COF - Earnings call 4 2023 | Capital One Financial Corporation

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Operator

Good day, and thank you for standing by. Welcome to Capital One Q4 2023 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Jeff Norris, Senior Vice President of Finance. Please go ahead.

Jeff Norris

and Conference to Call. Amy, Quarter One's much, Earnings XXXX very welcome, Capital everyone, Fourth Thanks

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

have XXXX addition results. In we the summarizing presentation release press a to our financials, and included fourth quarter

Financial Chief Officer. Richard Executive are and the With Mr. Fairbank, Capital Capital One's Chairman through Young, me going Chief and Officer; are and Rich Mr. Andrew you to Andrew today One's walk presentation.

the To access then a and release, copy One's on Release. of please Capital go Investors, website, Earnings click presentation to press Quarterly on click the

and this SEC. titled note factors, our see section or in a presentation update statements. the Capital speak Capital new discussion the of or revise indicated contained for may cause materials any as that and those quarterly accessible these of website financial factors and information not could of today's reports information, materials. the described to to regarding Factors dates Information Forward-looking And at earnings as One's results One the release information, date future Please presentation filed on or performance does whether materially events particular in differ section otherwise. Numerous forward-looking result the forward-looking the undertake in Risk actual this of any in more the from please with only statements. and our annual and statements forward-looking Information contain Capital any One's obligation

over call the turn I'll Mr. Now to

Andrew? Young.

Andrew Young

today's I'll everybody. and of good Thanks, start on afternoon, Slide Jeff, presentation. X

share. One $X.XX million Capital or per $XXX diluted common In the fourth quarter, earned

$X.XX billion FDIC quarter a adjusting were One million Included per earnings accrual were current our For and earned Net per share per was for the results for of special earnings or full $XX.XX. item, share. the estimate $XXX fourth the full fourth assessment. quarter year this Capital $XX.XX year, share the of in $X.X

period-end On Growth deposits X%, a and basis, and average linked-quarter in increased drove up average the deposits Period-end Domestic loans X% in quarter Card loans up business flat. were our X%.

FDIC Our in deposits XX% fourth deposits of the quarter. total of percentage to insured grew

linked basis income. the interest of charge-offs build FDIC Provision assessment. by that expense XX% both in was increased by half XX comprised year operating quarter. driven higher ratio, increased roughly in net X% of and Revenue adjustments, allowance special XX%, driven the Noninterest expense quarter $X.X the efficiency Operating of full expense and noninterest million. with increase points an net $XXX XX.XX%. net of The billion of was billion, to improved up $X.X

as the billion allowance will up quarter, in X Slide basis assets. to $XX.X prior cover brings balance $XXX detail. driven up XX. of of by The ratio mix allowance from now higher total The allowance points to largely December a X. Turning company coverage approximately million our card in greater the I company total is increase balance X.XX%,

most of the variables Slide coverage we rates, quarter, are today's levels. the worsened third economic assume Outside in our by ratio of modestly and drivers from segment the economic of key from on cover I'll to assumptions X. unchanged several changes largely interest continue allowance and

increased by Domestic quarter. in The million. XX to allowance the growth loan driver the was $XXX In ratio predominant Card coverage our The allowance balance by decreased business, the increased basis X.XX%. the points of

points decline driven primarily the by loans the Banking decreased X.XX%. real to the the quarter. by estate points flat a to $X by allowance In in X X.XX%, in segment, in ratio in at our Coverage Commercial million, allowance $XX office charge-offs Banking declined business, by basis our coverage driven Consumer the of quarter. roughly The X loans finally, auto by increased And essentially billion. basis was

have office additional details the included presentation. of on We XX Slide portfolio tonight's on

by billion $XXX balances. now increased our to the in I'll driven investment by quarter liquidity lower Page partially discuss about X. value higher offset modestly Total securities billion. to liquidity. portfolio, by The cash of a reserves $X.X market Turning increase was

Our cash $XX.X the the $X.X position approximately ended billion, quarter down quarter. prior at from billion

in the banking can by You liquidity balances at was parent the coverage ratio company average quarter. preliminary our see up The driven quarter in our third of cash more from versus subsidiary. holding our during was XXX%, fourth XXX% LCR the increase the

I'll Turning net interest our cover X, margin. to Page

quarter net points The driven continued than higher higher card NIM year X quarter. lower yields, rate shift asset X.XX%, XX largely deposits. mix quarter-over-quarter partially than points offset ago increase quarter fourth in paid by a towards interest loans basis Our the basis was higher margin last on and was and by

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

common at than points prior lower Tier approximately capital Our X equity ended the the ratio quarter basis XX XX.X%, quarter.

in Asset and the quarter. growth, offset income dividends repurchases the common than preferred net more and share

to the Rich? over that, with turn Rich. will I And call

Richard Fairbank

evening, quarter Card Thanks, XX shows results a Credit and of Domestic on results largely credit our business. results Card which our XX. Slide Andrew. trends, card Good in shown function fourth everyone. are Slide segment are

up growth XX%. billion fourth trends loans And loans. Card growth increased from year. loan the was business quarter or of the quarter and driven increased purchase year-over-year, quarter XX% was in Ending also remained strong, line about in somewhat revenue the $XX even quarter. volume by volume year-over-year. XX% last Average fourth fourth growth Purchase balances moderating in fourth the up for Domestic Top with the X%

rate charge-off XXX quarter to X.XX%. quarter The year from basis points the X.XX%. up prior rate the to increased at was for delinquency basis The points XXX year-over-year end XX-plus

rate XX sequential charge-off basis, up up XX points. points, basis the and delinquency basis was rate a was the quarter XX-plus On

charge-off Adjusted in of the monthly described month rate have of the charge-off impact X.XX%. would for December, a footnote points onetime the basis For credit was this X.XX%, the rate in impact, X-K. for been monthly December a including XX

has has stable delinquency a on normalization believe run basis credit, adjusted number now. Since that seasonally we months monthly delinquency of its rate and for our stabilized. XX-plus have has up results on course been Pulling rate a August, credit relative Domestic The normal rate this line and into in that same seasonality, we with and delinquency in in been XXXX stability to And January December month window indicate continuing point, good January. in stable delinquency as ratios pretty moving have entries at a XXXX. the Card

We've we seen always said charge-offs follow stability the Based to give in and our of above XX% flow indicator our investors X time, since delinquency out by asking that settling is charge-offs level charge-offs inventories when window off? months. about the should stabilizing and or for less this because been have this levels. I to more point quite where we August So about X the happening, now meaning believe see leading extrapolating move some current with our where seasonality are and from that in is delinquency delinquencies also rates, charge-off to Charge-off recoveries, in rate our the and delinquencies and the to the coming are tends we've started stabilized XXXX which flows on rate This delinquency going. rate have which stabilized, rebuild. months. comes from buckets, window modeling will have

potential economic picking there that charge-offs but of potential and from up less near This moving In isn't longer the from the as recoveries could rather longer-run over inventories. run, additional from be seasonality more time with worsening, such charge-offs to finally deferred from are benefits, and increased pressure term. forces pandemic to over designed the or the indicate be guidance, depletion

was year-over-year. the of was increases and quarter expense expense. operating Noninterest expense about with the Total XXXX, compared in for XX% up expense XX% up marketing to quarter billion of marketing both company fourth $X.XX

the are business card our total marketing. biggest in choices company Our driver of

We Card continue attractive growth to opportunities see business. our in Domestic

transformation. technology our by enhanced are opportunities Our

to marketing our strong higher travel enhancements across Shopping. deliver One and in Capital portal, Domestic business. quarter, the Card marketing spend for increased the also airport included lounges like fourth account Our continues And growth new franchise marketing and media

Card We resilient marketing continue into enhance Domestic our to to and lean franchise. growth drive

competitor on keeping always, a risks. potential marketplace As we're actions and close eye

for fourth year-over-year. ending Consumer driven shows loans Consumer ending billion Banking business. in auto auto X% quarter, decreased the Slide In about were XX loans originations, or fourth originations Banking On X%. year-over-year, X% a basis, our linked-quarter results decline the down $X.X declined by quarter

We Compared sequential or $XX year-over-year Average X%. strong sequential deposits. in up quarter. deposits federally-insured consumer year-over-year the in quarter were were the growth quarter, another year-over-year. about ending deposits posted billion deposits consumer bank and from up ending about XX% up up quarter the X% to of Fourth were X%

technology deposit that insured. our consumer modern the of strategy banking our Powered leading growth and digital strong FDIC and company digital-first total direct by increase deposits national are to deliver capabilities, percentage gradually continues

to to revenue XXXX. for were deposit higher and Noninterest lower in X% about Lower was by XX% expense down about partially quarter support auto marketing expenses our loan driven the year-over-year, offset was digital Banking down increase an fourth the by quarter national largely balances costs. of bank. operating compared Consumer

basis were points seasonal year-over-year. X.X% rate the rate these quarter basis to basis of XX charge-off points. the typical line for quarter XX was was while XX-plus basis delinquency auto points XX-plus Both in year-over-year. up was The up up rate the XX X.XX%, delinquency The quarter, points, XX up and was charge-off expectations. linked rate the Compared with linked increases

On normal seasonal rate XXXX through Monthly auto basis, credit been continued auto earlier and of a and so tracking than stabilize first Card monthly do credit patterns to the Domestic rate even delinquency results. began charge-off to have half December. since

Average linked earlier for results we loan Compared quarter, shows in The the decreased our balances made choices X%. year credit. to down of declines fourth quarter tighten loans result were business. largely the also XX are Slide Banking X%. about Commercial the modest about ending to

rate drove linked The selected Reducing XX rate X% deposits. Fourth driven in compared office our linked trends largely commercial Banking Ending down are rate continuing paid commercial performing X%. X expense X% points X.XX%, X%. criticized rate the balances. deposits for was largely quarter down basis increased quarter. quarter were Banking Commercial these linked about manage the driven criticized down basis to annualized Commercial charge-off credit Banking Commercial fourth declines basis from quarter. up to to XX our nonperforming average deposit were the quarter to pressure were less from points attractive points the The XX from point The about deposits commercial attractive by linked Noninterest less in the Average down about loan also third our loan by down deposits improvement was quarter. X.XX%. on down continuing X.XX%. choices basis The was quarter was revenue also the portfolio.

than deposits consumer additional about in revenue, the and of resilient And Slide seasonal commercial loans. In portfolio, another grew the continuing presentation stabilizing balance in line quarter fourth with liquidity results results to and to purchase quarter of and information were less total maintained we line in credit we sheet. deposits. auto solid posted capital volume Domestic delinquency fourth XX the total Card office continued which strengthen trends quarter. We XXXX and shows of top deliver Card strong and added our growth strong is X% a of remaining our loans. indicator results. consumer normal Domestic further patterns, We closing, already

efficiency incremental efficiency ratio. expecting. opportunities Our XX.XX%. manage net full achieve actual The ratio year improvement improvement was we XXXX and operating to and "modest better grow made adjustments In saw basis annual the than in costs been revenue had our for tightly was we point a to of operating XXXX, XX improvement" the choices annual

Over we've invested And improvement technology. efficiency improvement drive operating as our significant continue we the driven transform last to decade, time. even for over we've efficiency to

compared be flat annual will year efficiency of XXXX. to we to For operating expect XXXX, full ratio, the down adjustments, modestly net

expectation partial are in across up, set late impact October of Our rule assuming opportunities XXXX. Pulling our the modern of effect that an our includes takes rule, capabilities way CFPB generating expanding fee technology proposed businesses. the year

we well deliver efficiency to the economic our modeling as in marketing to We improvements thrive scale. value in compelling scenarios. shareholder of drives remain range We term. at improvement And drive and value continue engine long creation machine broad long-term and underwriting, growth, increasingly enduring to a learning and leverage tech possible over positioned

now And your answer we'll be questions. Jeff? happy to

Jeff Norris

please Q&A Q&A. start now Amy, Thank the the start you, [Operator session. Instructions] We'll Rich.

Operator

Instructions] of our And KBW. the Sakhrani comes question first Sanjay line from [Operator with

Sanjay Sakhrani

real as the on charge-offs. stabilizing to I'm correct? from cited how I'm charge-off benefit declines, has growth rates of color and like here the consumer come I -- and the sort rate, know rate towards leans could thinking for you minuses the positioning from down. resumed with you if the reserve coupled going you about charge-offs. thank recoveries Rich, here inflation And pluses interest should improvement feel curious the And forward. think the income just This, But

Richard Fairbank

Yes.

really that extrapolated charge-offs losses settling Sanjay, So look note, and by my at delinquency I way, first so higher wanted XX% also about half in of all, year, wanted losses. should share comments, are half I out, are levels. yes, I just buckets, our of to -- second is our the we seasonally than my credit sort -- first my XXXX comments which any where above And with

So first the is within the normal year, peak. half, any

Now not really economy, about dynamics longer from the as about pretty of a guidance, strong remarkable economy could certainly I unemployment, said, giving go think place. here. we're From let's we're at an a how run but point in things view,

if think, than downside I Perhaps anybody to more I unemployment does. than insight has So anything, have else more upside more downside, don't than has those could upside. does inflation have it it any but

you pandemic. And stimulus about and the are the were believed of that at delayed with forbearance to your so otherwise absolutely you think over permanently, certainly but set I got that, of play time. going kind that think for had also experience and when two for time I we the we've some long the guys unusual some talking all time I delayed. out averted charge-offs got happen point. the on, just And consumers pandemic have reinforce that effect that been about There charge-off good should would from that want think to a

think And part very what's other it's with it's we that so phenomenon been I its course. And run think call is much this in that intuitively something a but effect, a the quantifiable thing of charge-offs, the really delayed I and normalization recoveries. will -- not happening

dollars the in to thanks rate a our recoveries, really depressed pandemic, dollar charge-off inventory, number strong, per So of the at while the level. were charge-off remains recovery,

we out be origination should the a now inventories of that I our lower there increase, And they're and with are guy. Also so that starting bottomed look are also are than losses strategy consistent are credit good as and choices to these have normalized, we starting -- at to when underwriting we course, and where gradually now. longer-term make, has

really direction, but sort things guys. good a think focus there's credit could our the focused And to settle certainly out commentary of consciously So that either of point some forces then of we out. in on where list I work you

Sanjay Sakhrani

Okay.

and it? Maybe, a just year? we of basis about rates coming stabilize? on NIM, a think could reserve down, go-forward Andrew, you how talk rate come movement over with about And should it maybe also the Just Can how about should follow-up. Should we the the down? just course it think on the the

Andrew Young

Sanjay. Sure,

start NIM Let which we me negligible first item, quickly and some pay have be balances will with housekeeping The just compartmentalize two allowance, answer. a well, whole reminder those But a that seasonal in therefore, is to quarter separate things. off QX, that respect with let the me a in coverage. tactical first have

really of there. Longer and QX the provided So that, a there. fulsome itself play is are be leading a of modestly indicator lower of losses are a to reverses of delinquencies best but said going QX, in it forces in the Rich driver of as and at dynamic modest all that again, real before, the effect description And ratio result though, biggest we've coverage projected as the coverage. just term,

economic the to from visibility months just also remainder have with the delinquencies. quarter, So a first X the every through window the the we're the the given average. next by And be that looking then of predictable assumptions. projected reversion XX informed perspective, then but that reserve losses more at more far really consequential calculation long-term to we in going of And

flat. than and or ratio last coverage slightly what roughly And in stay seen quarters, you've card we've over things with out so few played consistent expected, have the better the

in coming would We that see of think after see coverage a period release but and note you coverage modestly like declined might only future as in seen, the that flat coverage nongrowth-related important in or are remains today down eventually, that projected quarters in the we reserves. well period where a losses than very a some that allowance, stability even indicate into we've scenario otherwise incorporate I could like lower of release. a uncertainty of to So it's ratio a

Richard Fairbank

NIM?

Andrew Young

at one with first we're and fewer I'll to But here point me to let see going X enumerate everyone of lot the NIM? factors also play takes and remind NIM, Sure. same in headwind just basis a day, that maybe roughly with do the There's the to NIM, then with housekeeping a there. quarter, puts NIM.

and possibly the before, sheet tailwind, On balances we've $XX of side, that's in something also We've higher of certainly this billion. as but a total in of growth card tailwind today percentage a talked and within those rate, a balances, balances last lower about balance even couple seen quarters, then and cash over the cash balance. the revolve

$XX but I down to expect think come a at from were time level. with where than I about the think today's I we back bit is quite billion would number don't that get higher we'll is, the prepandemic. Fed, prepandemic, over will

be tailwind So that would to also NIM. a

the side, the up deposit though And see the creates bit decreasing deposits, some will even assets betas. quickly potentially competitive rates, if to the downward on continue cycle. in going rotation July, On pressure to a has have of a and see and more the and Fed an moving than starts headwind to product then upward we're QT betas on stopped we reprice impact Fed the even deposit the it of environment backdrop the

go other the that income that I then uncertainty that up. the So pressure. And credit, a quarters just over last suppression of up headwinds, interest impact a seen potential you've has as around go as could things path would regulatory create highlight margin as changes just the couple would well bit of potential losses of as few

pressure that also So NIM. creates to some

you partially play. from hard I interest forces a say, But a was say what based kind to but of that to near in to of believe gives really the that is NIM materially and NIM takes, sense pre-pandemic than term, least because this point, that, of our will of me going remains all of leads where we at about was different balance wide puts detail on say level structurally it's kind sheet there's nothing know at longer today. the where go rates of I fairly term, path especially into that would where over I was list the but of know So much go at be it the different that it to

Operator

question Ryan Goldman line Sachs. next of Nash comes the Our with from

Ryan Nash

I when you're tone on expense billion We're of growth. growth. about you some look, year, $X hearing a cautious Rich, more second and the put to about marketing of little straight for bit strong with a drive continuing others

just follow-up. where increase? market? leaning seeing are in you have And how best really, ahead? to a about, the maybe are So And the about And I you you do opportunities looking And are talk in? marketing expect you growth thinking

Richard Fairbank

Okay. good We opportunities Ryan. feel the Thanks, the very about in marketplace.

there in business. But But our especially see leaning we driving in to to that the we fourth a in. so board, we the leaning a continue quarter. want factors are the across definitely continue We're card opportunities lot quite So can you just key of in -- up, to the are was marketing emphasize. see, there obviously, few pulling marketing

growth sort excited the of We're we call edges. -- all, around we're of we across First the of our edges over last adjustments years, and trimming just around about some number what making made the business. the have, really opportunities

more that we're that. it, opportunities results really Lately, getting there's respect in a better the identify beneficial, to business sort of us transformation, create the we capitalize we're allows machine technology have going just and learning investments very we're place our it's more lot and to with a basically customers way. think been the on the trimming And stable around leverage but to really customized more attractive for after, data and for to it more zeal course, of solutions along to and models I has even of not

be overall very strong. the continue to opportunities just So

experiences now to at investment, sustained, in almost for our win after part experiences, we've market, is XX and of like elite And portal. relates heavy fraud servicing, incredible high the levels the and see the of to second And out top groundbreaking online market. you those of high-level, go customer going course, things our in defense marketplace in The management investment, digital customer quest like the importance spenders of of needs quest years. marketing And really the ensure intersection card advanced best-in-class -- to risk that to the been flagship of the the of the that can always in to travel works. products, top

out general and lounges And marketplace experiences the services in aren't that to increasingly, and exclusive such we're access just also rolling select as properties. available airport

towards investment are So quite and And upfront continue here. the obviously, that into we marketing annuities of the of long-lasting, market quest top involves just bit growth annuities. investment for to of wonderful, fabulous a lean a lot that

national And marketing just our vector smaller a is of as And a bank. the real footprint. efforts to continuing third branch investment have our we build reminder,

And continue, heavily investments, And our on there there, years it's national this digital to our investments lot so leaning traction we and the and but and of with marketing in brand making, our and we results. pleased are build been the definitely bank. we the love really are cafe experiences, in organically technology a more to lean network, our

of window about across as and we see continuing kind the it the thinking the we So and we see are -- are opportunity board the capitalize into on how we're opportunities those Ryan, to that behind compelling it.

Ryan Nash

part my question, put talked Got fees aside Rich, which stable late modest would you continued first to of it. fees improvement. about And escalate improvement, the for imply you if

how just On you fees? do late a offsetting fees improving timing talking we're efficiency, of And about efficiency, late are the back were pandemic? before on the of journey then operating sustained you about the like you thinking ex think second,

Richard Fairbank

you. Thank Yes.

our story a for cut companies -- our I continuing And on a of I lot been about efficiency, So same it's to a years. energy greatness. are to into very certainly both of the and the building revenue -- and And their by of But bunch way model efficiency, and the our costs time. just business efficiency growth story drive think experiences has really, we technology the of drive it's about at cost think, a by lot been a consistent building side powered customer we're business. to put -- --

about that. is the benefits powered see talked we've of we so much how by And technology, to this of and continue

-- hand, So a technology on investing at and the -- hand, into the beneficiary one investment. leaning there, keep the as the we opportunities efficiency growing technology keep to see on other a of and drive

up, So be any while from pulling year different particular can way overall trends.

We continue to drive believe investment we're the of operating that an years investors, is value continue efficiency. and important proposition part making of with to the greater benefit of the to

So did you Yes. have a question? CFPB

So about turn, let that. talk me Ryan, to

approximately So contemplated late as fee would XX%. reduce proposal by late the currently fees CFPB's

CFPB's we there at the the While this been and least to of industry an once litigation litigation rule, CFPB about publish maybe we a and the soon, implementation has estimate to final of the or publishes October. implementation rule. you half that finalized, proposal will rule saw, CFPB could second until block likely the be of expect the This proposal year the delay talked expect we its not longer, the of delay

is in the to the will have would near what path to significant our our implemented, If be proposed rule term, been. relative P&L there impact a

changes this our to and believe that gradually goes our a rule will products that of choices. policies, However, couple we're resolve mitigating set the we through a we choices after of include years have into investment working effect. And impact these actions

and take come before few change the many rule the effect rule these after will takes effect. a place are of already takes will change Now some actions underway,

Operator

Our Cyganovich next question of Citi. with line Arren from comes the

Arren Cyganovich

hoping was business. I auto talk a little about you'll bit the

potentially back about to bit pull billion originations, a this a $XX of of make side, pivot you some at you're wondering thinking how when there. healthy feeling that about just from still You little might but a amount originations continue kind increasing year,

Richard Fairbank

Arren. Thanks,

auto cautious of we've So a a time, couple business. been of this noted headwinds We've the now. number of years period in in for over

all-time from pressures vehicle the of So credit values high from interest car from their Margin let's normalizing tally and rate up. normalizing interest pressure affordability highs elevated cycle, and the combined them rate stemming prices. effects still

we you terms backwards us. growth our that as we're from setting we with and Now in don't comfortable what disciplined gives the pricing remain know, targets. take and work then market And originations,

the in tightened and resilience of box manage XXXX, raised our lending. steps other back to price, at end took low our the So credit we market, of the

originations But striking, been has been ago. of you see. our X result, auto we've The pleased a result been as of years can our lower than, just like As a performance originations. of rate really actions, with very course, our of which, credit run performance the has

peaks. rates So that on originations risk XXXX particularly down their originations stable. below have vintage, to on normalize, from as our remains risk interest new is over even the last The saw originations, recent vehicle recent have actions. margins vintage as values result our improved well, over the as couple come months pre-pandemic from continue of most probably remains we what in our of And

performance quite So good our the about feel originations. of we auto

I the our continue own of about that we risk. are striking So of on headwinds some to or But emerging of for where always we adjust strategies growth see think easing, results seeing and headwinds, are think those the when do. our But what we book we some opportunities really that's pretty we're and course, gratifying.

that outlook, caution. gives of a with a So note still us more bullish

Operator

next line JPMorgan. the of Rick Shane question Our from with comes

Richard Shane

will delinquencies you expect are about understand, December, I'm year, the up XXX points, year-over-year will in are charge-offs into has we the into though is very down. be that year-over-year given that basis I -- the on they on that the through framework charge-offs continue one rise do for -- increase is observations you've that the even consistent second half description, the to up basis curious 'XX? would of points are still half that basis December through in second would year. What up substantially. trending delinquencies, a the basis, of of will year-over-year the given a That 'XX, even still be charge-offs suggests, slowed make look some of your versus Rich, But we with first when seasonally, XXX year half

Richard Fairbank

So on benchmarks. think the I way most stable to best is to think focus this about the

about Our focus is stability. here

we're XXXX, to. So leads most can we back are us at XXXX. that the anchor looking really to And what that stable really benchmarks

let -- that, comments a so bit me little double-click And just on into speak sort of sort in that. my of

this above levels, to tracking for the the pretty of are And January running looks above level compared like May, entries at level with XXXX, stability. point, for seasonality good and delinquencies in as XXXX since XXXX. Compared of delinquency our of above to quite December, we're same normal to a pre-pandemic now the XX% we another since been some have around we're XX% based it's but going And for window that they've time. the same running around at of August, month into be month well, month XXXX. XXXX, So on

confident So delinquencies credit of we stabilized. And delinquencies performance. our are course, declaring feel indicator best of have that our leading

second have leveling charge-offs that stabilizing been this charge-offs off the of XXXX. to well. the our delinquencies is catching up what as are here our declaring over half trend at Our we're in But point,

of than month-to-month because more volatility by X delinquencies there's bit, of in includes every point inventories. data charge-offs delinquency a in Now months quite delinquencies

And of reliable end the bucket. at benchmark. noise also looking quarter at off less charge-off fourth makes charge-offs in of small some number And last there of that the was that course, falls the relatively a is it XXXX as the

levels. that benchmark this year. just our our quarter, charge-offs charge-offs, actually fourth happened, to we were our comparing quarter XXXX of course, XXXX above think for In a fourth even an rolled stable XXXX. XX% XXXX into charge-offs about net the And past for is better in So

XXXX, at as and compare So that's into we benchmark an appropriate look to XXXX. to head

rates, XXXX, we recent some course, look we above our from net Now current and normal inventories typical volatility that charge-offs stabilizing are and flow at with, conclude XX% month-to-month about of extrapolating delinquency seasonality. our when ahead,

Now of of driven stabilization course, back we planted that quite long XXXX. and the choices and in now, this a partly by XXXX the time seeds been made for have

and Fintechs Coming flooding were creating subprime out pandemic, selection the potential two credit were the originations. market, with worsening concerned the of about the we especially trends. for offers, in our adverse credit market,

that and forbearance over would fees consumer and We inflate also scores would that temporarily revert pandemic anticipated era stimulus time. credit

tightened been the to margin there the have effects, been the stable with in kind years, number the the striking. origination vintages. then. make our noise has adjustments strikingly we over our normalization, and performance So That we of the continued last since of of changes, has underwriting all on at result anticipation all that And these

portfolio, basically in this it lot each top quarterly stability our In has a consistent -- over vintages. vintage into our our And with less ultimately, a post-pandemic on to other more long. been all of of also relatively of originations, shoulders or increasingly and time, just each manifestations, given the stabilization and said, for credit that for pre-pandemic waited stabilization we exactly created moved we've see so have course, these at as stand We, trends. portfolio contributed looked And are to of that much stabilizing. portfolio the of our this, to the on, to very good segment still

And and industry work tend over own recovery we once, effect to running of our is, had overall a average above Another by the our larger point a to to competitors because of for recovery so than for the years. we our way, charge-off And not all contributing recoveries, because level the One we therefore, sale. to is Capital charge-offs level most low of in the levels. pre-pandemic because X come have largest recoveries. time, over at tend have like a meaningfully for here. This rate rates raw they driver of stabilization this than is low us in factor unusually material recoveries just higher debt past very future course, the of and been And rate, low

our And course, -- now this recoveries started that's, confidence that's started and to have that up And inventory coming our has recently to overall -- pretty trends our that rebuild, back recovery contributes and from and we've observed our has level. of loss that a our a stabilized also although to stabilized. rate low guy, so tick good it's

like those stabilize kind to seen it XXXX, since a of with charge-offs XXXX do benchmarking in XXXX. experience, -- of two delinquencies really out recent quarters years is the and stable multiple as where We things we've to really are is our question, best And describe those which settling to what and to relative of where you we the sort felt when So compare your anchor you stable generally to most done language to years. in have benchmarks.

we've X a with of those entering XXXX now year as real And where benchmarks. sense a are we stable are so of we And benchmarked stability. multiple

Operator

Our next question comes from the Cowen. line of Moshe Orbach with TD

Moshe Orenbuch

Maybe, just up following Rich, Great. on that.

and I loss delinquency given I talking loss card spent the the think of have that been coming the assume of a spectrum. of the the with lot lower that of on bulk that from dollars you're or the stability are card dollars But kind about, of business. end in marketing the and transactor space

that? that's XXXX? an mean does do follow-up. So how about should for we that think expansion have Like And I that area a in

Richard Fairbank

what -- area the Moshe, you lower an is end is Sorry, for expansion. saying are

Moshe Orenbuch

Yes.

Richard Fairbank

So been the time, in the we good -- consumer. for across segments the us have health card you've we Moshe, known about and and we what also together. credit as -- And we've decades, feel a talking of spectrum our long all as relative of feel the for long

You at we history know resilience of profitability that the of delivering a lower marketplace. end and long the sustained have

we just let's this second. for And -- a on reflect

product you're through But way, talked if the the of the of strategy we've this requires there's whether important X the we've you're attract but and and pretty that. by is has do has Recession underwriting card, credit a been and -- of underwriting. deep -- the been And striking about years testing of when serve. subprime we course, with to is of that we One and most analytical the obviously, about decades end there's information-based the the honing about that whole end lower this lower us part you and business the a we marketplace that and and investment developing resilient terms the doesn't And in spent of in tailored marketplace the over Great If how franchise, the and X whole talk capabilities structures sort and marketing the complex what's talking talking serve. Capital been operating and we of really to lower this. And end our #X marketplace, marketplace, -- consistent serve following how as a also things

If and market. the cured in little curing off going of story FICO, the than leveling talking it very normalization look curing is -- the board. or across we're of story, It, in a you earlier that's started the parts the even other bit today some at market. absolutely look about the But either solid on, of we've at income that fact, seen part the

the you've the of relative though, And see to fintechs want the the see market the They marketplace, the I point, were I we we stabilization, when overall certainly we dialed the think sort vintages, that ago. continued I say, do flooding dynamics there, the we portfolio think very will Moshe, had years to have your whole opportunities we about now who also that into One's concerned of some stabilization back. that. in Capital into success and leaning our like Moshe, of be and that massively

Moshe Orenbuch

fee not And financial late of a the impact its just about mean, deterrent impact. you've I the past but as just follow-up. Great. talked the in also

any the do post late think changes fees? you that to resilience how of in as segment So we that go forward of about terms

side improve of do expenses mention a dollars that And late I like just even you thought with the could out that to you seems have ratio did a maybe take efficiency mean, you just of the to as couple point, million you fee. that. hundred

how answer tack would a talk there's the and that to what help, way that So on happen, if would -- too. that about to

Richard Fairbank

-- simple Moshe, of many we of to sort And for overdraft marketplace, very no no a create minimum strategy the and built strategy side, of strikingly One banking point a pursued mission some we the -- even a balance like, this, Because and simple Capital much requirements, years the -- so trying and fees. So we but on fees for so in deliver brand example, has believe and things products. to view, membership no products. over having

we is So value a speeding because, but would left, the here, your on the plays to most deterrent I we hang an company important consumer. has a think we use the had fee late point, to a And reduced ticket. that to fee the is in we really, very sometimes if analogy really that role fee fees, one are it

I of fee. think an we highways speeding think not alerts behavior that all very safe speeding are to active quite sure the I'm now that because would let's ticket we're been for they were really say, that as consequential our if in really the deter trying really of we as ticket, $X a be had our -- is customers. We've is that people, role to giving if

to with on to the -- not payment of trying do late actually fees, customers. maximize alerts trying to our late performance When of goal maximize trying the but payment

certainly worried, just for choices it's be question to late is this significant together performance on we to experiment, into what this to Moshe, credit created of we very across things an your if economic on going impact different having types the question from experience So as a we've set that important And I've all effect, about obviously, And not of P&L. about -- a we're talked could going goes -- we're rule down products, of been fees but the investment sort have us the this controlled CFPB to actions mark something the point structures, of that concern the individuals. are pricing a policies, back impact. a about that. But about, thing view, from claw financial of many have

Some of those underway. are things

fourth to the efficiency to respect annual quarter, but fourth be way, impact. by in and full late 'XX time as will the to of them the of still -- something big rate an run quarter, into mention there, the then impact Some ratio, in does rule Obviously, be doesn't have when get something -- the coming the in company is in it, happen. With waiting of fourth to by it year are the the estimate, coming we by on that effect. majority announced, the our offsets still the a have just in, some the much is going

modestly the So effect. it, essentially, that guidance fourth quarter underneath on a of efficiency what's includes the quite to progress bit flat that ratio is implied down behind

Operator

ISI. Evercore with John Pancari from question comes next Our

John Pancari

I'll the two-parter In all late the here. given it's time, of interest my ask in call, upfront

level and this CRE. office, a saw some this full on lumpy to question expense? it credit First, or in Does stable quarter year. that above I in my on modest year I marketing could know indicated marketing that still that, some I real then you Or estate mean this continue the about you lean be how come side, the what could know billion is commercial in expect marketing second on see pressure criticized the that marketing you side, mean, nonaccruals. losses thinking you year? on to decline? And $X imply in on you'll you're does had that

color outlook you If give little charged more terms what us that just could bit there on of a off in front. you and your

Richard Fairbank

depends, Okay. John, we year opportunities is thanks course, full don't get there. typically on marketing for lot -- see the marketing give We good here. of because guidance. when And a the reason that your questions we

the making sort positivity the particularly Ryan respect to question after both going And So we structural what is, also I and the more in seeing wanted with about performance business, just continuation of Nash's share -- numbers in response the response the feel to our of real-time in of a that that the spenders. to investments of that. heavy and we're then all vintages we're

like to have continue the see. that certainly So we full we year don't guidance, but we opportunities

Andrew Young

fair lot generalize And on talked about the both property side, of individual a office. B, a and properties. than a us It mix past having A in the is cities frankly, the whole it's and John, We've virtually to specific. incredibly But matters impossible the properties. amount office decomposition then, gateway less having C in

losses saw to the more loans. what was And in we $XX tied so million than office little a quarter

quarter, the And amount. that back little at for portfolio about entirely down down had essentially not the to $X.X XX%. it's the in reserved bit But come around balances $XXX about as for We have to our we we off total built maintain charged think in less up I originate than their coverage quarter, remaining of a million then billion, the we X% continue loans. to

Operator

comes Fargo. Fandetti Our Don question Wells with next from

Donald Fandetti

spenders. Rich, of on progress you've made heavy a lot

you many of on where look Or of are are there's are cycle? -- still in? expense Just we where that we where scale sense cycle? sort you we, trying sort on you a some out, on looking Are some at to hit that level acceleration? investment years kicking of type As I get guess, do of

Richard Fairbank

small marketplace, Well, the as be can the heavy the spender Don, getting to is way. is for a the of it it the part in think key the players I will more we're of it's -- quest The really number way same to that after certainly who who the spender quest players in it heavy we out going and win -- -- the are see more in business. far scale as along

growth up over seen rates in heavy you've -- looking spender. monotonically by we've is spenders. a segmentation of towards more go the it any the rate you what the So the level years, faster. at, been purchase the monotonically growth see growth And is The purchase volume volume, don't you

indicating getting a of So just we're it's there. traction lot

more why all with I traction. that's to players the pleased continue even But largest, invest including And in customers where in the a more investment getting to that do that and done just achieved of blitz is have is a kind wouldn't we scale So and business to the we're we really continue with we're way want then that to business. the by the the say business, that in invest.

Operator

Bill from comes Wolfe Carcache with question next Our Research.

Bill Carcache

weaker a and have you're and of I'll in you're about is return you stay from arguably instead, how that. here? runway out you, that on a that dynamic, and There's bit commentary a way? some ask any now all growth Can little whether you credits a would very I purging of experienced for coming we'd on if had But on clear provided update Rich thinking for muddier in just a clear cycle. Could speak how that that, Andrew, seeing and it growth follow-up, that about late would the credit. Andrew. the capital view what mild thinking the in of we're weighs still appreciate environment here Rich, as us And to you're from recession

Andrew Young

bit this point, aware the not the at look, number quite Bill, start? there, including I a a win, which capital, fair rule proposal. around at don't of advocacy forces a will We're of of remains of of and there's impact still risk and of been all least where phase-in like play. uncertainty uncertainty is why endgame the AOCI Rich, the ops and other there remains things and there amount

that, the on see we're waiting addition to don't this we do, what holds we -- coming in scenario there. much year. know final CCAR, we're as up the have to as rule for So yet you and But we're

at balance to the impactful scenario sheet as the You is look as back how those starting well outcomes.

last to our And I XX.X SCB here years X. now down You've seen the over think, from, we're sitting at fluctuate X.X. X

little is I'll consensus a of clarity to range outcomes to hold. And wide addition, then growing but of our outcomes of continue get a see there's in more finally, So CCAR just waiting a still of will we landing, bit soft what range in point there. own And growth a there's to projections. the quite economy, the view

that the And when feel for in when under And the and so. to so we think XX%, we'll it it's have value. operate use to do flexibility is to repurchases SCB prudent given recognize way create excess framework, that last that we all of we capital we position, that one chosen manage flexibility dynamically, factors, few quarters like we're an we've returning around those to

Richard Fairbank

environment might late that on lean that to is continuing some in, comment cycle. the a Bill, argue our given economic people

great a certainly question. So

So eye wary of -- But continuing to change. the bottom Obviously, in. keep with could line lean of I that out sort a there of we for all, the is we health consumer. first the are things start

X of of the resilient overall the proven the economists year, consumer in excess many that after bit declining. pandemic, rising in a defining new past repayment the borrowers. strikingly rates. near growing prices low loan the although now and rising years. levels they strength plan, again Inflation reduce have really of burdens wages interest real Student repayments labor also highs. In a -- and are the expectations in Again, almost income And XX-month I the a over source which October, across lower U.S. market those rates, point numbers on-ramp has are back interest doing has by historical face consumers home think from to for the period resumed significantly remains economy. shrinking Consumer relatively will all-time income are better moderated remain for income-driven but there's all aggregate, despite standards. the they're servicing savings payments debt and generally still

it's of we of our even the that on that's still that to real look see by We the off have gross shape then own So that's the whole, is the really, we've have but Then really results we leveling times if in in for -- really, we them allowed charge-off And delta. the and on the higher XXXX -- a think I'd we marketplace. a I done see sizable a at compared of from get are continue we sort that results lower thing to our inventory in haven't say like pulled But of in that competitive our are to XXXX. the And consumers the inside debt. the levels marketplace, in segment, we look historical alarmed wake as compared trimming have the the differential had creates recoveries charge-offs, stable average the pricing quite actually, we good very most good payments the so above we we've really, in the XXXX or off to vintages, benchmarks. actually, portfolio. And at themselves. our rational has we performance level in relative the at we pull Then business. recently edges off competitive, of things of stable. And marketplace very it's seen few much of last the auto see our I -- a business, and industry years stability. about rational of recoveries inventory by the -- pretty we and underlying then charge-offs the lower XXXX. practices that the being card -- think, leveling you've by how stability and diverged some a back that importantly, past, It's then the portfolio, in ways but come and talk XX% as the over around net The to it's back interesting, just prior vintages most to charge-offs close gross leveling but to not top charge-off

way a way the lot pandemic, customer is cetera. view, better, underwriting, feel our those credit relative for us business, said I we on always a well, I the I it this. but the felt customized competitive marketplace, years reaching from marketplace So before, us success of in won't with good. experiences, in so all calibrate unusual share credit about marketing to enabling our a credit be help other continue to unresilient really that of tapped -- we is less itself et terms And even to create to that the abnormally a in times, good, of good like obviously, because don't the lot point and this the underwriting, actually a quite able practices, unique, results, couple customized the to that, brand pulling worry up I but in business, reasons, pulling traction said things the lot. But of to who in The ago felt I a create couldn't a seeing really I actually tech position we this putting the channels traction up, side of totally hadn't if

really had, if the kind landing term relative what think is the business, quite word economy which soft from the of can conversations soft kind as really, actually, One, still of calibrate as all I've here. landing Capital we've way is the borrow right I landing exciting relative I times landed some good I sort haven't fully to credit years and on the landed. a is this, So I in to of a quite actually declared this the pulling journey. today if to feel But really competitors this time up know And over I

Operator

from line Dominick Our of final with comes question Gabriele the Oppenheimer.

Dominick Gabriele

have XXXX levels? I a particular. shifted card you industry are consumer the may consumer One Capital actually the charge-off do Is the forward? in And in making two be think follow-up. where above Is the questions. that payment seeing, behavior XX% general, think there something net Or in rate a you for just through-the-cycle something charge-offs seeing what you have higher net I that's there changed? that's Rich, stabilize going

Richard Fairbank

really that now. believe here actually It I very to is through up situation similar going right One the So what Capital we're lens. pre-pandemic. And is seeing a to credit showing I'm that's speak

Capital I industry. think, that charge-offs, there, to as you at the One. they're I'm to mentioned settling going not look if But prior where I gross in universalize the out the for answer for --

around this edges. Capital One has -- the the a trimming around is that lot the done trimming Now last amount over of edges a fair of

unusual sort above, levels. -- we that. But benchmark get charge-off we really first stabilized -- is it's we a to of fooled as probably and we're to intervened incredibly credit will, we said, of strong was from of consumers, and by score did you an that very we It at might to not XXXX so performance think I it levels. stabilize, a stabilized, have and and number result our we number this important is XX% when very choice. about universal. so I'm the that But saw at close choice of of models this moment sure forbearance, been alarmed much also Already of that, a didn't one to driven in the XXXX stimulus if say, grade players gross -- essentially we the sort became inflation, that normalize have by credit

recoveries temporary So our don't as collect effect a a much the because recoveries of are so should guide they time. good effect, is just that over to lower that on. That's much which help have charge-offs inventory

of we So started also we the talked said the sort and pandemic ever I side we've think the -- of We coming as other since of about, out have about talked pandemic. the have let's in happened charge-off if that that it, but would happened, think another all about effect, didn't. charge-offs you that many have there's those delayed call of the would effect, pandemic

a certainly of normalization a charge-offs over temporary measure ways this bunch may reprieve over is elevation but others them gotten thing. felt of charge run, have an something this. of we to have long think the that is out we And off have It's to equilibrium. time. playing been effect leads we -- also it, a to not for Some are that but has measure that can But to that nobody an this what's we try probably relative going precisely

guide underlying guidance off XX% the that's to right off, because to recoveries was above to a effect me speak if there very leveling credit past. seem lower what from at Capital to One's point our was similar now, So view, of leveling XXXX. in The you the the dynamics I of

their strikingly -- think actuarial guys can show being a we through all credit they metrics more things on there there and some the more the was just of good the before equal, to that even what wary pandemic. way and are keep I as eye the sort similar help other business economy, that making there's

things speak I'll -- have So pulling shifted. don't way think I don't and I think, up, again,

seeing where and good feel we of great assessment about we've we're a out. Capital some we're -- stabilized, think really future. our But trends playing for we I One, see

Jeff Norris

One. continuing and Capital on tonight, for very you Relations The your you for joining Investor the much, conference everyone, available. interest thank Well, is thank us call team in

evening. So questions see answer to me a further have them. great if you Have

Operator

concludes conference This call. today's for Thank participating. you

disconnect. may You now

Capital One Financial (COF) 25 Jan 242023 Q4 Earnings call transcript