetting industry and will normalization good going fall So, to current of forward, a the other will that

Operator

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

Ryan Nash

expenses XX% in and that efficiency the revenues. has of target, the Rich, mean, on two terms equation sides to I clearly

So, points given XXX better an basis to then ratio of below is, how expecting component And that efficiency. and the over us efficiency time? I it that the that can at looking XXX we'll Is between cost as maybe today? say be marketing revenue historically XX% somewhere environment given of guess, could safe and what secondly, just big or size up you're end of that to for fact you worse being the relative different

Richard Fairbank

don't. business, and point thing one know XX, we our do all estimates. to to revenue. have our they're going we think only metric not is Ryan, in experienced way you respect So, the we about The this I that to point What particular a doing always investors bad with be know estimates exactly Point by this. create estimates, like try mean, can we in

is, if So I'm did that way of think different That thinking if coming you our and And what combination our the in operating associated metric know, drive XXXX, the efficiency. digital revenue productivity what is of is, good guys kind really drive of we how years. couple will through, of this outcomes. with outcomes the a general of general guidance been you of in of what, we and that costs last was through of to the growth know it continuing over we've on the take away calling go are different improvement side, sort gain giving in story the gradual you cost our revenue guidance, you revenue

on come good that year align few top point happen guys around primary we're of we that end that gradual other the from on improvement specific centers out which by will the savings of here in should beginning all revenue of full And is side. to pointing XXXX. We're drive the the do the are making we those course So, cost a the and a is things our what good XXXX, significant guys XXXX. exit data of think themselves

specific, XXXX revenue technology efficiency Some that gains, because structure around and Walmart align of enable share then And the deal that the some line the benefits and is lines innovation things of thereafter, some sharing deal. over the around steps also several coincidence we, the it with so will revenue partnership, of our that kind then sharing Walmart now the a of full of recall, from XXXX. in first as the you where there's sort year up revenue to less themselves up

the for we that lot oven, to we we planets give a are know they I efficiency see you character behind and in works, where baking do of where will that, several up in just you way well, metrics would operating align drives -- something such specific pull don't all it's know the that are that to sometimes question, go use number really where I Capital if word things lot and the a time. of of your think that Ryan. One a little future. the are things in years out the to So, over be able context out But we a the revenue know, the

Jeff Norris

question. Next

Richard Fairbank

Oh, he marketing the asked the question side. on

going when to the years by marketing number bit the think to ourselves contact the point other out I'm it's the efficiency efficiency the specific And really find efficiency this get drive total will of a significant a great that I well. in that's expect -- was with improvement is as XX, to respect ratio but several very is course not were not to that to we that giving operating generate significant XXXX business not in by thing driven that guide improvement we our improvements ratio ourselves So, a opportunity we're future, we and in there. because that overtime and total

Operator

with our question will next Chris And take from Brendler Buckingham.

Chris Brendler

out card business, on non-net income big deal So, out ticked had just you looks XX%, a acceleration nice a business subprime related, anything really card quarter up up like the bit, interest call make I And with at mix to of on this if it. it question then not there. tiny

know Just it's on if want to underwriting is more there decision or a macros side? the

Scott Blackley

update of about then any patterns our updates in liability. our some redemption $XX couple terms rewards the quarter, Yes, consumer on our estimate is And conditions. of an of changes card cost That one and context we Every million always adjustment A was to mentioned and just that happen things rewards. Scott. there, so of this Chris, that terms there. had in considers so honoring we that estimates Rich, interchange, and

sometimes it's see a quarter adjustment an usually some we decrease. here level So, increase, every or it's sometimes

quarter the $XX was least. million, This

Chris Brendler

fee the then Is that there, down it service still? coming is side, a decision? conscious bit on quite And

Scott Blackley

a or as a subscale well. ticket we a item of a basis, On 'XX. year-over-year few And were have benefits the ongoing an things there, QX on number couple impact that few exited then line the there one-time on basis, service businesses that a one, fees, small things; in

number, of know, is in most number. I the that XXXX that not in the but QX XXXX you think So

would I quarter. charge the that service income So, say for XXX of million QX clean pretty is a fee and

Richard Fairbank

to lightly sort over these respect asset there's subprime is rounding with quarter is line of our Chris, our of mix flat and XX% of up so or always quarter year-over-year line integers. in numbers in these seasonal plus with one portfolio all are third, minus. mix subprime with historical and trends It mix, around

takeaway to mix. is I So, of a that with there's not should think the news respect the really you have subprime lot

Operator

our Shane JP from with we'll take Rick Morgan. question And next

Rick Shane

talking growth. when think about impulsively account Rich, I you're

between heavy and bifurcating You're revolvers. traditional spenders

to thinking you'd to terms Our when do in spenders at of you that's the have that traditional over assumption the limits be the potential accounts if it? limit. is most And have for that that do the revolvers time. the case the that right be you the look think heavy you have about Is added to grow way that line competitive pretty line of

Richard Fairbank

Yes.

there revolver but from side so one dimensions because of business credit line. the you different the them glad on many heavy that is question the of side spender certainly asked of I'm is the So, business,

the let lines We, heavy So, the the spenders. comparable competitive, at spender the our very leading side. start players market to me top of very with on are

low a line to spenders. not strategy with there's respect heavy So,

On validation revolver know, been credit very over time. side, probably for practices to with and to industry you have line conservative the we our looking relative more respect always

been that's I think more respect with talking why to bar raised credit we lines. validation the and we've on recently caution

all still it we're The, is you had know business Now book, now had. shifted and spender the top a of to because the there growth what let the with. marketing point is along, it's we It's of more at that that of have it's getting are across and lots usual, accounts getting traction looking that that business the time, we that's come talk kind surge of know especially portfolio grows how growth with way doing. expensive we've out the are And consistent of surge we credit are annuity, of actually, much we're the It's will all, great earlier, we that's of market validation, the know very spectrum. you This my the me than there's that to is market. that in you to play is what business the all over And build pretty booked. those about to of up lines complements whole revolver as booking, etc.

Operator

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

Betsy Graseck

Two questions cloud marketing just can in starting deliver off, one the the and much programs better more cloud. I've drive the efficiency heard marketing much efficient that itself. help

that a just either tool something revenue is could little dollar TBD marketing about with in if for use to that I'm that a are but driving potentially, that's invested expect and we you down So, budget, well bit what the better of as experience this even question. talked drive we earlier wondering, kind of

that if seeing of I So that other wondering, am improvement efficiency just same you're are? kind marketing

Richard Fairbank

So, efficiency at maybe cloud of lot too. think and leveraging when the are, you moment enjoying are they're marketing improvements efficiency there the marketing a folks improvements that I others not say

walled garden or turnkey much with they how companies facilitate respect more or of tech are I of there there either the they from is banks on think I going choices marketing major in whole lot their a things is digital for the a the other impact made driving on and world lot the the is But think channels for provide in and choice. marketing. information, digital companies coming provide of the data an companies, more who world of services to quite marketing other and getting that's efficient to to

time example. and what more write here, classic data, do customized only decisions, The the that leverage get love modern companies is of separates a it to The for I itself more to make in a and really the but do data classical down easy exploding think from to the more big big do meets is of American lot it's elephant one. problem with to really whole is data of I micro room of data piece not how where there of terms is with ability a in when most massive technology to you've information We marketing they is, one Here them segment is mentioned big know enough this how can you for a on and data. and technology given you on world from technology. challenge and that, mobilize better to real-time, down in of the real-time but make earlier kind paper that's

marketing because fully of So things you'll we basically efficiency with improvements as with but list the don't huge want driving we the respect forward frankly a the that to a the improvements with were that improvement you journey overtime, the marketing go look doing that and driving marketing cloud, doing, see that's we're we on the one more to of that and that is set cloud -- marketing so will in in has -- been in we're are our progress. most ongoing more forward look many to expectation to an of I suddenly

Betsy Graseck

how wondering, on in comes are or on on consumer just talked or planning their you with Okay, them side that is the that I'm on products supplier us with the doing model? launching side you'll BXB that and relationship you consumer? anything understand broad is on Just separately Walmart, the then help be it be? be about if could when where side. or business going of business there to over there's, solely working

Richard Fairbank

point this our card. credit at Walmart is with relationship Betsy, consumer

Operator

And our with we'll question take from Jaffray. Piper Barker Kevin next

Kevin Barker

spend metrics versus of know of some quarters? first have would I little better couple growth, quarter, we've some marketing about some that growth happened, to expected of talk of the expectation regards bit your quarter just the what you year. here ramped you move a seen traction starting we in customers you're what And up fourth with, the is the about your next that quite in a bit market Could to as believe comments and through for up last the

Richard Fairbank

especially show the effect one marketing periods who them coincident been expect in to for I've many levels for So, on, in loans. on dramatic don't have like years, Kevin, many, adjacent even in said along, said that following Capital or probably all I've immediately One thing many, metrics periods those changes

bit with let just Capital to a So about what's One. me happening talk little respect

in of earlier So, one the spend in is. the we reason just that marketing don't the to it, that we made have spend remarks -- money I comments

has opportunity spender digital business in experience, earning You in and especially to in the a the position just experience, of can't progress of is customers all with and spending happened by the and the we've see place, the along on top customers, to the the you been is marketplace. putting been we years traction for and progress. investing spender actual way customer and building growth an of in we're with with seeing business a recent with sort buy lot alignment have money spenders. non dimensions all and your combined very tremendous quarters products that committed in at it of where brand the what This with to lots about And know brand be of a we our this our of those marketplace

a side basically the It over have that economics a you I those of of business, is up So, accounts on lot and mentioned, significant see of the there shows accounts that had growth it's directed and the by numbers that that for a great fact many traction heavy lot growth side the literally numbers we've tremendous loan business in spenders time new and as the really spender and of spenders at how the is years. annuities spender our things. the how and there marketing move basic a just really doesn't their -- ramp it's are the purchases and needle are

about the they business. when is that which bank any and the and it growth through for and the prerequisite revolver to growth revolver the on let than capability, really ultimate the want what revenue for exists a side the increases origination. happens loan spring of of for way other I always line would new called And it's opportunity dominated often So companies a the me do great to that drive account loan that's take by that on comment coiled That's advantage growth if side. is to

which account has translate growth. point we my had -- and these we've really lines we loan As growth, credit gradually customers that mature, revenue strong and increase been into

us revenue and passing of are growth puts every on this the position the of advantages and to capitalize We on the credit growth performance overtime. more all a month validation into to loan turn in growth with account getting

Operator

question our Orenbuch Moshe take next from will with Credit And Suisse.

Moshe Orenbuch

shareholders? itself because and the there? was strategy higher little with struck strategy. that online bit about Rich, Company in does that of deposits about including talk and deposits and the margins, getting I cost more growth you the by plan there a How maybe online cost a isn’t if commentary benefit really growth the could deposits What's

Richard Fairbank

company to in order Company. course they well, first One Company. love and the of you biggest fed where is think are the that is is a or of fund because for is, And like to there where different ways that Capital any any types lot position if that, for Capital in the bank The I fund deposit. of I sources recessions strongest on the and funding various through at the our is side, that's One rate consumer look how need

pricing look have top the overtime consumer you funding and opportunity resilient to is at If of at the deposit. my list

a in our already we bank national building -- are national a we a were businesses, and in local funding our So bank asset bank. we and direct our businesses, then acquired

central success a fundamentally the is Capital of building So One. bank a national out to

their businesses acquisitions most way banks they envisioned the think to deposit other -- That's I they banks. grow going do are and of it Now not acquisition. how through overtime,

model finance that While we of and past specialty acquisitions important the part in strategic migration and from funding of the our been line an bank a they've company. company have

what different Our know most from that's future growth players this organic be of have done. is driven national going to bank, and you by

where in Now people deposits consumers. a goal have all great direct poles with know we're a to for thin a on build one you I bank grow is a trying towards highest Moshe is deposits know, or wrong to paying you from where one to quite there's the national is nothing banking retail and work know tables around Over banking our get products and either and lead physical high-end for they which at the on is with way to of the backwards to branch centered to going that and only go, not rate but and believe is what there capabilities attractive are price doing have deposits and low bank certainly two every that. distribution digital corner of have do you world time

every saying of we're seen our in sell really much build early a available side to long-term own for to on not through other up. higher way accompanied you cost our there. that mixed anyway, of sort this that case, of corner in as Company average natural one and this. our of company the, know, investors it But are side. very importantly, our cross the a to lot over But really out and basically franchise, the that. will and on market is of fact a of itself is, a How competition In the hotter that the that's bank deposit on go direct branch the this very base bank of One that we as we're to financials? in go where we've know money Capital the but the deposit expect journey increasingly going particular banks funding figure will is through effects but a up with our customer Again, trying really what flagging So and the building the the things there manifest on that relationships build costs. hybrid the reasons for to to most number happened building And traction hybrid the large are just face end out time go bank bank and be and by one

Moshe Orenbuch

be that the the sell you'd know the to are what you And products able bank think you customers? online banks,

Richard Fairbank

for so first all available, second. capabilities is what about between of we talk Moshe, Basically, a let's

challenge presence. pull-off every a as to to that on of it banking or some branch franchise needs if corner But is suite is while how they'll are banks opposed I've One of online I of find full capabilities, is well a the can them entirely in people great of bank probably to confront, the course, to Most of to of power world to of that really course having on be and some a to digital. you deposit challenges that build you're respect not concluded assuming be close here. to are have going your does of a any bank banking, having for that is actually digital, the come them. -- physical phone importance

set you mobile don't done to with little like a are now really feet and full the a of need in we're have can of majority banking online But of we the every to been and physical vast some have all clutter iconic out so, going activities that them the but have built we NASCAR cat banking, And capability of we these because feature. to on banking don't distribution have and be on physical the taken uniform virtually just have hand possible overtime, them that sloped locations. put have distribution many distribution whole we mobile not in all that local by want locating of physical we importance,

digitally, retail and Moshe in for the of has course award-winning taken cloud row our putting and bought, and particular hope and and both taking rolling capabilities building cloud been we building of now experience banking to world region with and platforms strategy, all salience, now them on banking but local banking from banks of capture various years banking. just we we've their best taken out capability this also tech in that to building J.D. integrated it what out banking of putting the the -- capability, the importantly and years together that in some broad-based So, has a direct from is national on capability, great locally. worlds Power a a of two the prior bank consistency the banking credible our the a online But a

branch that of model. this end is economics is our been other overall presence done we physical been The very the to which have thing on has of the rationalization, leading important

Operator

Chris Neil. And Sandler Donet from tonight our question final comes with O'

Chris Donet

ago is you it about process if the to starting a migration to over have the up just this a get been keep, going seems then think to path? Just center out competitive I'm the journey shortened you've that to it's that be could you Because wanted whatever, and data to roughly. again. couple advantage had on do Do me that on you years to six there years anyone you decade follow curious, it and think another else end. taking might with have

takes know and to Just thoughts, which just how you about it it if done infrastructure? redo less to if you or time you're personnel to what long could talked the systems have that's want earlier in like and

Richard Fairbank

this in well, -- the thing one in which seventh One -- said denominated two six is technology denominated ways. years. the transformation. our we're journey We're We is so, six it our I two years. is I in that, for Chris, I journey recent completed

talent on and model, the that Capital Importantly, of information-based built Company what shoulders whole heritage the it founding and of stands the the went the who are. the One itself of whole data, strategy, analytics, the we've sort the into with of technology, we the

journey appreciate an a tech you So getting, and years looking you our the bit starting is beginning what is which is advantaged and eight striking centers transformation your years that. those of question after data we're know, six we're already I at in place. years ahead shoulders, know One, to of essentially Capital two this out On

way people a any this think is, both the is a learned that on It's the and that Company and think it's on. I true across over Company. way, the is be we that works, it's software work are know requires confronting lots how would journey of journey this did transforming we but for the built. a company Confronting, and talent there really, how because that American I it same side a be takes it's the if work tech you journey, journey the things along the how we would

in task I very We not to don't in now. And think from do, and news why do all change seven this, banks, we by entangled possibility that what be it call. say from including been acceleration building the the a set and bottom. choose in of shorter you of very, know the what's that happening at say were digital of is, feel is if tech bank, could this And the of was What's transformation experience. think are momentum That rebuild customer news the we are sense I would isn't feeling that's sort path that adoption we tech a to own, the infrastructure take could that the is the the company, every transforming inside the one national economic Walmart the progress undertaking One, top our I by to just about And journey tough The is acceleration the on But the winning what's the this happening out economic, have absolutely central on around sort and in exists the on in to of compelled way, And the dimension, well, thing the large how Company, in this to Capital the daunting than momentum the you done. the our because journey. the feel real really on pace customers. finally, of can much. management, last with is. the risk by to here. know we're accelerating opportunities wouldn't operations success thing opportunity a how year talked you and happening of destination, too we've but the you stack about are much speed would we the I absolutely on we with know, to the have, we dynamism The have market our is partnerships, customers about work, products, we deal.

Jeff Norris

to on have. us may for Capital Relations would interest today. this questions Thank Have One. teams a for any you conference your everyone evening night. here Remember, this in further joining Investor be you answer great Thanks call

Operator

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

You may disconnect. now

Capital One Financial (COF) 25 Apr 192019 Q1 Earnings call transcript