COF - Earnings call transcript Q3 2021 | Capital One Financial Corporation

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Operator

Good day, ladies and gentlemen, welcome to the Capital One Third Quarter 2021 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.

If you would like to ask a question during this time, simply press the star key then the number one on your telephone keypad.

If you would like to withdraw your question from the star key then press the number two. you. Thank like call now to turn to would over the Mr. I President Jeff Norris, - of Senior A Vice Finance. may you Sir, begin.

Jeff Norris

Thanks very XXXX Quarter Capital One’s much, Keith. Welcome earnings everybody conference to Third call.

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

Mr. Financial One’s walk presentation XXXX In presentation this summarizing a and on Release. Please financials, we've To results. and me Officer, presentation. Andrew addition contain and With statements materials. on the performance or regarding does forward-looking as Capital included of indicated Capital particular and presentation today's Information undertake materials. to Officer. the please not Quarterly only Capital access Earnings release, One financial the click Chief Young, the press the Rich click to release Richard Numerous new in in today in Executive any contained future go dates Chief Capital One’s are Andrew Third obligation Chairman statements. you result the forward-looking and update Speak a through information, events, Quarter actual of to Fairbank, cause and may could any that and press of whether from Mr. forward-looking to or Capital as note this our date One’s of those any will a copy website, described this and the revise One’s or otherwise. results Investors, factors materially information, differ statements. discussion

release in accessible and Capital annual Forward-looking these section on and quarterly Risk the Factor website factors, section the information our titled For the Information One’s with earnings in the And see SEC. presentation. filed reports at more please

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

Andrew? Young.

Andrew Young

results adjusting afternoon, earnings quarter share. third or for In pre held or billion, I'll an our earned start diluted in to Included loans Thanks, $X.XX of loan held-for-sale per common grew were On increase tonight's per for Capital reserve XX.X a end a good Jeff. moved quarter, earnings of million build. a of as we were was slide item, billion three the $XX share the quarter. of relative of in second And investment growth ago. billion quarter we legal on Period had to this the X.X our $X.XX. One billion quarter GAAP everyone. basis, Recall X% all X% presentation. across $X.X businesses. loans Net late in strong that X.X -provision the

modestly growth So third in total increased with just grew average in increasing by margin with card expenses the quarter quarter, X% expansion Operating business. linked in in our more I the coupled grew loans the expense X%. driven largely loan X% at the described, non-interest X%. quarter, Revenue

In addition -provision quarter. pre the P&L aided earnings, provision to in was strong the benefit by a

record charge-offs release. offset low by an As were than more allowance

strong actual growth drove in offset the continued $XXX Turning four, performance in the greater as the allowance in to in cover released allowance in a by a in I quarter. loan qualitative We partially detail. and was reduction quarter effects credit the changes our million decline balance, factors third slide allowance which will of of

described. driven allowance Turning can X, across by coverage segments, of to all our you our factors Slide the continued decline see ratios just to I

Page to now discuss liquidity. I'll Turning X,

regulatory requirements. Third average stable during Coverage Liquidity was see remains the be well The above Quarter the Ratio can our LCR XXX% continues preliminary to You and XXX%.

the prior cash, quarter. securities, home reserves loan billion liquidity quarter the ended bank from billion and down XX federal capacity at $XXX Our approximately from

in our the decline investment by a the driven pandemic. billion liquidity modest in off run in As total we of built $X reduction to was excess in during liquidity size X% cash ending The portfolio. an to which An repurchases. on impact will which loan our on The balances discuss X. cash balances, detail NIM, used had I and fund decline growth were more in share Page lower continue

net higher points margin higher X.XX%, third increase than four interest XX was XX You year-ago linked basis basis in points was and can largely see QX, than The our quarter. NIM factors. driven that by quarter quarter the

First, the balances average decline cash described. in I just

domestic expense in margin our expansion Second, -- business. card

our quarter. benefit the And day in the growth lastly, loan Third, in one domestic additional business. of card

Slide to end our by X, Turning covering capital I will position.

at of offset billion X third framework, quarter We than in Federal October billion. XX X.X quarter, of approximately points capital X% CETX remaining buffer stock of and assets X.X the end Tier third XX.X% began quarter third as billion increase $X.X our equity requirement in minimum ratio authorization risk-weighted repurchased was board in operating Our from of and the the resulting have basis At quarter, common Net the by the prior of Reserve's capital income the an down repurchases. of of capital Xst. the more the was current quarter. share we beginning stress a under in common

to our our need we is CETX capital estimate on around continue based modeling, However, internal that XX%.

outstanding over describe and we H a to in stock Before October few early related On Rich, preferred our I series let our turn G redeem to items XXth, intention me announced the preferred stock. Series our December. to call

quarter elevated Fourth of quarter expect result we a and of XX dividends planned preferred around issuances at partial Quarter the million. redemptions, to full the of As recent a remain

we Rich. per to expect million Looking decline the for over approximately activity. rate I to run QX, With preferred $XX the turn barring dividends additional that, will quarter, to to Rich? ahead call

Richard Fairbank

for card with XX and in revenue Slide revenue quarter increase trends purchase, which domestic results growth, shown an provision on drove and improved business. losses third compared on Slide cards results function XX. Strong to of are of card XXXX. credit the begin Credit a And I'll our are margin strong year-over-year volume our largely credit significantly. Andrew. Thanks, segment

ahead growth X%. flip purchase Ending line XXX XX% pace third basis-point up quarter improvement as delinquency at rates Purchase a Payment results offset of domestic and XX year-over-year. payment in strong growth. third X.XX%, The Third for partially quarter-end was volume, X% card recognize us volume rates. compared revenue as and to interchange was growth around remain loan of quarter the the getting growth enabled rate Quarter growth year-over-year. charges proportion favorable of leveled fees was increases, prior quarter rebound was credit can charge-off XX% finance X.XX%, higher year-over-year a and current year. XXXX. for result strong domestic well. million card, credit over the plus continued traction well the expense tracks improvement As - retail third The revenue from basis-point generally quarter payment was high the The credit the new XX rate - performance strikingly marketing up ending you in in high the is near see loan X% billion, including volume in for grew of loan Revenue And Company And factors particularly purchase basis quarter, is also This originations in a spend we're card drove is the card $XXX as quarter revenue Ending the benefited margin strong. velocity, and impact rates. most up the balances was of continued Slide highs. third XX, sequential with banking. to credit, off account $X.X with and outpacing up revenue slowing, typical improvement by which of trends. year-over-year, remain on and in delinquency but the card historic auto of seasonal loan of XXX rates domestic grew side XX% loans or credit-driven Total to net XX.X%. increase. margin marketing quarter the The Domestic about year-over-year. from Two points growth year-over-year

the Our of trends. choices are Company total biggest in marketing card marketing driver

business. attractive grow continue We domestic card our to see to opportunities

enhanced by growth Our technology loan our well, -- transformation. our opportunities are

requires once time, Turning is on build again, we're environment, actual keeping the watchful marketing to a intensifying. we're same competitive investment. opportunities leaning And in the and to which drive further the franchise. At growth growth eye our into

our continues total marketing in the we up, banking strong auto business. third are third themes we Looking and auto sequential typical the card in build Pulling main summarizes to fourth invest as growth business XX credit the our in Consistent pattern. deliver Slide results. value consumer ahead, quarter Company for historical our to domestic quarter consistent that's a expect results with quarter increase banking significant franchise. consumer

increased digital XX%. basis, Auto business. exceptionally Quarter continued loans our originations Our strategy down in to a in business. auto, ending and year-over-year On year-over-year. deep high-level the Third the were XX% Quarter. relationship drive capabilities consumer auto XX% the in up dealer grew were loans Driven XX% linked-quarter also Second originations growth Average strong from by auto banking

auto demand Quarter auto pent-up in a quarter, marketplace. surge and across last originations we As had driven discussed the prices Second high

year-over-year. Quarter were deposits consumer X% prior XX% deposits up bank Average also by the increased the X% were driven growth banking up year ending in from year-over-year. revenue Third in quarter, loans. auto Consumer billion $X.X for

Credit basis by business quarter Third improved driven strong rate our release X.XX%. points for the to auto year-over-year, points remained improved XX in by And an quarter $XX to in allowance basis third rate losses million charge-off results our provision year-over-year; credit X business. auto delinquency improved the X.XX%.

consistent was basis from trends, plus from charge-off rate points the XX with seasonal historical the XX quarter, second the sequential negative at quarter. increased quarter in rate Looking pattern. unprecedented the the rate second And charge-off delinquency up

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

quarter by and industry X%. elevated also the grew year-over-year. Third third loans customers Quarter up deposits XX% X% ending as average year-over-year, government middle liquidity. increased of XX% continued were Quarterly in market loan specialties. selected Ending to of growth XXXX hold deposits Average balances levels were down from driven

criticized Third Banking Recall remained Commercial unusually from XX% real the linked estate third prior-year billion basis was in due quarter sale. the The performing annualized was the to low of X And the rate the for the quarter. quarter, in non-performing rate hold commercial charge-off X.X%. to was quarter, Quarter loans revenue rate was points. and impact up credit XX% criticized X.X%. ROI that Commercial moving strong. the second was $X.X revenue performance loan loan In

drive before and any remains is loan is technology. even strikingly In volume, and rising The experiences is faster from size Our clearly business the to And opportunity the changing the continues tech headcount fintech delivering are capital accelerated this and and realization is domestic of will digital in drove underscore model. we into embracing tonight businesses. way as business innovation The issues. the adoption. it's accounts. the do strong is The shareholders. new I'll products these all continue And permanent well-positioned game and tech transforming more war stakes strategic we escalate, growth growth voting their hybrid who technology see across customer purchase common close before. exceptional growing. developments Competitors picking has works, existential of costs to and capabilities. thread thoughts capabilities the just Quarter, Fintech in Credit build positioning. up shifts performance the throughout some that for investment new than that. our valuation strong with continue up. virtual Third to to lead to the revenue, banking our very talent stunning for commercial In to fintech investors’ And Capital We ever and solid can are the our new pandemic All an marketplace, One work and maybe and to digital labor card banking players on our our in feet which results breathtaking how commercial return with is we flowing in increase.

the investment the year scale. tech now. the technology We to also is of what in the compressing. and and are have Xth innovation bottom The were modern Fintech stack are we of for clear is transformation capabilities marketplace that from at our built in an We up. technology is original imperative But the invest timeframes

to productivity have a been on by revenue digital gains. journey We and down operating powered drive long growth efficiency ratio

Pulling efficiency an ratio of the marketplace, through it incorporate extraordinary likely the of the to rapidly way. up. pressure journey time to digital We're living way along change. investment need operating is changing Our accelerating will imperative and

Our accelerating long over modern the happy our And performance Jeff? technology is in and enduring And stack the revolution be it's setting to value our the us questions. that opportunity, banking. drives is capitalize engine on term. now your up digital creation we'll answer powering to

Jeff Norris

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

be who available the question. Q&A the analysts limit session, after As question, will a ask team courtesy one to yourself to please and follow-up investors a to other after Keith, question Relations Investor may And you a plus the start have single want the if any please Q&A. questions follow-up call.

Operator

first Sachs. with from Ryan [Operator go Nash our Goldman Thank question Please ahead. take you. Instructions] We'll

Ryan Nash

evening, everyone. Hey, good

Andrew Young

Ryan. Hey,

Richard Fairbank

Hey, Ryan.

Ryan Nash

Rich.

the talked industry competition you across intensified. about Rich, So has

You better-than-peer is yet in and and evidenced strategy both as Fintech growth your and noted working metrics credit. seems traditional it players like by the

just there, you And And maybe, think in how follow-up does about the then, was have you the I it when for from maybe Company. guess, last the environment for does of out there wrap just maybe what I where I competitive -- do can compare you're So wondering, part competition here? to, accelerating. with it middle talk one goes seeing mean growth And question. saw Thanks. that the we it decade

Richard Fairbank

saw And the We intensified, can Rewards in offers in travel time some pre levels. mostly we card -pandemic pre in have and Rewards Direct expand say, introduced -pandemic the What course increasing of to that's about space. a recently, levels particularly buy rewards. increases continue Okay. let talked increased later, that see we -- be reacting. that I If the lending, probably The if new -- way, I with into installment mainly pay Fintech, such competition lean Marketing, of above industry. the is upfront that. didn't up natural. especially by continue competition, become Ryan, levels. XXXX questions. continues lot and of wonder cashback in increased of is industry the also the enhanced for breathtaking the competition incredibly stable. to in we're great But which watch on And product and -- questions opportunities definitely limited be see about the wrong tech talk woke context keeping our we But to the investment Originations how of we domestic in returns. activity good of this place. really in structures and now, offerings there's richer natural a with but I the that. growth, heart This transformation. has approaching competitors close have the the all expectation recovered for your in in future. to form of back to I there's also this levels competition, here, into And modest By a demand and selection may originations. and by result earn and closely. across higher of as adverse venture you, eye mail card media capital we incredibly is of would would we that are business, very marketing that just underwriting continue are, are in on also looking to come as described the also market as should bonuses, have the rates with a pricing of everything losses are some me activity

in It looser interest. than was a underwriting have things for back -- the was and fully the that then in Back to very I decade, and just about we Ryan, ways the for the but saw really did robust with of we would the consumer were last more in card started sense origination's you keep in I feel picking in up. would use competition how here, aggressive in What compare marketing. bunch being practices Certainly on really comparison, of does behavior decade? we out that. middle we'll eye But practices there a spending credit in is use last not some space the form then, asked more Now, that this customer's don't marketing an the descriptors some the of for see really saw and industry. we of the that now, that

more not make only quality if thought was of lot quality there over-the-top, could card to the we that costly -- that but loan react were we being the was the of is So in impact booked. One’s to a face marketplace. originate, things of growth what that to kind look of And you business was much in of to in the moderated more Capital it back, credit, going what competition as slowed importantly, and

a now So we're not at we that. feel like time do right that

the continue now that grow, competitors Ryan, my over years happens and we going into for Ryan, by We Capital things good good have a on marketing, that comment learned things, over but as having their lot we're to pretty as I And to are about in have of see we lookout the think efforts eye right be the think indicated leaning heat a our the in opportunities, we're natural to top. to that. we're things seeing period, up marketplace. for And for One, out

Ryan Nash

for have I than And ball, know better credit the as quick yours And can just a ever it's mine. know all don't if follow-up, I you color crystal Thanks there, is I been. as one Rich. good ask is but probably

So could this an we of you Thanks. concerned more I thinking was risk frame? period -- normalization how wondering downturn extended or run for industry below the time there do that has an about is been like over of think the well other, you become intermediate time, are you think of Do credit that about? as normal has trajectory the fast no given

Richard Fairbank

as business, speaking Ryan. of view, certainly in Well, -- a not are, really an only at board extraordinary our in card credit the pretty we're I even but Capital we credit not for from well, and well. a One, obviously It's and extraordinary the industry And pretty think place of across One. extraordinary, also I'm point Capital

it where is. So bit about here, what's it think let's go think where from could as driving about we little a

the factor. has the obviously support high So been consumer level a stimulus through government of

consumer concern that rationally mirror, have very basically this come for debt. benefits this be support consumers -- of how also We've some down themselves this But And lingering stimulus there's through widespread industry in the of and seen will labor behave growth, a stimulates absence balance consumers -- of demand paying top so good the that, had then which uncertainty. with solid wage as workers, from terms forbearance we watch performs high of mostly spending government saving sheet more, and have period year that's that. to time the very in Although credit in market rearview far in that. the less, Generally expires. on and strong should

does the losses exceptionally inevitable here? where of from up in timing and and Card kicked levels for timing easier from will of low where past But that delinquencies about will -- everything are. what It So much looking September. think it's have conviction increase we feels happen that. We're signs of the August go the the year I than normalization. to modestly

is when we time year see seasonal delinquencies. to this in the Although, tend of increases

very So have. -- I think the a are time. this strong most just enjoying strength they we the the strength enjoying a this And -- companies is that banks -- is -- I that think most

at leaning opportunities normal. for of meantime, opportunities. watchful way, for the because And think surprising all. technology it the And eye it opportunities. That's absolutely One, particularly lean the into and happen. by the extremes we of happens, necessarily watch are they're behavior, happen. would for the think It out when good didn't we just -- normalization, if in into our Capital be that we'll I But that's their stand But will on. I a alarming not our inevitably that shoulders with that

Jeff Norris

Next please. question,

Operator

Orenbuch question Suisse. take ahead. Moshe go Credit We'll our Please from next with

Moshe Orenbuch

the bit to card because always to how follow-up lines factor that. standpoint customers steps a competitive about talked been of about expand from growth talk that's and about you strong of do for I credit question. little of about your a Rich, talked for underwriting up think credit a taking Thanks. make Great. kind big ongoing and kind some Thanks. the loan industry you're Could XX:XX:XX]? you have you a in dynamic lot an in [inaudible terms ability your generating

Richard Fairbank

as -- are years. continuing you we we going prior know, Moshe, originations about in our talked So,

and with spring that the we were that that we back caution environment holding online the coiled talked we while the were about about represents. in, Sometimes

the validation the build we the with And lines. the the we're trying take dramatic, in strength so lines and but we of then leaning franchise too continue we our always expand consistent are Nothing see customers. individual to about the general. of strength as how credit marketplace gradually philosophy to And of and the increasing in underlying

We are increasing credit lines gradually.

So be growth another that side. boost the on loan will

Moshe Orenbuch

potential Just efficiency for as a the ratio. pressure follow-up, you talked the in about

strong will be time able obviously, that some what to about being standpoint drive revenue fund you from ratio would the where think helps about Could -- pressured improving? Could where You've of the you versus periods efficiency that investment. had one pretty that growth. would talk of it talk times would factors be

Richard Fairbank

into like XXXX enjoyed XXXX efficiency in in out point some sustained the The the that a we've to interrupted pressures of a ratio ratio of XXX friend trying is Yeah. from drive course, can revenue efficiency you cost pointing growth to time an think I pandemic out investment out. costs just to something But a the that digital And try improvement as efficiency we're opportunities And ratio pointed -- and And that's ratio. when certainly long-term a Moshe. and reason that ago in investing the efficiency some with frame and come philosophy, digital Well, the our look, efficiencies is was technology. certainly improvement the marketplace sweeping for few transforming point I combined on growth. our for companies the compressed engine revenue innovation. by about can leaning a our side be -- growth out, drive process. improvement efficiency of squeezing minutes ratio help change best drive comment And of drive much efficiencies basis my sustained in from from lot technology the philosophy really

in raises arms of arms tide in And X a The One. seen directly building Fintech new a biggest is fact, so in benefits that decades that race one disappointing And the to traditional minute. that it's tech talent tech in I've costs Moshe, without and about any -- embracing race And Capital talking competitors my of talent because a technology. level sense, and the for fierce the just generating, that's for invest the from that. need

quarters a some this than been numbers. are react and of more billion. from for striking investments annualized assault through last total. huge many, has Here defensive that banking this than And year our many Fintech of to at more a on a $XX on indication breathtaking industry and course, for three say just that's data, ripe billion point is those but which that's double investment first of we clear years. Or in that's XXX the view an year's as believed basis, look I we And are that that's transformation, have also,

itself shows And in in need is to ticking. products invest gain all digital up and in to this technology the So the leading both competitive advantage. clock

for the marketplace. invested a opportunities in So the modern advantage to we position stack. to build And take have in of we're years tech strong a

thing, heritage data large marketplace. from positioning and which one a way opportunity. rapidly from and really pressures Moshe, and both capitalize chances. is and to brands I customer have to But two national do our things, like a up have really We our and derived we analytics. so the deep invest the the big changing pulling franchise have And come which we

innovation And leaning equal for the are we and with we being things So into investors to capitalize that compressing wages. that other pressure all just you've the across cost industry. of that And efficiency in the ratio. got on share terms wanted this timeframes tech pressures opportunity. And

not the imperative the longer-term Enhancing course, way importantly, when you growth, driving of very the a just objectives. and building much about, tech in I Of efficiency. but is service costs, everything pull up investment so franchise same maybe labor talked greater

Jeff Norris

question, please. Next

Operator

Graseck take from Morgan go We'll Please Betsy our question ahead. Stanley. with next

Betsy Graseck

Hi. evening. Good

Richard Fairbank

Betsy. Hello,

Betsy Graseck

you Has maybe want to the to degree from then in wanted customer, in or starter trajectory hear at you spend quarter. type What a the just the specific get expense in changed sense there's been been of sensing here as me in And And I in generated higher-end terms of you're here? in terms this of you think routers? numbers to seeing that the what's follow-up. which accelerating sustainable Thanks. the okay? margin. then, understand where the any I you forward. going a that's Could are have I spend to Rich,

Andrew Young

Andrew. Betsy, this Hey, is

Richard Fairbank

Sorry, sorry.

Andrew Young

Rich I we mute on a second. can hear had for you, but

Richard Fairbank

on was mute, sorry. I

Betsy Graseck

Okay.

Richard Fairbank

Betsy. I Let our of years overall are of of kind just the XXXX. ahead. compared the rest shows only and the kind start said versus given over, across-the-board sorry. years eloquent, you laggard. market thing ago. I Basically, up every purchase that what have travel But in X category X so the much I spenders ago. we surging It and category how up, to pretty say the ago. volume really is spend numbers portfolio. repeat from our over was to up Great. it's X me heavy It is much, saw mass can't virtually, And years categories now, entertainment shouldn't was that growth up an has up spend laggard of caught year, over with XX% The it's you customers all last But it are where

it's and years that franchise. of there. investing our been a numbers spender marketing building traction and spent that's see products of that and the partly So on marketplace our about lot also partly in Obviously, getting we a a across the are you business. indicative we've the Capital comment a comment our One spend posting traction we're and that from can from And

going not where from to to give go on I'm here. guidance it's Now, going

really up making momentum been their bit it's of for up. time. where the so And being in volumes purchase up growth starting as by ends rates. the constrained to we'll move happy there a in giving -- like I of go And all good things being outstanding’s is a were think sort have from boost got needle levels the the we but somewhat think But consumers which, here, quite up lost cooped momentum, high success growth to spend quarter. still been but banks payment the carry marketplace. have is think also, being outstanding’s And I they the a breakout certainly we that the even the to the Capital course, see I pandemic, see of One, into of

Betsy Graseck

Got it.

Okay. That's helpful.

hot. think that competition other long how not I account, the the run earlier of question per rate. I to has become is do value account, had Just the how but you at cost it for mentioned quite with takes that ask how only follow-up you because about the account to

Is call you acquire might But How do from to XX-month today? of thinking, timeframe the rate possible full value what with environment tail account getting run about pick where this then are XX-month on that So to -- cost all that in of job versus okay, some the you inflation, is feel past? that you've is a that the levels. come the Thanks. this it or that, my away the value in up, generating we given seen longer up. that of growth, that accounts takes to there's you're -- something account a

Richard Fairbank

seeing franchise. on the spending investment dependent exceptional been money I -- franchise years investing on of creating products back powers pay just And think the the to of is benefit any One. spending building the we that technology segment, experiences, the is are in do, exceptional of building we for creating have originations on customers, what and the Capital a the really continued that for particular brand, with we time our customer the but So obviously, in we've marketing, money not the but

to places have talked to increasing historical been we is standards. and for is continue and about the opportunities competition, account traction, good about into our leaning reasonable of the do everything very that. investing we been for a performance we as a and good which doing, the per booking. we're while Now, there like us originated see cost I said, origination, we We we're we've by that we continuing And that really see marketing, early years things in see

should strong. see that value suggest the So that that would accounts these of be

the a time. one But opportunities good good. in marketplace and given see we and a going investments right been is to return And may have at continue close the think this, the we've eye had opportunity so all on the for we on that now, are we growing as that keep change things of segment

Jeff Norris

Next question, please.

Operator

Rick We'll from take Shane ahead. Please question JPMorgan. go our with next

Rick Shane

questions in back-office, seeing we of my speaking, and misuse it's about underwriting X elements, opportunity, or places technology think look, afternoon. those opportunities. think are people probably X bad there. on technology. technology, to factors clear the decisions adding taking any been you you of four driving and Rich, for outcomes when And see opportunity I curious When everybody are four you've or customer Thanks bad about biggest of generally there this terms it's about and factors? experience, think very product, potentially the it's It's return? enhance I'm you where those value these or

Richard Fairbank

opportunity know that and the I Rick, areas you good evening. areas. all mentioned Hello, are

kind of -- opportunity I I think modern tech me shoulders stack for let real that agree areas you here what the importantly, to the us. more And we're on to of at what I'm stands breakthrough and list through want products, experience, solutions. is the underwriting before to expensive working our even and with going looking than I'm just think but about talk is build I say certainly customer and and what capabilities back-office, some have, because I of

platforms customers driving data For and example, reach offers, with our real new to and right the marketing more to conversion rate. in big streaming optimize improve leverage time

decisions. data enable credit algorithms new Our platforms decisioning to credit better machine use to and us sophisticated more learning more way make

always also works transactions to let fraud examples. an opportunity platform that the rise in down spenders, to important, costs getting incredibly on the is costs. one the breakthroughs But on more of costs important pause I'll fraud the business because really give fraud heavy simultaneously fraud opportunities second at side you enables fraud is me card two our opportunity marketplace. And we thinks continued while an battle very management of industry. a top in where credit improve fraud having in course, because of customer the experience new just for for have while have. and to in investing the cry for Our fraud reducing it's is the -- in creates us One customers cards the

are in digital also, spillover benefits there a bank. national building And so, significant. And the

accounts. and into to come rates So while if its goes and online. don't turns easy and that want it's a commit walk account they in fraud, bank digital bank out the for very says, folks on fraud shingle to out hangs It out people, just typically there do in branches to for if sign-up commit fraud, branch a opening but

our the investment accounts our to So you the respect comfortable be national TV, really ability on strategy that been on up instrumental that basis to banking and that see to and to heavy what mass fraud costs. open in we a nationwide, with found featured has fraud have is

been things. So side risk some about of we've of management talking the

before There Capital of One but delivering is the Navigator, on key underwriting process monitoring we which time Let And business J.D. experience the the was the TV CreditWise. Shopping investment just sure real-time just it benefits risk mobile things Capital customer. offers promoter and app. tech all for ability brand otherwise with enables We're valuable them, by their we another to to customer business We're like automate risk little in not franchise, of last is transforming banks, management lot in fraud they of world's strengthening we've are car franchises and of banking beyond like car move our also leaders XXX% early net we're mouth that with digital the partnership I One from the the in Of winning Then you've seen real-time. the category, on ads. important naming and customers a area, management and are our card will customer is scores addition months, card of management in flagship business, conversation. your products as list, products me America financing leading own Power fraction to the few second, on put their card where advance data on enhancing stake directly franchises a platform building capabilities that thing that sampled. Snowflake, increasingly a We're in growing innovative leverage ability dealership. to visit partnership in word And any to part know the come a In been to partnering were any we We're the lot or any retailers in really Auto terms until the turned be like preemptively your just opportunities. risk business. And just say focusing able business. a of getting are growing our to underwriting what addition the management how and experiences auto innovation. core national like cards. We're to evidenced we're in innovative to the work. largest leading and high I'm the

On to savings, processes, our and Then to legacy enabling costs the operating modern to legacy reduce there's costs. tech costs. on to us are automate tech enabling the in side, and tech investments our we operating are risk working steadily reduce reduce us technology vendor

with legacy more And tech some virtuous we're we talent, speed-to-market invest enjoying opportunities, modern of by better these of which growing progress. Digital are tech, all the as gains powering our So in generation. turn tech really more of accelerates powered we're cycle revenue benefits and the attracting and even reducing again, productivity costs. in

the Capital strengthening for leading One your growth, the great a in efficiency, driving which our beyond our list, list great technology brand, transformation risk [Indiscernible], a and improving of talent. even So is enhancing of status trajectory destination management, is changing as improving

so we're here. And that the much like very in position we

I've your on said, want sure question, we Rick. opportunities. make frames compressing industry, in time are Thanks to As that capitalize those for we the and

Rick Shane

Rich. Thanks,

Operator

We'll take next question our

Jeff Norris

Next question, please?

Operator

Wolfe go Is from Bill ahead. Carcache with Research, please

Bill Carcache

engagement so, transactor winning areas high see general? dynamics of your Capital on willingness to in seeing banks a demonstrating industry And if I you business with to across the driving go Are wealth and wanted underwater management evening. other Thank and these of Rich, evidence you you. playing card in larger business. do Good the rewards One like ask specifically credit the And, in spending mortgage? hope particular? how out about

Richard Fairbank

product can the that. more of see rewards there refreshing enhanced is the the you The space, at the rewards intense. aggressive. overall see everybody So, And point, is very certainly of the And also, the market, only the rewards. marketing and top high-fee the with for out in market in and cashback card. your very up continue stepping to with not but We fairly rewards structures products banks recently competition be to levels levels, in it including

that a at we what's live leading invested players brand would think franchise if the have. franchise years think of a business thin small it's particularly happening, margins that But the look, card on consumers, what the sustainable to have of have all what of have in that's banks though doesn't where I great transaction our basis I everything the one consumers. position. are not I So at because on really really passed really surprised -- competitors top the we digital be aside at and So benefits think pretty this biggest I servicing One. of certainly, I think elsewhere of for the many on is players, -- by And of certainly players and of we've a end And from selected things. us that of things, every investing I the years Capital doing and I capabilities, this it To examples invested and here trying Capital what make think feel compete top Important have solely But we for day side get leading I been the about are always works been to -- this in customer is to market well-served may I rewards. the is, for One, their money losing in and experience. There I be on up volume what building have The franchise. number are the at all that. transaction think with what of

Jeff Norris

question, please. Next

Operator

go from question next our Pancari take We'll Please Evercore. with ahead. John

John Pancari

Good evening.

side, you Just on trends. sequential on a side, quarter historical the expect indicated with know expense the you I fourth quarter the consistent increase in marketing

costs. in seen link the million If you quarter XXX going XXX million quarter marketing increase look fourth in at it anywhere you've to between back,

wanted side, you help to that maybe get implication expense on longer-term to the separate idea then IT efficiency just of investment. the size ratio, try one an can And us thing up. if So the

terms an into in the operating Thanks. ratio could to Just way impact that wondering about think if there's of what any that on interpret on ratio?

Andrew Young

it question take Rich one. then I'll for the pass second too first and over John, the

on You we And items. note seasonal have has technology you talked think and quarter, side a the I that term about Rich -- the the we're sundry investments typically a compensation. making in of to the volumes fourth used number increase due and

history sort might near guide, I there's in guidance, lot if a any going we across Rich how think time, And the growth, talked other I P&L, at of about look So explicit giving think over term. many would be are that where there playing suggest but and and going of and to the fraud, down your investments things of that number would through factors in that's you as that the into terms revenue in there. the play not

the term question. about I'll over short So to it Rich I that's turn and think answer how medium would your second to to

Richard Fairbank

Yes.

was opportunities John, improvements driving, going of proposition drive efficiency the this operating the rising time The One. and tech growth more, declared part And transformation tech rising strategic into are The value. our of transformation operating will can transformation the along don't I themselves productivity into an leaning of time. over cost we're talked that to our were digital philosophy drive original really as over investor and for the would the growth some top a about the money. come They generate be us to labor to that way driving efficiency. position over good we more that the that could things extra through lot we put continue That's to that the that, investment the of we drive already Capital pressures get that which growth a ago the labor again, And imperative that could So seen the that. the significant of stack at and we've while, tech in leaning here costs invest. in part are longer that we more in way the would drive that be that important to that in from -- the costs efficiency. talking us about things term. power the we gains way, marketplace years But value about operating opportunities help that tech very by that investment cost

on imperative all-in need the that the Quest, to of about. way. have ratio and destinations Quest, investment efficiency we're We So of incorporate have still the the talked that we along kind we the

John Pancari

couple the of if Are at players, Thanks. be evident? that just lower seeing Thanks. then would any that delinquency seeing of you're you in anything seasonally delinquency front, changes the pressure bands on seeing FICO lower see a seeing to credit trends, non-primaries. been And not little any otherwise other they're there, evidence terms you can FICO wanted on that talk the pressure some about upside and on trends. We've the in if

Richard Fairbank

marketplace that over of Yeah. range will most that are of number that customers away. argue to to the be the we tends time in first But think have the what I of certainly normal. see benefits more and had a I would John, subprime in going be

would card there. wouldn't natural draw be But What a seen any be across we've and is both would So a seasonal We natural category would the It both board. carefully. I the extrapolations thing thing and a watch big of it certainly really all thing. Normalization be normal. from very that. in natural in these auto trends

point. Just an at we of observation this see of more what

Jeff Norris

Next please. question,

Operator

We'll our go Please with KBW. ahead. Sakhrani Sanjay from question next take

Sanjay Sakhrani

these compete, sizeable I for but Obviously the inevitability towards currently one hub big topic making is for Fintech app. know think have consumers, a world is might aggregators? behavior big there guess be rather do question might be and that how big tech you're the than I picture companies bank in the I what to embedded central investments you Rich. banking, Thanks. shift

Richard Fairbank

that many, is years for question, have center strategic and a and that been, your great own years. front we've for question many one So we Sanjay, put thinking look really in our

life, be the the incredible in radar watch, marketplace, So has think a the ever our example most way could that risk, of front-end being both that. financial gets there. -- course, is on have Company. banks of years. tech of scenes there you in seen we that one really And since is looks the by end behind by to camps. over extreme course, front And embedded apps, taken been your over of the to whole I one's point tech screen and and continues of at utilities of momentum banking China inside that taken That's and for many the in to including life, companies being quietly in tech central The being -- banking the

where go-to being the back-end one companies ours we of want of stand as a objective in life. the be increasing variety Not So attraction to can to XX the now is of aggregation. in customers, things really aggregation not budgeting people shoulders terms many, tech see the between manage and tech front-end incredible that they app banking, the of And that reasons I coming shoulders our to the customer's on a companies And of incredible of in of leading for a one and the consumer’s a model that That life engagement we that have. think types have, of but at. of us staring aggregation, a for that's banking, the technology the in a the traction primary is the see have have get through going one's the that need the of to between scales of race a hard in probably But all just And great to front-end sense bank. we of transform long for aggregation. kind for things many being that same been in go of tech We model because companies on, one-off a thing. there's banking, really time. financial place. so bank And technology something of particular only and kind whole terms increasing worked

need that we leading seen a speed-to-market and I lot mobile reactive at of that, their being and the say, sense only software growth banking One, the proactive X out. is then helping going from traction all into is as not not And tech have life kind really they months And people on that with in comes the increasing when do the of some this ago, and TBS, have, a were of of both had frequency can noticed build they isn't number banking about money one's and walk that really with I capability visits so rate we and Customer The and the did, that watching figure banking real-time of of particular banks how The them world a months financial in information of other right customers we Company. So we as have no we're customers. looking reactive to leverage one. would a of They're the XX idea also we and respect money. the that the you for cross-sell customers. the that were opportunity world branch I just online I providing have on, customer alerts would banker proactive customers customer's the and app have the that some lot banking we the a of flow at Capital of But seen gross the traction the mean, too. And banking. where that spamming think of in modern the technology are -- with a customers of many offers. and of mobile comes of to the we're old provide need. was but our and that can need things they guidance have things some where the if of lots new to important probably

we growing feel that our to So position talk be the but bunch one I It's the is. where is actually that reasons customer’s a of actually, customers, the some have we chances and invest. about great and to customers' be and where really Capital to on. mindshare financial a just features imperative like, right to like at are. real the eyeballs able franchise a center is really our there build to of build you not I But our race think of where lives, One And

Sanjay Sakhrani

Thank you.

Just Andrew. for one quick follow-up

for you and it you and the to we On different number But the as would nice there’s about cards, or saw specifically. the Thanks. items. a with NIM, obviously, loan the remixing, how a increase growth should we the ahead, tailwind upside a mentioned NIM look think probably of that? seem, U.S.

Andrew Young

really touching So on Sanjay, the primary drivers. you're

So in versus if yields. I in side, you're the would call out the quarter factors looking just are there at card that drove it corporate X card

flowing in about Specifically, suppression. credit benefits through talked that the Rich are

can dimensions the level, card that which rates. card then is factors third this that what quarter just have And how fourth to are you really the reduction which trends, counts more by replaced playing line a a are macroeconomic are of play for benefited When in higher revolve by So And aids coupled trends. because fees third card a drivers NIM be that think -- which factor are and growth. you of total really though, -- kick is some the underlying just higher day the quarter of driven to up through but give about I'll is the versus touched of of yield. with of corporately, seasonally cash the things that the the on a and that out, described late delinquencies things seasonal other having more corporate view I seasonal Company figure what pull yield versus in I quarter. that with in tend at up then quarter those in out thing

normal Those ahead, in look yield get to rates in continued like card movements cash, would Things direction. normalization growth NIM, than card tailwinds revolving higher are the a continued headwind. the things we would be in as that balances. but of sustained reduction So payment be other or

another. how those So we'll one things see just net have to against

Jeff Norris

please. question, Next

Operator

question Jefferies. take ahead. next from go John We'll Please, Hecht with our

John Hecht

much, Thanks. actually guys. asked question. Thanks NIM just my very Sanjay

there a Or versus card -- I maybe diving better And So answer into opportunities. have that it are versus Are opportunities better maybe competitive deeper growth in subprime seeing revolver the or question, arbitrage is you transactor? both and prime? auto.

Richard Fairbank

of into growth at the John, benefit transacting the being we really the a a side business, enhancing business, transactions, of other the subprime helps years investing Okay. see the even things, book. can we've you volume and there. have I up emphasis what number prime something but A even Capital toward drive And on the But One all that not but that of you the other transactor real when is continued also for purchase is generates found and only a not differentially revolvers, see more in it thing ends a healthier for side see stands out. segment strategic leaning that really that running really away don't been one migration particular from of the course, that.

really see very in Auto. competition board. that across is card across quest intense We see things board. One. Auto would a pretty the that Capital -- rational So growth marketplace think alive at opportunities relatively the and well I and the opportunities I two There's we growth board say business across about The

all, been four align a or in the strong of credit I again, that's that business terms five revenues, business business. the Auto It's growth, the that led happened very of thing. in aligned performance lifetimes in don't to are Auto the going some there's to have side extreme the like think of of First the the our that planets in

pressures because the in is us disrupting business, auto the competitive exchange, dealer is driving auto to the the the always card whole The the is has middle a competitive Given or in card that eye been business business the had with one-on-one auction. and prospect. more business strength, pressure, to a an at customer looking business. cautious again a dealer of business subject have said particularly that the than And we I've

carefully effects. we so continue monitoring And to competitive the very be

environment and disciplined And focused loan -pandemic growing our continues what business. showing It's auto made terms. unions remain up lenders up underwriting, it And in showing from have across-the-board of we seeing is their to of the and our banks, segments. evolve, seeing smaller market levels. credit across in on assumptions competition more pricing, of vehicle us rapid box. credit maintaining And the big competitive play to conservative the assume many we remained independent the our taking execution philosophy strategy. are and all We lenders. we're credit core In values unchanged. It's sustainable and high underwriting, pre And out resilience gives normalization expanded beyond

with very things see sort sell marketplace. by we on you an and which in kind results is every effectively. wants better see. competing also our tech their help more the business the have powered player like technology get -- because sure So Auto them opportunity the our One competition, that there our that signs to that we that But growing in underwrite we being some cars has the reliance also there are business. have going auto out two dealers, Navigator, we the things and relationship to more Things auto in are eyebrow posted to sound rapidly underwriting and our capabilities and like -- differentially is that make auto returns that of of of on drives understandable raise really is strong in There that.

of and So been. as understand, the as the cautious be aligned go another some forces point to they us and that in have marketplace should those should about auto leaning really we be the those we has all won't two at will led the post understand planet net and planets alignment, But where business. solid also quarter we're

Jeff Norris

question please. Next

Operator

go Last from evening is ahead. Kevin question with this Please Barker Piper Sandler.

Kevin Barker

for Thanks my taking evening. Good questions.

expand the market One environment or your accelerate to in change, in s. to more up fintech? the radical on competitive to Just to of considered some especially that growth it's in the more within acquiring you efficiencies whether about, fintechs your dynamics you Capital order for position fintech within order address to potentially or follow a the competitive Have radical speak develop competitive possibly trying

Richard Fairbank

was on I Sorry, there. mute

Kevin, for there. Thank you, good Sorry the for silence. question the

of are journey number ago As a industry of decades because banks One at way, the was didn't by I've however always been lot. said and buying on acquisitions. matters way other ago, a on -- way, have important someone years of scale the Capital not scale. on we tough how have to started for as a help. And I a by and always the build time, altar looking At lot -- the scale and we the the focusing and most by that industry Banks the scale occasions, one scale, banking it's worshipped is, important a scale would One, think, reminded the Capital banking very most that's of we bank more three

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companies since share And at those a has past, breathtaking that have the some these technology command. similar of have and on looking companies then where us, well. been accelerant. that tech lost compatible acquisitions of number done thing Fintech, stack, of we One we're in course, to the It's acquisition not as capabilities that's are We and tech the of valuations we done and building they Capital a do a an

and are investor, a in do of things stakes we much that we by some and they and want so patient sometimes inspired them, things we learn come some acquisitions. the We're up do, to we with but take be they of the can from partner so of the Fintech And them. them, because real students of some marketplace with

of the is Fintech very tech of have One the of has I behind thing, is to Cloud, Capital Fintech they're because position much out been there tech its whole on since the emphasis we and there that in -- of the Cloud. modern our and on think our culturally, is data And the founding Company the they stack Fintech think focus ideal that Fintech a pretty an every talent the days. I similar own a have an every on is number as analytics acquirer that a out

side. So natural on have I think the acquiring that some we advantages

at acquisitions pleased For made years, looked and we ones with fintechs we've are and occasionally we certainly made. the have

Jeff Norris

joining you Capital I interest team you Relations in One. continuing Have further conference this earnings for on call your and this think evening. us call Thank here today will the Investor answer that for a to thank questions may be have. concludes Well, Remember, our night. you evening any the for great

Operator

conference. participation. today's Ladies this gentlemen, We appreciate and concludes your

You may now disconnect.

Capital One Financial (COF) 27 Oct 212021 Q3 Earnings call transcript