COF - Earnings call transcript Q1 2024 | Capital One Financial Corporation

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Operator

Good day, and thank you for standing by. Welcome to the Capital One Q1 2024 Earnings Call. 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 everyone. Josh, much, very welcome to Thanks

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

Chief release the Executive Young, XXXX a Capital quarter to financials, we With One's Officer. Richard Officer; Fairbank, me Andrew this Financial Chairman In presentation press have One's this Andrew our Chief summarizing and and addition Mr. are Capital you and walk to Mr. presentation. and first results. included Rich evening are going through

statements To Release. website access and of and Please the as does or contained the or presentation may and of note and click or of discussion to whether statements. obligation on presentation One's Investors of date dates please revise information, on future materials new then press and result otherwise. click that regarding performance and this as only update release, any a materials, financial this the copy speak forward-looking Capital One's in undertake any today's click Financials any contain Capital information, indicated Earnings go a Information Quarterly Capital in to forward-looking particular and the events not One on

cause differ could materially statements. from our to factors actual results forward-looking Numerous those described in

Mr. the of to Risk Capital with section that, section -- see at turn call For the and forward-looking filed information annual called reports more Andrew, Factors the Rich And please the in release information the these over with website to and on earnings presentation and I'll One's factors, SEC. accessible our quarterly

Young?

Andrew Young

quarter, the for of X or will in I for Thanks, accrual share. special presentation. the the the Jeff, diluted was $X.X billion Slide our afternoon, earned In One million updated results $XX on additional FDIC and of Included assessment. Capital common good tonight's quarter a $X.XX per start everyone. first estimate

share X%. deposits were were prior $X.XX. held quarter and decreased period-end deposits earnings loans period-end this average loans investment item, adjusting per for increased quarter, the Both Relative of Net first flat. average to and X%

insured fourth the of total the the in X% at Our deposits. quarter adjusting percentage from first remained Pre-provision of in or both increased quarter FDIC XX% special for of FDIC earnings impacts quarters. assessments XX% deposits

Revenue in noninterest by declines operating X%, an adjusted decreased Noninterest driven on quarter expenses. linked the by declined largely lower driven X% income. and in basis, expense both marketing

$X.X million was million offset the billion provision of in Our lower quarter, charge-offs. $XXX $XXX $XX to in a million was reserve driven compared by build, net for net decrease increase The quarter. losses decrease an partially credit the prior by

X% to than the quarter, driven and Slide by this modest in less Auto I built billion, bringing $XX greater Card an fourth portfolios. from in in in balance quarter. The $XX.X increase builds Domestic X, the allowance cover slight increase of million the will allowance our to We balance allowance detail. Turning was

drivers in increased Our XX coverage ratio X. allowance on segment the points coverage by X.XX%. and of the ratio I'll cover total portfolio changes Slide to basis

compared quarter assumed which with this aligns to generally improved last modestly forecast consensus. what economic baseline Our we quarter,

outstandings. The of a consider denominator basis in the seasonal effect In the outcomes by the primarily ratio increased fourth coverage business, driven range to the continue We quarter's to Domestic by our of our Card reserving points process. allowance X.XX%. of was in runoff economic XX coverage increase

to our driven driven was million, by Commercial ratio decreased X increased level finance basis in $XX basis In by Coverage the allowance by The allowance business. by of million, originations X.XX%. the by Banking the a point Banking contraction. And increased increase increase allowance primarily to Consumer coverage primarily $X in higher a segment, ratio. oil X point our portfolio resulting finally,

liquidity Total reserves to billion, Turning liquidity. Page $XX quarter quarter. higher in now increased last to about than $XXX the I'll billion X. discuss

the billion our balances. position $X retail the and The at the up seasonality banking our prior business billion, cash by in ended cash of $XX about approximately quarter Our increase quarter. card strong growth driven in continued from deposit was

Our average quarter regulatory ratio and liquidity first XXX%. coverage remained during strong at minimums the above well

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

having Our day first was asset higher yields quarter. and the margin quarter net were points quarter. in in NIM quarter-over-quarter impact year higher Modestly was offset basis costs quarter. X.XX%, last largely ago in basis the by X than the X funding The points the decrease interest quarter X of fewer lower mostly by higher driven than

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

ratio Tier lower shares Our and impact quarter. risk-weighted the XX.X%, higher first in capital phase in and offset than assets dividends than We of CECL million points basis XX common of approximately prior repurchases. repurchased equity Strong more share the earnings at X approximately ended quarter the $XXX quarter. the

volume limitations transaction. related Discover turn the repurchase was Rich. I announcement and the restrictions the Our blackout activity over With in to purchase impacted quarter will the daily call of to by that, Rich?

Richard Fairbank

quarter. first Andrew, business growth largely Credit our in strong segment the was function in volume good in Thanks, a evening, Credit XX Card results of Slide line remained Top growth for X%. purchase trends Domestic the first results on Card Domestic quarter business. Year-over-year XX. the are everyone. trends, Card quarter and which Slide shows first and our Card shown are results

Ending basis increased in increased to X.XX%. The rate and growth its delinquency charge-off quarter volume revenue was the the points XX-plus end $XX.X basis the increased at prior XX% about driven purchase year year-over-year, for up XX% XX%. up loans first rate or points was Average of the XXX quarter about above And loan loans. in by quarter balances from XX year-over-year level X.XX%, billion to XX% The quarter first XXXX. pre-pandemic year-over-year.

rate refund so was far delinquency the On and to points. rate XX from expect worse We relative trends a the by and delinquency basis, rate were modestly XXXX, seasonality. believe normal was up payments and this basis basis later driven consumers would largely what we've The we what to is in historically observed. than charge-off XX tax sequential XX-plus quarter down points, linked-quarter charge-off lower

factor in refunds credit drive in recoveries are delinquency February. an improvement payments Tax Each year, and an they starting seasonality. in important

to generally charge-off portfolio that on that delinquency a our trends our view was more near was months, settling horizon based rates was out our and in than rate X estimate. term. flow the quarter, the industry seasonal XX% pronounced of XXXX Last the pattern the and inventory That of over have average. was Our levels an X extrapolation about above

not that out referred have for sometimes credit improving view. but the The it and and to been the If The the XXXX. supports pace pre-pandemic modestly of the levels declining to as quarter. lower and is our continued credit raise the could second level in year-over-year the continuing steadily in this increases somewhat of charge-off change delinquency rate above our charge-off trend view settling pace normalization derivative does tax sustains, in refund of in near several the of rate in trends XXXX deceleration shrink both first quarters the term,

of the leverages builds X% Consumer company expense with builds Total the Domestic in year-over-year. compared Card noninterest of in expense. Banking businesses expense and and was quarter, value growth company our increases marketing operating of expense billion Card about both marketing to and XXXX, for the marketing brand. drives first $X and up Total franchise and was our up XX% quarter Domestic

Card choices of biggest Our marketing. driver Domestic in are company the total

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

Our technology opportunities are our by enhanced transformation.

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

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

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

linked quarter, our shows In first return after Banking prior originations in XX% essentially Consumer XX consumer year-over-year on Consumer or another loans the A $X.X from basis first deposits. posted quarter for year decreased year-over-year We ending quarter of quarter. growth billion X% declines. ending Banking Auto quarter increased several growth year-over-year Slide loans quarters a to business. of about flat. were results the

billion the were under quarter consumer ending $XX year-over-year. X% deposits in First bank or just up

ending continues Powered X%. deliver consumer XX% year-over-year, higher costs. strategy to up and Consumer for from deposit up deposits the sequential lower X% strong sequential deposit Average banking balances direct revenue X% down and capabilities, national were to by deposits was about growth. our auto quarter. modern by quarter, our loan Banking were largely digital-first digital up about quarter Compared technology driven the year-over-year the leading and

strong. charge-off basis charge-off with quarter driven was was about digital observed year-over-year. auto Auto the improvement to discussed. quarter, first XX to XX-plus the Noninterest remains up compared The basis was we've operating by The basis refund support The delinquency XX historically points. by modestly trends expense an credit Lower down X% I up points delinquency typical were national offset rate patterns was linked-quarter linked for XXX was expenses XXXX. the rate the effects, underperformed charge-off XX X.XX%, the rate just to performance rate Compared the the points, of year-over-year. quarter basis XX-plus bank. seasonal down down increase rate marketing in while partially our tax points X.XX%, tax Even the refund

down decreased to are deposits X% the down Average from The X%. attractive about were down about selected declines our The quarter. in our business. modest choices loan to are Average Slide balance. credit. largely commercial the about results also choices Compared deposit shows quarter down manage were ending first Ending largely XXXX for XX continued X%. result Commercial driven by tighten were deposits about made Banking balances linked to the less we quarter, of X%. declines loans linked

the X.XX%. from rate linked of from decreased to sequential commercial Commercial X%. The XX most performing Commercial quarter quarter X% XX was company loan revenue increased Banking risks basis criticized the down to the to rate X.XX%, linked which up The XX the the rate net Banking loan for expense was less points Noninterest points than criticized about annualized The nonperforming X.XX%. charge-off to basis pronounced First up quarter. first points continue basis X% total balances. was credit is portfolio, quarter. in compared be office Commercial loan quarter

Domestic Card stabilize Card to loans. posted top We first quarter quarter. deliver line purchase strong closing, volume the continued continue in In results Domestic another credit we to growth trends and and in Auto revenue, further strong and already seasonal maintain stable to we grew line balance strengthen resilient trends liquidity with sheet. credit patterns. consumer and deposits, We and added and capital remained normal our of in

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

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

fee late assuming uncertain. takes effect CFPB Our of the the The rule expectation rule, new year the of includes proposed XXXX. partial impact the timing in October rule remains

If ratio. the at the rule were to operating would it headwind earlier to an a take date, effect be XXXX

more Card as consumers the vertically Of the a submitted portion of announcement in we're driving businesses integration. The scale, quarter purchase agreement to merchants One's was platform and we our add fully opportunities. increasing spending that Credit growing [indiscernible] game our The a Capital of approval, network's significant enhanced news deliver global and will diversified, plan network entered small and the position to One biggest We've and into regulatory debit application strategic payments growth. changing and Capital Discover mobilized adding network for to required the Discover a Discover we and course, and combination definitive successful Capital creates a integrated value One payment

our business, we In first And customer. the digital consumer consumer franchises X together the franchise the banking and national can by shared accelerate and complementary benefits we're with on focus debt Credit adding the Card a vertical of integration proven growth the network. Discover's deposit bringing business strategy

of transformation marketing able and for our network, and capabilities serve and scale technology every and innovation the compliance across as We leverage and will business be benefits in catalyst customer underwriting enhanced the the which will years to management XX risk

and compelling and It capability offers over it XXX strategic modern Discover Consumer delivers than unparalleled results financial and of payments It opportunity. powerful upside customers. platform and will brands franchise with term. pulling significant economic and acquisition of more a value technology for million the unique merchants long global the potential to create service, and the [indiscernible] [indiscernible] create customers an Banking

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

Jeff Norris

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

Operator

[Operator Instructions] Nash Ryan comes Sachs. first question Our Goldman from with

Ryan Nash

It quarter. just do refund, of running And credit. on the off level you think And at the maybe back what consumer? once start what settles, outlined? ahead we've seasonal of just maybe Rich, had tax you're So a noise where that we're think that you bit talk about put from like follow But seeing can in you aside more you inflection outlined now had the we kind sounds when time do you're the the reached patterns? little the you closely XX% last

Richard Fairbank

think Thank story terms in you, of well, continues -- the there's Ryan. Look, to sort of the consumer that I itself. of one be --

about then health Capital just for credit the Let's talk of the a One's consumer. consumer and the just let's but about talk second performance,

relatively I think consumer consumer of strength market The resilient. the incomes historical Rising by debt have source U.S. standards. low a remains economy. in servicing remains strikingly kept burdens the labor

when income balances and the we than levels. bank before customers, is have look we higher And see our at across they true that pandemic, this

in And new margin, every has rate hand, On this major asset for some stretch shrank effects of these And environment, in I up incomes interest think of cost at class. financially. high years. X the gone course, the consumers inflation borrowing other the real almost

say shape reasonably on but are the -- So relative whole, shape to [indiscernible] consumers historical strong relative I'd in good benchmarks.

behind -- terms are what bigger seasonality. we The pull it's very knows something issuers, settling consider make think point effect One, I in speak second believe other out. The just a sure But the -- card what's definitely the I all we we because across sort a customer our up tax a where is a us in important Capital we think for is. It's collectively We we but for play think of let's I to of about I continue exactly a see on we landing. for very wanted that about can't One's so driver -- And believe players refunds, refunds nobody that good for refunds a -- little just Capital seasonality. bigger a than So to base. of seen cash bit role that. for have our tax credit that feel performance,

rates, charge-offs, near roll half just see tax tend very annual was not just delinquencies and the terms delinquency window was If effect that that's we of guidance referring see near-term higher Ryan, extrapolate the we the charge-offs first in performance, So you're that what refunds of in very of credit to gave, and saying. where that XX% year. in in to the the number we we an what be would the guidance

to of and levels. around we doing we're what year, charge-offs they were the saying for part So settling is the giving looked window were higher a out like XXXX XX% above

that -- of is what that and about includes seasonality assumptions happens Part refund I'm so tax our what with effect. the basically, saying and

see than and As we historical refunds the data, government in lower later patterns. tax by can are

charge-offs we and once credit affects the talk bubbling that often isn't we about, where well, rate charge-offs start our so X-month near-term And And see performance. window basically the pretty going much actually, through are buckets roll going. can

Tax affect in payment refunds every actually bucket. the rates

leads doesn't a near higher a rate a but term, was not to But in settled view that change has very bit So credit it to that we window. had charge-off guided out, than for XX% actually guidance over the was the that near point year. our our the of

strong, Auto We Card credit What in business, our we for we're credit just saying things Credit is continues haven't business but given really very in guidance credit both year. really and that we settle seen improving be really the flag out, and like have to wanted the to seen delinquencies. while you've

in have as terms just what wanted out of seasonality we flag very we and kind very point what seen wanted the by relative it's cited because in we just We to of effect refunds, near affects term, earlier. the the there that to watch that confirmed historical and numbers later. coming tax it we is of that patterns And in near-term lower -- to

Ryan Nash

of heard quick even means it follow-up Got guess, this One, for ended trajectory Andrew. think below prior being like and the what about maybe it. about expectations? maybe down that seems allowance? Capital talk as at year. you a for given my does we've mean Rich's peak It handful just potentially being your Maybe credit Can talk coming us for given or the where what the you I issuers of other answer, the

Andrew Young

pointing Yes. from of And what there's are to there's that others perspective on I'd Sure, going assuming are a a then answer, Ryan. like to. coverage say from and least things simple but that but my is there's drive allowance the host not. not to focusing of which here, just that's growth,

and I'd quarter pay I the coverage, quickly seasonal see thing -- have fourth first The highlight in negligible said that talking had they first which therefore, my off we year. and in balances, quarter every points

biggest ratio a line you dynamic. quarters. loss been But a bit saying with number from result up we've ahead, I the largely projected quarters, look of as preceding it's best the mean, we in as driver, at the if for of look coverage really quarter that. So leading the is now, of are the this last coverage indicator quarter are delinquencies ratio a rates. that And

And so months look then to next uncertainties. and reversion the to there. And range over of out we're we're outcomes account into a from take XX every the quarter, going and going

today quarters, losses you've keeping a where seen note, last the period I a in ratio are release otherwise. though, And in the projected even and quarters flat. future will might coverage lower so than indicate over few

flat a projection well that You ratio as or that modestly see into only of incorporate uncertainty the we could future allowance. remains declines coverage very the

down the they're and coverage losses the eventually, uncertainties more lower ratio those through projected become bring when certain. so the -- will And will allowance as flow

business going take not into And like is really to this we uncertainty through when to But reserving see scenario, the take because, would in you as I'm we process. ahead said, account be that that we need decline. actually look to forecasting every quarter I the that the go under at of point, going a

Operator

of Our comes from with America. Bank next question Mihir Bhatia

Mihir Bhatia

for And the card second the antitrust been talk within your around issue? perspective Discover about acquisition. to I was There's could issues on Rich, a hear and are deal thoughts business. around regulators, if if heard I wondering lot share also how you've potential of switch to approval, particularly a but if could that you from thinking you just issue anything that focusing

Richard Fairbank

Thank Okay. Mihir. you,

questions. the with We believe for engaged role payment have competition case approval. we and that will benefits we -- make compelling DOJ the applications course, Fed and the applications we for play this with key merger merger that of our competition filed the among our a believe credit the and OCC very significant with sorry, and networks a in advising the We So card issuers increase Fed and strongly the OCC, both consumers, merchants as they, banks, are provide serve. communities and on

deal While will some have of favor the compelling. believe about raised facts be competition, the concerns we that in

networks that we If to On by side, business. Their the to approved, we currently be decade talent adding network far to able marketing scale X% today, the do of and still is market smallest the customers Discover's at was like we're the viability. competitive sits X X today. let's but capabilities remember deal networks have leverage just will ago new will in and share X% and just that and our enhance not a greatly technology, be we

will our as in applications. and that we've substantial merchants significant consumers for provide we outlined regulatory are planning The benefits investments

it time On the and that the all card market at studied credit concentrated. highly they've regulators competitive the found is every Credit have not Card side,

choose similar X,XXX less was offer ago. products XX fact, than today to with years over issuers, In able it all Consumers it's capabilities. from can concentrated

likely a anywhere small of One union Capital wallet. business in folks every and card card of or these kind used a already a issued compete but bank a X,XXX the this, in reason also your you playing place certainly not own. can in with industry Imagine credit or other that can the with that field only we by every airlines used many not There's to exist card We level in That be be by doesn't place your grocery stores any others. other the what's world. other like a gain issued issuers first in ask

like entirely bank, can another moment compete card they to close Put or choose transaction we at single they to with or And have can minutes. in stop because day switch our way, every using another every the don't if use have, the or card card. any large account small, another another to simply they customers it for

there believe entry are card time new We forming all the that to as the of and current in no the ones also the demonstrate. are facts business show credit thousands that barriers issuers will

achieve significant and credit New of fintechs are able service Marqeta to card and leverage high sort a funding growth. VC infrastructure incumbent like players backed the by to as scale of instant

the existing their choose credit any they simply Also, spectrum play bank credit by can in changing policy. where

pay that cash, consumers choose exploded has payment another Let's or also to use which of debit form remember entirely, later, now marketplace. can buy the onto

One. are to fintechs day players Capital share the in small credit looking entering space dollar all like traditional every New take from credit payments card market

straightforward this we'll successful the faced of on the powerful for in major It's healthy fees, bank fiercely products industry. and where have no But it minimums products a We the and fees face card all the our with competitive overdraft and the credit with and come continue in years, we banking offering needs only customers retail We're been marketplace. fees. competition to focusing terms no our of by deposit evidence most fewest and and no future. of

that we businesses consumers best-in-class their up, use this and process will regulators what to set of In very benefits facts way and believe services products is for pulling So the will pro-consumer, and small the vigorous both our the and enhancing a show to that end, we is opportunities believe greatly evaluate. pro-competitive and transaction merchants. bringing broader

Mihir Bhatia

helpful. That is All right.

the the second health follow-up. a for of consumer Just my turning for back to

in that environment good could I the the you little about the for growth you a business. If bit talk card think, mention, opportunities acquisitions, growth see card just did you

just puts expand can Maybe if Are as being the make of where given cautious those consider more you're of the investments? there wondering takes on you that. and about market you to parts the some where talk So environment?

Richard Fairbank

board leaning are are we business, seeing across in really of very pretty card account originations, all traction are the we're and the consumer the getting traction we healthy our the purchase seeing Mihir, by volume in parts -- Powered nice business. business that good the in on a card much side.

And leaning positive very marketing, time you reflected you much our reflected numbers. so the for it's in, a in of growth in as some see as see

win top believe at those at that we the And think I see numbers all the traction. of to there's affects And lifting are a investments boats making the behind just that success would is, traction a but of top one, for that just as that of I in market, our continued are the the numbers market. things not things and of savor that you investment -- second, lot two there. of powering really just a let's only some I I see, the the flag that And that, from

business to the that the of the a business have are just able to lot on including say on business, customized of powered continue transformation, technology enables very we capabilities whole to marketing in things mass also way and picking create offerings of but -- Also, run traction we we just solutions national bank. success that only just that Auto want the credit real-time have side. Also and more also on the really experience lot us ability the see up and some our to have traction the offer, the notably a of not we're and by the I we to continue pleased side on to product growth impacts and to customer our

Operator

Rick question with JPMorgan. comes next Shane from Our

Richard Shane

will pretty Rich, time, terms I than levels role observed bit recent When the 'XX describing and will near things back 'XX, 'XX 'XX to might to rates Does delinquencies levels higher tax what be a higher look actually slightly fully of has of in achieve is The get one be levels. understand back term. from little it 'XX, charge-off That I to over that. below now actually make been 'XX, But converge we've any that at in charge-off that higher is performance? with at about to in refunds, it than you're framework time that the XX% want it sure suggest history. the that I need towards charge-off delinquency that credit. than of level delinquencies, is much above

Richard Fairbank

So Rick, there's lot. a

First of things all, were exactly weren't me clarify as let that state the think some I to of intended saying we them. you

forecast. So let first so higher from saying That year. annual We're out. the near not an That just a on than credit. so talked them to forecast. extrapolation about was delinquency In be said at XX% roll are we we based buckets we about near-term the yes, near higher talked settling charge-offs the We -- rates, was of me and tend term, where expect -- in would out pre-pandemic. the credit to very term, half settle in

are back over XXXX your that, then your clarify words, and to those and converge to And just to just I XXXX. time, ours. comments you -- it not say slightly will want above

on give given But not charge-offs. we not have much charge-offs. of full to very tend generally on you are full We We year how year going. guidance things guidance the like give to feel

very credit see settling are we So out. much

delinquencies, that of the see can very and second that derivative thing. that's on continue a the You trends positive

lower usual some charge-offs, the quite -- affects are low of time, another factor -- very And charge-offs we've past saying been we have recoveries saw that than over the been The because the which is for there's recoveries years. recoveries. X

competitors debt. of in-house for rates result levels. relative have and And than we pushes more that recoveries that impacts and to our up our some probably pre-pandemic for of business rather prolonged the to net us larger So probably tend recovery than losses strategy, selling we else because all equal, of and as our to most tend than higher work mix industry a our

So longer of past charge-offs than recoveries most do. tail we from see a

that a of of relationship They're the today. about time that we are talked probably had in their recoveries, terms heading between charge-offs way, and at by impacts But brown probably they pre-pandemic So out positive direction. recoveries. been in also the more and over sort where the bottom

So pulling the we credit for way guidance don't year. for up, have

be to continue that after very settling period charge-offs about the charge-offs We are years happy normalization, a way long of after out. of

just to seasonality. we -- given wanted the flag that We've

this whether let's right of still pause they're cumulatively what just pre-pandemic is was are It just look The here or than lower lower. just they remains comment how a now seen how to will refunds story they from period -- thing how see whether at second And have of just tax time. to later. is been later seasonality. and plays -- much take end than are key was for for the they a on Let's much it be were lower out the

we're what talked It we across and about before. our it's about then Auto the performance, about doesn't charge-off both about in credit But extent lower, that the term, to that Credit flag Card it's change view the about just but out. positively business. something credit to very had impacts it settling very wanted the near is, saying doesn't the our change numbers we view But that consumer,

Operator

ISI. question John with comes Evercore next Our from Pancari

John Pancari

period. timing Discover late the of comment Fed, OCC to out close? around 'XX, know put 'XX. know just you back to the the I thoughts combination, your I the early expect the the guess deal extended any I update And you there,

financial any out? around close the the metrics of terms you expectation of any So change your that of the key timing in or set

Richard Fairbank

Okay. Thanks, John.

Reserve practice to comment comment It's standard extending for the the mergers. the Reserve the OCC extend period. and Federal on me Federal bank let the period comment So on

from any the the Fed's signaling expected we deal on extension, We take and don't here. decision our

several the way. is have on respect the along typically of they and we to we team months of same process to DOJ the timing, the And bank So Fed that did course, OCC the engage with work merger this of in of timing all at underway. time applications our continue And take views consultation competition to the frequently announcement. with questions overall and the that the through with the about

John Pancari

Okay.

near Any XX%. ratio your around And front? change Okay. your -- remain buyback expectation? front Could of the that in to any active then expectation forma on for shy just about just on the regarding activity the Great. of pro that And thoughts separately, term? a you CETX change to CETX

Andrew Young

a marks, number we performance Yes, of and stand-alone would John, companies, blend driven by we of between which say, at variables the balance that just consensus of are I'll talked a credit sheet deal, of with estimates about of it, we, time at we going now where stock are the legal time, close. some each of but of when There's respect and not price. as CETX day our to the to announced X, used have the move just the in

deal wide business And not the be of of I going of so a to say our But time will of sort the I'm considered little in recasting valuation a outcomes. moves. number every range

us prohibit of excited does Discover financial to we we With about the as so respect the not note when did the and remain our we just repurchases, the today Capital agreement strategic buying And as with Ones, stand-alone benefits from transaction that shares. deal. announced I'll

my the for the rules daily remarks, in prepared of SEC announcement. to time noted blacked And we were amount after safe period that has can a a harbor purchases of limit average deal. the the afterwards, up we period leading for out do I

to as So recent the again, less restrictions I we're that what on continue QX note of blackout pace there's period. during shares. also of limitations, those we've result able also done a just prohibited, that a vote blackouts, outside was and not had than But quarters. repurchases repurchasing in proxy those we're will

Operator

from comes Moshe Cowen. Orenbuch TD question next Our with

Moshe Orenbuch

year reach sitting or putting portfolio, like the that, think of Or particular a a tax level or time, point somewhat factors the charge-off X, refund for about potential level given in of you're some over you've nature in going looking increases got persistently they next a but thing, of has expectations? How we where here yours Rich, of over think should we're kind type in higher a that? in you inflation thinking some what those unemployment, driving higher-end the how charge-off of period lower-end the about point been got terms Are to about high still mean, not time, that? think environment and of -- your and you've about you -- aside do I consumer. consumer

Richard Fairbank

we have of part and I they're our -- -- portfolio and about so environment because on. an at sort inflation how is do how the of Moshe, is of performing you're partly what feel we context think so getting our in consumers, of subprime higher

saw -- a comment just saw me In move sort credit both the earlier that global we we Let consumer. little metrics moved proportionately. subprime then in bit the we everything about that, but of subprime directions, financial crisis, in subprime observed

during global a obviously, In fact, quite frankly, prime somewhat proportionately than moved, But portfolios all worsened bit a as crisis. the financial subprime less multiple.

In credit to seeing also And consumers than government not course, that unwinding income, subprime course, that's they but more improved context of quickly too. then time. prime, and although benefits and with lower of the are aid in subprime correlated. lower of somewhat And normalize pandemic, the more disproportionate of more income synonymous it is, over quickly, began

they seen the look has been consumers on -- -- have have several take, really past we So than from seen And the other effect, worsened been lower-income the the really, at of does end, show we our consistently other income -- lower end just we how which growth have the It hand customer be if faster. quite higher years. the so part higher for doing, over more in very subprime credit than tax up our performance strong. base refund

a to a out started it. then always out, caught -- seems And settled the with little little it rest earlier it of But our everything basis, be portfolio. than frankly settling bit a mover, earlier than proportional frankly, on first and a bit up

very feel credit good we performance, across spectrum. current on based the So

attention of catches when also lately. specter -- see greater sort our certainly we the it become We inflation

real on a have we that. So eye

we the growth we so the look As good edges full impression around to would very the marketplace opportunities. the really continue and net continue we you know, of feel is on. at about our But into spectrum to trim and to customers, continue lean you the that leave I

trimming impression growth line still doing about good there. opportunities and just credit are just the the that credit and and some We is I marketplace want for increases. this around on time, with some things to feel the the edges that pretty that we But been lines leave have, being you like tighter a little

Moshe Orenbuch

it. maybe as Got And question. just follow-up a

thoughts you expect Andrew that alluded a of coming late into of or that kind try How to something late bit process that to from a you talk achieve objectives -- to You it? is still it can you're any efficiency to your But fee, going alluded a use you ratio fact fee efforts in and standpoint the effect. or share? little think the you you're from doing? about competitive that planning even the your do could about Or mitigating with take about

Richard Fairbank

Thanks, Moshe. Okay.

So rule the let's is fact CFPB's on XX. take and up fees late to May just on effect reflect pull on the scheduled that

to time the but if create ultimate ongoing We are litigation continue efforts outcome timing of the uncertainty prepared line, the and implement rule. rule necessary, the to this on on

As will we've rule is to before, when be the said P&L. there impact implemented, our significant

the We our will actions. of mitigating from implementation resolve within itself this years of impact expect gradually that a couple

our to include These investment choices. products mitigating policies, changes actions and

actions already and mitigating Some implemented of have these underway. are been

through out. items once of will within on impact P&L their of of the Ultimately, will settles the on planning the additional actions mitigate couple late and different we where about our learn are years mitigating a these line P&L play fee We the rule litigation in more actions implementation.

Operator

Fargo. Don Our Wells next with Fandetti question comes from

Donald Fandetti

know has been as a thoughts on a well car prices there? about around lighter lot little recently bit But tax cards. Maybe issue. auto I you Rich, as your provide a been the and latest bit pivot have can -- of focus used lending? potential a talk

Richard Fairbank

Yes.

business. good feeling very about we're auto So the

So somewhat quarters. just industry up. few Auto pull the margins way let's recovered past have over

quarter-over-quarter basis that year-over-year pleased were we're and up QX in volumes origination with Our basis, growth. XX% on and a

still due to significantly Auto headwinds Now normalized as their prices rates remains high combined the car a peaks, And new concern to Affordability haven't equilibrium. a high car prices. and still of reached business. there from yet effects they are the even have interest

risks think, quarters back So credit up in tightening we competitors. the in of before some our anticipated several this XXXX, business, I

over from and 'XX originations. in. vintage, been risk frankly, we're And a remains As vintage and the an bit, back a lean to opportunity has our pre-pandemic 'XX of result, better recent originations as seeing even stable. recovered strong that performance have margins And really than

we make our of us us technology credit strategies nimble investments have adjustments where to and to or So emerging in targeted industry-leading allowed growth opportunities infrastructure for and remain enabled see to origination years our risks.

in business booking for bullish confident we're that the remain growth. So looking ahead, and about opportunities the we

pricing terms we to and market. comfortable continue feel good the about that that we in in So we're opportunities the set see with

I of situation in couple moving period sort a And after a we years very our that more and by couple very strong for this where into benefited Capital One. we're, seeing I dialing is of made for back, really sort performance over years last a a the of vintages. it's And into talking leaning about the think, think choices of

Operator

comes question Our with KBW. Sanjay Sakhrani from next

Sanjay Sakhrani

catch-up the your the think when valid look point your though, second And March. to think I the clearly line and refund in from a kind is last of now it Interestingly, it come I IRS, seen if year, refund on not I refund stats at you've a even average tax the like point refunds on Rich, like numbers tax very into quite in have derivative, one. that's seems higher. nicely improved seems slightly with

improving, there if are So that's effect case the pronounced that like past? those a has in and there? lag think we too. May? in see April How I Is the been So should more

Richard Fairbank

Yes.

So I can student you're tax see that a refunds. of

learn. nor really this card business, all would Just I around that thought think the we head really trying expertise your get neither of years to credit of developed the have things that to over areas you you've

Let me of here. a make couple comments

we too. key what So is question are things a benchmarking

somewhat over last recently to really to over lagging -- if to. relative outlier which we very pre-pandemic. year, year, very, of last from talk crossed they've the was -- I S o referring year. things then last an relative year you're relative to curve were to even think relative actually about last crossed And But the

seasonality one itself ask, year. use didn't just benchmark? last odd as year well, Last was Now do might why an we year the

was it to the the things all credit of a noise. from normalization, view read hard through with point And

of how As year the comparing this and we year have and patterns this the time last seasonality we're new year, to that relative sort this whether a last we to past. to the end really done by watch represent modify going up compares year year to it's collectively

to credit it's And I normalization. metrics reading at it's was year's seasonality, relative hard on that. so look really there much because premature last to think just

So eye an on had we've this.

seasonality is which are We And this a magnified it that we have sit back years. when the when and business I benchmarks, to -- this early our stick number we're to we'll think developed with I think and before? look less tended with business was it did about of over might be done say, like it ours is seasonality too than a where in something period, at learn tell.

refunds, because your other over recently that have to to year, it they of themselves people has very make crossed effects to to then have these point, tax get things yes, refunds. have But your the lag in relative even And payments. are to last terms point, then

by what's the is cumulative done, refund effect. of this the And time of And in phenomenon it's thing So a middle happening. will kind of that the is sharing just with we as we why tax you much along. sort be go we're the key are very flagging

little high by we're made if if the wanted driven just saying -- say of kind settling year. probably the it of doesn't delinquency the higher we are And -- effect, where of time that last will a but window from this tax refund the seasonality -- very revising this this be bit the the is were that particular in I the our part reason that of in because historical I'm number, of in given sort that that higher part windows the the than to the year, patterns to where particularly We things first up near leaning And the year, just said. a talking patterns, the in to year in than half about of extrapolation then not buckets catch just near-term a out. number I very we're into high XX% sort one the about give of very were is term, numbers

Sanjay Sakhrani

Understood. Understood.

looked The nonetheless second March. derivative good for

Richard Fairbank

Yes.

I -- just point. just I want to can look, that So

be strong. The derivative to second continues

impact pull didn't think that look you fact, wanted were there's of But of all studying strength lots In has the One's second I effect, know businesses. -- we this. so a There's calculus so of of the when heart you just you good consumer to our the which point players would at refund when that Capital see of can do. see that be all players, topic, you sort this effect what card another at that derivative. think certain clarify on we both I to from to more actually just little bit other out One the tax Capital than and in you

Sanjay Sakhrani

Great.

Just one for Andrew. follow-up

I we can But but limitations, we as given return level quarters a quarters lot we rate there's today? ahead, your past earlier. we to ahead, some on capital. volatility I few there's up a been levels the to look step capital of proposals in of the last Just some of we look step on ahead? know Can capital run of up return regulatory the no the look know the question relative capital see relative as on as the

Andrew Young

that, Well, to Sanjay. parts there's two

The new first transaction procedural process the is, submitting given so we a in a that's piece. the just capital are plan, of

SCB period, amount the in what requested. new have we constrained So once to we that the to that capacity unlimited capital plan approved, is intervening repurchase we've is then relative this

Operator

Wolfe comes Our with Bill from Carcache next Research. question

Bill Carcache

seeing on take market degree? perhaps comments your follow-up my constrained just And how attractive ask your advantage on much can't the and of capital up of Are to Auto, excess same who now. are conditions competitors the position? capital I'll then an you is Following advantage

Capital to As continues you One preparedness? Category speak X could to grow, your

Richard Fairbank

we a is tend see very zig In we little about business while my others Auto a here still to Auto observation to bit the zag. But -- opportunities that it's grow, our when marketplace. competitive

point others is others leaned are sort more. a I back in we my a and while we're pulling of back really for now leaning so and And think And little bit in. pulled little

much this just different very time occasionally the as rhythms of and have you've that. times and by has advantages just think marketplace of sort about in One inflection analyzed numerous Capital our in But direction the think points the we of Capital of bit is of really as I of much than little couple to that's very last a One natural of where a the seen some made years. it that virtue others. I we'll at past point capital as different really an just the in for a of But of terms little choices really inflection a choices sort hadn't the that over there's

Andrew Young

a Category $XXX And threshold with we're the to well, me be billion then, note, beyond let really going below average to that. the X-quarter and trigger closing respect Bill, X, is just first, at

distinctions. wanted I mention going to specifics Category to of just X, Category what is big X But within there's X So to trigger the it. really

on very tailoring The feel around well prepared. is see first one the ratios benefit that losing our conservatism NSFR, We and for there and we hold the LCR can and you liquidity. based

part DTA being the implications threshold of which anyway. proposals The are for that and rules. was other two, proposed III But already those are all debated game the the from at XX, what Basel going included We and ultimately, both in refined. regulatory know as at two looking of we're proposal and those XX to the are capital those inclusion least AOCI in

different implications, see may two as eye today, really that at on. don't we those already we had were But big a the so from take things least a And form. our long-term perspective, proposal the we in difference a sit planning again,

ultimately the currently the Category constructed. or X if go of And to well as so they implications we game end either proposals of feel in prepared were III all Basel

Operator

Adelson final question our And Stanley. from with comes Jeff Morgan

Jeffrey Adelson

continue bit Rich, was about And remains with on lean relatedly, trimming of you're into factor about more how I that pending to thinking does a today Discover of credit around continuing up circle how edges? a how box number to back the allocating suggesting source, about at about into I your trimming. last quarter, opening comment the abating the deal given in, thinking kind little capital more here? point? at of to of all the how potentially how the trim your wanted strength growth from are But this were after think sort a U.S. consumer you years just you you're you comments of

Richard Fairbank

We is, we of the the but we observe the may all not -- the to Jeff. coming time we edges Thanks, what course, do what reactively marketplace. think only marketplace, around trimming in what and in the be

the the sort talking much months same been around things in trimming very big see we quarters than during words, back has ago are we bit credit we've of normalization in dialing We place edges the this. it were the more X the and when was about pronounced settling little In a as the been other out.

said consumer of other. the originations viewing, struck been addition And continue edges been credit drivers lot we're comes sort that of around that a some to -- as that very I observing underlying the have been on been but each been to -- generally top probably a have of each just little of generally top very that been trimming that's be only the -- out other. but even on our of metrics. our about it's bit there's also performance consistently originations And and -- from the we've data overall that our in of originations what performance performance, consumer, And portfolio after how much we're of long strikingly, the quarter, worsening how it's we by doing overall credit continue the the not come to much Quarter our lagged obviously,

about So performance feel to where we're origination place good We similar credit in our very a were. performance. and we

across very it the With deal, our continuing deal. pretty own altering our really before. the strategy was to Obviously, the with Discover think strategy not was respect before. We spectrum. as that's origination are to I really same leaning very much about much in excited it's as But we're it respect it's credit Discover that the

Jeffrey Adelson

the that just wanted just X strategy. proposition type about that's a card component. a recently. there you're opportunity card like charge how business really quickly and small far? really bit getting? you of new the to maybe seems growth about And talk the value customers It launched the just more going ask card I know to drive Any with to Can business little unique so I Venture recently you also early

Richard Fairbank

Okay. Jeff. Yes,

and with of broadly card X Venture in the the business launched the year, far. we're last quarter engagement pleased market customer so third we the response So and

example preset card, elevated So Spark our earn business help leveraging invest taken of Venture because consumer business is we've developed flexible of business no businesses. X And travel limit, our including travel other's many a with offerings, of for and our Cash capabilities business-grade business, much run their everywhere. with spending Plus the the product each combine evasions to benefits like great designed the and small Venture our owners industry-leading larger great it's in spending them business capacity and is features that X of was

at that small shoulders to across broadly, and all of example stand top at our investing of of launch our another technology One it and on this been in and of And card in the program, on top to shoulders have stands the investment, win for continuing business. is small of business we So consumers the drive years. the the the transformation more of win market the market Capital

and question, the are we continuing progress. appreciate I certainly our excited So by

Jeff Norris

Have evening. and great and us for in evening everybody, continuing you, Capital your Andrew. One. joining interest for a this Thank Rich Thanks,

Operator

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

disconnect. may You now

Capital One Financial (COF) 25 Apr 242024 Q1 Earnings call transcript