Capital One Financial (COF) 24 Apr 182018 Q1 Earnings call transcript

Welcome to the Capital One Q1 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. [Operator Instructions] Thank you. I would now like to turn the call over to Mr. President Vice Senior Norris, of Finance. Jeff may you begin. Sir,

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

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

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

year-over-year Thanks, billion $XX share tonight Net adjusting this adjusting the XX the increased share had on Slide found credit Provision in slide of the basis X% allowance Jeff. Pre-provision $X.X for billion. item basis quarter was on which quarter Capital restructuring X. per of We be first $X.XX our XX% linked decreased linked one driven earnings costs. losses were Card a earned year-over-year quarter. Page A $X.X I'll in by primarily of on a basis GAAP quarter, in deck. million with item and and earnings slight items begin X% business. One smaller a $X.XX. per to on can XX% in Domestic or outline builds

allowance in movements explain Card we businesses, detailed are X a in across business segment Consumer supplement. risk math. and primarily $XX $XX in segment decreased driven paydowns net million impacts growth of The profile. Auto allowance moderating seasonally which built me of the of in improved growth an moment million Table Banking by Let in Banking our growth to and reflecting to our the Commercial in adjusted the reserves our our in our business, due allowance $XX quarter Domestic increased earnings take our In million

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

we and rate impact be around effective corporate of the our have to refined of now annual new XXXX expect estimate tax our the We tax law XX%.

quarter, points count X, deposits, interest that by can Slide the which XX net increase an rate paid day decreased driven fourth to primarily from in margin see you for Turning sheet. and basis margin reported higher points from up year-over-year mix card balance on yields X mix. in interest was asset partially assets a of basis the was only offset a by on higher Net basis resulting

quarter, income the curve headwind sensitive of was earnings. would end a implied modestly yield and interest modest net to to a create As liability of flatter forwards our the

were our coming to card capital been affected that severe X binding Reserve a towards Last CET there common developments the severe X capital have scenarios. mid then and ratio More expected its models CCAR which Turning constraint range. several our capital we X, trend XX.X%. is equity I requirements. ratio developments standardized Tier assumptions Slide back Federal quarter, on Federal more shared CCAR have developments XXXX impacts loss the course, include Since in developments, the for of DTA disallowed basis approval to that XX%. Basel trend CCAR was quarter, These In loss our these our carry these XX% III Giving a stress a updated are by to that Reserve the provided we use now X approximately back. our from by ends remaining and June not the our that the for light of of capital. of NOL XXX XX, view do million compounded and will of ratio the in up common both of window, first auto, XXXX. are expect to CET believe we subprime XXXX around resulting repurchased authorization associated incremental of stock We which any of the the

With of their does to were challenges pleased they regulators the didn't this bank but MPR view go implementation, see far of Importantly, CECL in that from acknowledge initial impacts the CECL any CECL, incorporate implementation XXXX. to enough. potential respect not in we

doesn't incurred since comments built but shift CECL lifetime will in simply cause capital else relief, frameworks. will current Our equal allowance, potential another We it and a and the as more around banks X view capital. to hold simply capital loss under increase shift all in no we loss seen to allowance from regime Tier model capital capital MPR the allow we've or for allowance CECL, and was form

procyclical and and has especially growth, periods statements make we In be recessionary addition, CECL potential less financial discourage and less will the very in to will loan comparable useful.

carefully FASB consider and all of will impacts the the to to bank advocate the CECL. of We continue regulators

over that, to with the So to Rich? turning I'm Rich. going call be

begin by both of Scott. Credit our Card Slide posted our Thank pretax also international both domestic We Card on and year-over-year performance benefit Credit I'll to strong Slide in the of you of with growth the results X business. income Card you, businesses. Card revenue and from which business. impacted absence On quarter quarter, first any reserves last adversely year. our additions PPI see quarter the in Domestic our can the X, for the U.K. results first driven

which As $X.X first year. last expected. to now results quarter out were Domestic a of the billion the X% include as metrics Card portfolio, reminder, Ending compared playing loan Cabela's the of up balances impacts about are or and

it net basis on but was bit. portfolio. for for to from XX X.XX% prior the the margin is although XX card intense, the charge-off was up prior include XX.X% X.XX%, increased the plus down remains year, X% prior basis of revenue margin The offset the quarter. The out year. The year from of rate Revenue from XXXX. prior for a settled quarter compared increased rational. from both at adding basis points high expected metrics the quarter points competitive the XX year-over-year. is quarter points the the quarter First quarter generally end the the credit side, Revenue Cabela's Supply purchase marketplace quarter the from delinquency rate benefit pressure volume partially increased was XX% from Cabela's. X% XX interchange Strong Non-interested first year. down expense

average up purchase X%. in about with first average Slide to deposit good up of results deposits watchful year our the on see loans XXXX. were XX partially were loans to with mortgage continue opportunities Banking Growth planned to loans while grow prior summarizes card volumes to a auto quarter for eye offset prior about and year, versus interest compared Consumer Ending loans basis the a increase compared XX first We X% grew marketplace. by quarter business. the runoff. rate point Ending was the in X%

by interest higher The in for increases increasing to rates business further market competition deposit Auto expect deposits. average and We grow. driven continues rate

primarily the our First for losses of was quarter quarter credit driven ongoing growth and underwriting decline. increased quarter XX% of to assumes a exit prices a is partially mortgage year the intensity quarter year-over-year, last Non-interest used compared but the of in by to and auto quarter, last for charge-off were the we in from by revenue loans for allowance still year manage business efforts origination XXXX we as Provision Consumer originations car driven about auto our up offset the cost about remain tightly in by expense result decreased down prior X% the and lower and loans prices auto. auto, banking X% rate attractive from to of first auto continuing and that In growth build. cautious smaller deposit. the first quarter strong competitive quarter see grow. increasing, opportunities auto ending were

As gradually. continue the the will charge-off rate cycle plays out, expect that to we increase auto

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

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

the roughly revenue average the flat income agency equivalent on rate quarter decline First in effect the as and was loans in tax of year-over-year tax strong lower yields. markets and capital offset non-interest

quarter performing commercial XX was points. the from The and as the down losses impacts the law, other grown benefit portfolio for X% points which Non-interest The you technology provision XX initiatives. from quarter. non-performing was moved that new first of a for compared expense up of the had improved by for have points basis we our held $XX for net was lower basis quarter, majority shared larger Last credit and to to XX Taxi most charge-offs criticized of Medallion the rate a of million was expense. to allowance tax the quarter. last loan quarter about X%. fourth primarily rate Excluding revenue The actually quarter would charge-off drove loan with rate fourth driven of investments of we Provision X.X%, commercial up fourth business quarter release the the our criticized quarter basis vast X.X%, the in as a result sale, bank year.

During gain. the quarter, portfolio sold small first realized we of the and this most

One have and balance the in costs Capital deposits, carried digital transformation. at in as balances still loan banking delivered We see million a are to invest card, our our first auto, attractive We remaining the resilient tightly sheet, assets revenues, quarter, just In year-over-year loans year-over-year sale. and we and managed loans, X% in drive comparable loans ending grew earnings. book company continue to Taxi commercial we businesses. even which and grow to and over Total the to opportunities growth portfolio on and Medallion recently completed valuation $XX pre-provision to

XXXX We expect XXXX. marketing in will higher than be

while efficiency any expense, improve can First non-interest ratio year-over-year vary year. quarter growth efficiency in ratio growth outpaced revenue the as in given

the gradual growth we we will continue gains. that to long-term, to be Over in driven digital able by believe improvement achieve efficiency productivity

will by As marketplace. always, competitive driven requirements expense and the continue opportunities the of be marketing to

We efficiency come expect long-term improvements and ratio efficiency from improving ratio. mostly operating total will

way consume tax into working will the of a a this actions, has year, marketplace line We observations continue we to fall to prices. while it's a the in Responding likely marketing the conclusions, to and of benefits a levels increasing tax ways. expect including over will believe have in through portion and to bottom behave way of definitive tax competition, markets surge its majority continue early these time. lower the growing higher to predictable benefit benefit A of still we

continue also brand, In into talent, will and technology, addition, lean investment we innovation, growth. to in our

long-term great no broader build transforms change the infrastructure or We Pulling of to scale, XXXX up, us with coupled our cycles. all enable with and growth, succeed the to we to society. industry net the that Taking about brand, are digital enduringly full-year our of assuming expect benefits we law our substantial the franchise new full-year economic XXXX account, EPS current our this adjustment of tax as will credit continue the to in capabilities, growth revolution to compared into trajectory and accelerate adverse investments. bullish continue EPS and an

transformation is technology and accelerating. Our digital

and we deepening and engagement succeed and our strengthening are We create new a rapidly value. shareholder customer are with long-term to marketplace growing and in changing existing customers, relationships new position

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

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

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

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

we'll Instructions] take Thank you. from [Operator our Moshe Credit first Orenbuch question And Suisse. with

for credit talked in I remarks, rational. you that growth little a alluded you seeing in Rich, you Maybe mean Thanks. kind was you could Great. of bit could, if about hoping of have that a thought credit I process? flesh kind ability of it you opportunities has bit of is within to you your little prepared this still the defined market terms your your how seen spectrum, the kind a in and to of the support where out market if the and that borrowers that to supply in both what influenced to

Okay. Thanks Good afternoon. Moshe.

sort a of into performance in industry that the went in get had XXXX. changes gave and supply. of and of growth in making before credit sharing we XXXX in the but Moshe saw metrics have started a our kind that. as very own XXXX to to grow what the some So it time big that, that's nothing effects if early and about sounds will in in think overly we Well industry in big supply. probably changes. off that I us cautious the the mean know, in there on through industry ripple big being alarming and we and all performance I about the started window said surge you in look we an calibrate, business, at business, a performance was exceptional in surge so we wanted about situation actually in saw those XXXX, our metrics demand In performance those we saw we marketplace that And cautionary oversupply. we XXXX. supply And sensitive metrics the on the is of the a we XXXX are performance so Starting I opportunity surge

programs - that the dialed at quarter slower you around more and today. rate. we so in revolver we're this back you and to growth slow the growth pretty this see back Dial And been moderate growth has across basically XXXX see can to edges, reporting our

just describe kind way. a huge moderate in I generally settled way, things in think would the out in have but I not environment of the a

can bit see credit cetera. the clearly well the the supply on and growth settled economy of is the out has the still You side, little is revolving of though even high supply, supply above et growth

we'll call of that one side, settling on kind but high certainly the out. So

of call it and I a pricing the things. think marketplace. is But you If I period. to and things is especially stability on look out very rationality at high intense practices, industry various a Competition a settling end there of the fairly would kind

in that ability for attractive growth I this about appropriate But a in have feel in still think like opportunity have attractive feel we this surge not attractive not about before, we environment, the optimistic like a ability like growth see big still growth surge this appropriate environment, an to big we but to think I optimistic think I that like the before. environment.

to that across the see growth invest tend areas we You spectrum really across would where in, about opportunities. see that we attractive some talked credit that say that we the

the competitive there. has of at top be the a marketplace to hard very continue We going very

results there opportunity know an can them good there growth I the those for I building staying to of metrics. our but credit years of across printed opportunity, and sort size a invest will revolver succeed think succeeding the particular of brand we we spectrum there. you purchase is who you that medium space, some in area, that people the like see are are and kind pretty who In there benefits and continue the power volume in think

see be conditions vigilant for growth. think we we act the but and some opportunity along we'll that the as So very read appropriately, way I do market

standpoint would of in last was see you just you from ever kind less or the And or base it enthused? of the that more employment kind that make customer income whether part anything of can

the look Yes, consumer, I pretty near-term. the think for strong things in

I think maybe job bit they're a benefiting wage from from growth Tax increases and Cuts.

stable and And so place. near-term which and the I is the strong consumer the a part in in big sort in economy pretty of consumer a is think the

but all a of are a out there that like considered consumer are still when out. a indebtedness, little the issues Now are of growing the and look growing government issues, bit concerning farther bit almost a you number can farther, deficits things number

view So is there to to now. adds the a all cycle are of field case of right where that our middle in of up Kind that we a.

that to very a we I from a work think out lot bring think here. number attractive but grow, get careful one a some have there wary I could to opportunities there to eye because day that worse factors has and every are of

question Next please.

Sakhrani Sanjay from comes question next KBW. our with And

I When credit be look year-over-year help us maybe a rate now. this story, positive to charge-off expectations you reconcile this trending the phenomenon? the paint the up delinquencies the rate U.S. Thanks. metrics, progression at for seem given Could year pretty monthly be down of are they charge-off to your down year-over-year, card

think I don't we've the given XXXX first charge-off about full-year Sanjay, any Well, guidance rate.

been is from the Rich, that I we've down. don't year-over-year modest that that? expected about think the any that income historically I having that's telling a that But I that what we about. other growth talked make mentioned to moderating seen was we've math on impact and if comments you we've know want increasing that you pressure the allowances basis

the highlight journey kind our then from to turned we our and since on the If the about appropriate math XXXX and of of card it's outsized that. to be of growth talk are over And moment and has to where maybe of talked of growth out reason we the industry. we just to that rest relative surge growth growth moderate. impacts was been the through XXXX back several pull about math just last - our years, Well, seize kind the

forward I is and have And in effects, this our we're with that we spoken natural phase of and these seasoning net have When off, increasing a newer up you stabilized to we growth combine more the than our and will the math these industry cycle, the seasoning - their actually And tail the will small now they portfolio growth upward story, in of way and competitive the started and Card by wanted XXXX, our these XXXX result business. XXXX, near from expect the losses. we will of ultimately vintages XXXX, improve. all works economy, math losses thing And vintages the the factors point vintages two and think more growth, early actually a XXXX way the If you are of is and pulling are but XXXX downward surge from other XXXX, that outsized out likely you be but to end impacted blend if effects. will have the be effects, credit positive. of those the is turned our on here to

mean Could year you. follow-up one CCAR you. we the maybe that? more I are then around, last this mean time think could guess I on rate just the Thank relative down I on a the now ask And talk just then dimensionalizing year? Scott. come that. I comment, terms for to charge-off do Thank the question just mean onerous you just of how expectations you in affect that about

has think I'll with a since that thing credit we're the give that But years the mostly driven and the frontloaded. we're modest I opposed everything along XX our window norm little over the more now as surge losses being that over beneficial story over Capital is All and been a a things beneficial “bad being a the of industry as factors, for going what's less into call three-year gradually company, of sort a - probably the been life way we're now a of gradual. so of be to have give I it again, you is other We our about guy” being precisely it's of math view have guy industry by having factors. specific credit we we've is Sanjay, - been surge the equal specific bit several but to being think to a public years rest been period. growth guidance. a it's not very it impact something the the of equal, very kind story our beyond of And good bit not the some happening and will One

CCAR. Sanjay, the on

XX% the kind I talk you our just how its than whitepaper information of towards. Fed modeling. do. obviously information So on that going I about can't don't going released assumptions you us first pull told CCAR trending submission. about will to XXXX We we're be about you give and more of up have much the any that terms about We've impact in the that's that to made that I've dimensioning

couple So I'll about I looking what just for comments make ahead a think capital.

capital the sure. get months capacity, support I that to think I I be so I distribution towards way. that think the we'll going for some would continued next think we're and to their our XX%. to I earnings trending over capital we that would have up capacity growth look XX earnings at have trending our the along for think that up when for support opportunity there or the

So our that all our management part we're components looking capital of as of at levels. dynamic of

question Next please.

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

if bit Yes. little I just loan about was growth. a talk your Good industry you on view of evening. sort could card wondering

seeing the about up on outlook is the changes have consumer also you banks? of talk in underwriting got a Can Fed dynamic If continuing the rates cut, there bit to edges, are shape. the tightening You've raise lot you a issuers the any in from yet been you've you little competitive behavior the are rates? the got of that look corporate and competitive tax around good some the very

a settled little seems it's rate It prime than higher quite and out that clear was of the growth last it's sure years. growth kind the still bit the not I'm over around settling the a as of higher than out. Card have the bit Don, as X%, industry that business, supply was pulling is rate. it's in surged much surging growth that of couple come subprime back but now It to down, Right. the

competition of that two alarm the it be kind the out one would ago again, years side, tremendous and on there some some top aggressive our going there, that those players putting raising to that things a pretty the with At but the fray card actively marketing shows abating characterization supply high into and of relative up but in on the only out retailers themselves. were market, is kind in about rewards competition we So bells. offerings rewards top settling been see not expectation of the is my of nothing are of was the jumping of there's market, at lot competition top my Intense pace associated is that the when will continue. I that.

studying asked have the retro Both in impact to of making seems and happens way intuitively about those taxes. end empirically, come and windfalls into their up the marketplace. when a it to any windfall Intuitively You the done companies. question we

say it a way able that points card its a one of of these be larger Card kind Now to measure the advance [indiscernible] the of to argument big would we point, of in the overheated marketplace, can again, Credit be I ever when are now. and striking industry the be to in to and wake I up got making thing the pretty won't bit will able any won't but We in the a think ended way. as of attribute from say little But unhealthy industry corporate that windfall unnatural some competitive reform to in and America there happened and thing even it this various ways frustrating that most things, at the the of default way a windfall the in my its I'd my this that where bankruptcy of marketplace particular break speak but I thing the way point, away into of than that such little cautionary sort of ways. marketplace. things a I'll societal the spending, a all attribute One. cost kind into the it thing who same for into is the I bottom the expectation ways to gets us to investment, all corporations of way a look think point in has and had more course like will good little end in form to of giving line, When my available make view to certainly actions, words the making looks in that competed I is of pricing expect more Capital ways a think I year, here broadly own which is, it would first it over self the how in our from

is although own end, that be So time more know one over are assuming able thing cautionary won't comments. will are we to measure And it, marketplace be we those our planning my and in the the don't we'll get we competitive effect. to the in really able measure that

in up the pretty about bullish business. Credit way a though, if Card pull still I the opportunity So I

know reasonably it's some think I are to things in think have opportunity a time but cycle industry. still there's the which the stable a window I credit of in growth. We direction moving, good

look senior they sort just like anything I it to there call yield went If lot and a of so was debt securitized quarter-over-quarters, clarification. at quick the looks subordinate cost a up just on normal your and notes, out And progression? funding

of is Yes. little Most through a in and of disconnect great swapped LIBOR, our wholesale run actually which for reflective month saw really three out items. of the the funding to bit LIBOR, we so those that of kind most of three-month moves it's

question Next please.

JPMorgan. next our with from question Shane Rick And comes

rise, afternoon. a wanted costs realize net little talk am I go about at it's higher of like the but bank, the little bank a the my for I another be - bit? it's corporate Thanks that a corporate more guys. to a one just is consumer transfer I profitable in zero question expense impact deposit pricing. and sum this the bit to on between assuming Hey taking and just higher funds that rates of the through rates would

I think as you're a right. I really think broad principle,

more bank that I rates beneficial. - to we from the into the retail costs be transfer funding segment its rise spreads and the other think that going

true. all things think likely going so be that's And equal, being to I

Scott and we in so dynamic how just that the about do right think a understand you way? reprice often

that the do follow. we Yes, on basis a is less more process monthly that we or

great. Okay,

Next question please.

from take Goldman with Ryan Sachs. we'll question next And our Nash

Hey, good evening, guys.

the So a are note. two that I through regarding of just Rich? wanted was you talk seen obviously months asked to follow-up Do gradual earlier delinquencies of - have straight improvement. We've XXXX vintages some credit questions one ask vintage improving about charge-offs the to starting in to XXXX

with we year-over-year a and now seemingly couple we're tailwinds should that given year basis months both on into and this. have a from down the So more losses delinquency

guess to environment start be I'm course I in see to assuming is of what from over we going year. the if what need for to delinquencies would would the losses up to - see need actually stable, we going the

I point change losses would trying environment no there's a start I'm full-year think big the that why just understand guidance, to unless but it go to up? there's the in operating

So of can come in I I'll cat small happen. happened think you on very environment an give XXXX. in easily example the feet. what changes They just can little

and sure it actually the see can if then on was you quarter of you phenomenon. supply of industry the was almost a the raising things industry industry, all in where the that you XXXX One It particularly there about the for alarm better actually things we actually just were the only see we we'd we that from many that in over of things where book and I period the moved side industry, - to XXXX to by the for really started book back also was not worsened on enough can't one better that stable, trust way and period but and saw vintages getting and it, year the But look beginning been period that were we this the particularly worsen. our good the that growth so that. at card XXXX Capital back an was where bells surge, gapping would second guy see securitization in several at on XXXX is years back and in the had worsening quarters programs going can for Now the back last some say then There stable, started look and time starting the and origination forgotten, origination it like saw you out. and of when we

very noticed to and quarter effect effects by a bit, happen very always competitor The underwriting that that that both most there back cause went little that and good extra of that those out this that that the but effect from in XXXX those guide can book worsening happen I neutral things various things origination that have actions thing settled the be in to marketplace easily second are in Now at that are seems changes on we can focus supply, can easily a economic the them. things. while even

fall just in So that portfolio we're business this why credit is - things. because is my guidance guidance wouldn't talk not business in that only when want really have the to do about unique the point is our we things credit we of what industry about the be to

into that I have look, important you good to to turned our with gradual thing guy. the share XXXX that a is So surge has XXXX think most I

our So put farther we've that to of portfolio benefit the of about happens industry whether whatever other we're be from beneficial way better some it may in along innings card relative have And on players. the worse thing there will and talked own little it kind math or and gets is other we another later that players. whatever, growth the as or

losses benefit that particular will I see. or So not in something carry have to up we'll I is the industry think us Capital go for think One whether

guess And in it. for we basis efficiency if the to points still years, managed past XXX I five been tech heavy of one on you've ask see spending follow-up, improvement the years. but Rich could two Got I last

However, I think over marketing half from and lower lower came amortization.

on as expense actually forward? setting, growth continue cost these benefits of from that through side lower accelerating to the savings get investments sun could to we saves going see So maybe the start coming we more see some you start and to expense Thanks. and little bit we the a you're analog see maybe seeing could

one on meter have we're sell cost we technology. self-funding the I we savings by we're I way thing in efficiency costs the benefit thing. before get think to and counting saying there one tech and the one on between way in years their beginning, amortization. that want had your the is been relative the the investing this to make benefit for last going few not on they're point It's something going a because of to and was investment. technology, we increased that ratio meter saying One will the it time more the years relative And what from I've even fund not benefit well think clear, is less for like long time going to growing saying grow But I some Capital less. are over been has investment which out banks than

have benefits. from the technology many we're we in that. isn't to heavily primarily me not that and cost invest top to we of there continue will are heavily the doing And cost for continued even to in and at So and benefits come technology invest it list

However, there offset with create savings. respect starting to so investment savings the spending two cost, bunch in on and technology. continued in tech a we're technology is is to tech that that to actually some good guys spend, of tech a One lot are growing

meter time. this tech spend other sort is helping minus of will to And The giving thing grow gift company. keep over on the a the that really across of one is

- be spend years. itself we not is that could starting at see as to going predict a of and point tech I spends And tech companies minus that's are. save going is ready is can grow all out to that's tech one savings on I've that as that a it thing the on But tech the I'm that is starting to all so think said because clearly just and for be meter far we always is become our grow, that gives what will to whether some gift we bunch

growth next thing one us what as last years rate is to steadily over the the the much. to rapid few a is basically the grow that's was of the it efficiency helpful ratio We years marched to have have over company. down relative as nice pretty not able pretty cost and Now growth rate to not were really we the our few just had as -

into that efficiency to So that an a us is should technology our we're have really noticed time. the year, benefits that that the to that. And with a may important In more over bank for does into in I wanted have any to banking benefit rates a this bank our be paid say in we and not will going think, ratio that's we've I able distinction The other that near-term of a manifestation only that. guidance more time. on way cost good investors work use be bit got the be cut the moderate you operating out a made believe just ratio be like we efficiency over particular over longer-term the growth harder overall but what believe guy that the we you will instead thing about the many very industry transforming of I tech company so really and that important company of work, the

already had to we've marketplace I the competitive as et this we over call about We increase around. marketing cetera look on expect think questions card time. that earlier marketing, said we very

We expect continue invest in to to marketing. heavily

where as growth carry the even brand and in savings But continuing think need and for we the for very of company. to company higher I the we it's benefit really of a operating hopeful are marketing the day. spite cost spend, important opportunities through the ultimately to technology of go to

please. question Next

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

afternoon. good Hi,

Hi, Betsy.

about the I said ratio. sure Couple to questions. you just understand understand ratio, the One, capital want make what - I CET X

need you course from around XX%? it back pulling feel trajectory and behind either you kind you're expect to and how next understand you what I sure why it we get anticipate can mean should quarters to expect I planning maintain four to get holding it three, at to the said XX%. I you want think that that get of Do can I there over of to that the take you leverage a you - there? the drivers So on make go just there or

question. Hey, Betsy. Thanks the for

did would we over say the that so next months get that I would here. I So from around to XX or expect XX%

support got us to same I growth time going and think those the potential some distribution that to the accrete earnings for levels to allow capital well. that's and power we've as the at

The where of of I what what CECL to comes to company eye and CECL business. kind day adjust that take on needing be at way learn the and effect we how where to to need XX% see a the there need be, to out the kind it's current kind point is I mix be out. thing going going its about We're we think stress implemented for some think CECL. of in implementation of testing to and and our going that is that with likely close have one CECL kind and is we keep of to we at see we're XX% about one to a As

say I topic. that the all that I that think So are on to things those have

Okay.

what have Just test at with what to run it because losses, this was around doesn't on quarter. parallel of just II? to of a it trying Fed like around your timing understand do Is CCAR the Is function timing the Basel for is in currently all outlook XX%? the this part credit

us. we the auto Fed subprime previously in additional updated models Yes. I'd are about is the around which be two and that information timing from businesses that incorporating card in and Well - then thought mainly we've need we XX.X%, big them to since for mentioned gotten

get on sure to we're So caught we April behind any don't make that of items. those the trying

you. Thank

Next please. question

take Wasserstrom with question UBS. we'll our next Eric And from

so other can income in Thanks several I exist. points statement responses very of where sort the I'm pivot Rich aggregate have the of much. questions the to if I before, understand trying may, sort to just real come that

primary as characterization, low So to funds the drivers prior is that changes year the mean little relative benefit is sustained, EPS a yields is I as provision but asset growth operating correct? of to relatively fair we're outpace basically a in see going bit cost what of and growth, and benefits of margin this

say Hey, imply basically sensitivities Eric, I what neutral would margin, if comes to look further changes. it think We're that our I at to that forward. think is, rate to when you I

you a that from should benefit with Capital anticipate don't One rate. I expect So further

that's again In be can that's scenario. and in that slightly we're fact, so - that a liability shock sensitive

So and we're also I curve. sensitive sensitive would the of slightly then to there shape we are liability the add that

competitive And then characterize not I an good to as on so we a the and I opportunity see XXXX, spend just also think curve that growth that growth we kind interest got efficiency, XXXX, that headwind environment if have So pretty then growth. net that's would that we see it us think XXXX. that of rates compete, mentioned Rich trend were We've think over down. we're we've margin. slightly when that think our I metric we've that flatter going can healthy a side, to will that's to something given the just we anticipate marketing XXXX. comes that increasing the We kind of same perhaps that create a and were to versus And to in see operating to a believe reasonable we to we as there's able guidance for said time

the and of if Fed in just looks and over funds of I - math that Is like delta the was the XX course about point. about quarter. was the to were trying in my up XX it I basis can cost one calculate the ballpark? deposits on follow-up Thanks points there is cost marginal is and

in little the being indexed curve is LIBOR. I - a we ballpark a about going think end that costs. talk in Certainly, wholesale month the had short you're funding of we total to the of number three terms the bit of

there. the up that picked change all So of

in higher savings commercial business So basically rates competitive as some one up well of moving the also data had in aspects our a of CDs. we some as then and more

in the that to contributed all that those things were that pricing. deposit move So up average

question Next please.

from And next with Bank Kenneth comes Bruce Lynch. America Merrill question our of

you're XXXX. that. good to look I ask if the won't on couple question for and like of growth last credit is trying a off so [sub One's to and out dramatically at FICO], any XXX over continue also in the and growth giving and has business But towards direct significant Thank you was pretty last that through mix and of pointed understand you ask the guidance few - evening. Capital pretty back years get of I'd off I out inflated look there a come quarter. we shift There that

improvement that call over or assume if to as it kind growth we to the slower the look growth math fair you will of subprime the it that the - accelerate is reverse next forward from So in begin should that downward XX there months? portfolio pressure

I would the Ken, like These subprime at be and Capital significant and declined we the is pretty to of I probably want - things things way mix thing nearest mix mix, down are are would integer business. changed contributor rounded I the to mean to mechanically of have subprime a the want work impact. what kind also you goes you away say have seen One Cabela's the to that that to do say off relative wouldn't recently, numbers has take I that

pull of I away. are in are carried our for all like was most been back long similar and industry the revolver just a think is context getting the bit to edges way how things time period around you of to very cautious they've little be a trying business in a

top the after While continue into marketplace. go intensely pretty of the

from will be down ago. as highs number of are things mix general but quarters a of relative the Cabela's going think a point I pretty has couple So around consistent that bounce to view and from observation, to brought the it

my had math would that loss some of follow-up the…? actually is just maybe growth the to bit start in to going on more you rates downward pressure XXXX, XXXX support in about optimistic is our that And give particular that on Great. into we're so you you, that question

the of to very a for about because things kind the its and positive there's don't and other it then to life I I? is of kind guys take being bank clearly one the the in are can think that then think over of years sort couple bad answer, vintages is rest of I very Ken, I vintage, a way vintages our there to take there's gradual thing The general wouldn't equally this stabilization all of kind right. of bank

where of one peaks is struck personality vintage has So a actually timing exact that always the it turn. I've that they by each when thing different been

I So physics. precise performance, that three too too this I've number any being out in I significant hard - said be a lean math lean of look I've surge. I works any saying. it's XXXX, in sorry count at interrupted. to to magnitude term, and the about hard that wouldn't come when particularly growth but on physics of things, exact all can't said, wouldn't Anyway, with a contributor. big timing that the particular about ahead I the But vintage The really the as on sort this you're I contributor physics go of one in year's just talked youngest of vintage is which being one,

were guess Yes. that expectations you would No, create going changing that is based like the my do is math? event, that caution the noted. a potential think to had willing do if this that CECL on to potential business loan loss follow-up go you about mix to into just I capital of

say just would I thing one about the and CECL. Yes

for whether where that have auto have don't us. one a When something to you're worried time life just from to type it's I impact of at with on what's or think classes. an look asset be card a or to a going think CECL going two to on a year going to number an to has window really coverage is I this have impact long of any different your is coverage about asset extend life it's window. I

just of challenges put you're CECL. for banks. Capital I see setting going banks, isn't really not think card a But One all in challenge and asset a for that see with on you're the allowance challenges with to a are impacted class I card and cycle, for asset out balance. pro card, with and that's it's because may all an We CECL the the it's biggest by based one CECL that going be outstanding if that I it's think most cyclical of to is revolving really going the

I going think loan times. wise tough it's to disincentive in growth

think there, those Sorry carry impact but broader - on they're in to Capital just are than One. I

your spirit on follow-up strategic But Ken the to actually question. want I of

is in frankly up is general, it's will pretty business, risk tax of on about This subprime in that up as it do on to loss that. the our it it. the by is in If business. cards make the that should the a players do that to form business tax advantage to the worth hopeful given Card that requirements we've What higher is that pricing look just lot are does you the think very deliver up the rational us in things because so industry is show I'm think like I that most is that of rapid it's bringing have on then continued front assumptions successful. return sure adjusted to But and on have the The bring the in of this. we that the pretty I of people you incorporates be we all that and be are competitive can't the required things in the get the impact capital going do is robust - good we to business, in with modeling on it have in resilient more this effect. pull CECL this test, in the and if this into to business consumer these used the really tax space ask to off returns, in business and particular. time much thing same I the and taking XXX/XXX that time a it business mean loading we all a even scare gone striking clear note of I you dabble at and a stress going Credit that same. end in equilibrate over tax thing the are risk the really front and over there growth that clear to then and build done higher to like for loading, things these and that feel them banking order to have think same now FAS in But people really going lending has of ourselves markets general to a over making who I how have time, One lot nature we on doing the potential to higher

please. question Next

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

Good thanks. evening. taking Hi, question. Thanks for my

business time I on well non-leading I think focus to are growth, up if I first back fees call those as out before insights just had well you interchange think statement this pulling non-interest like and a to for on one strong the net the any moment, in reflected the and that some side the other on as just in a Card products can may that the fees long as you for that time think but either related And business that. service mentioned those great Card looks of things? credit double-digit you've in be interchange line, of to a some and that's speeds you reward that had the think driving the strong on in interchange sort well in FX the I service anything the growth, income

start last QX Yes, was why XXXX. UK year, had that The that charges at impacted charge? when around service looking on the you're PPI up just basis service a I that just charge remember XX we on year-over-year don't that million

used period-over-period and run that fees part but prior contrary impacting any moved standard million of in FX to the new and We of and mentioned we just accounting that operating into down that's service so the impacting not reclassified the expenses that the that the also QX, at period. as about got that's $XX of related adopted. So to I

to as some impacting really core years things you've that for - are that's opposed So interchange just side, has things. growth the - well in business outstripped volume the growth line purchase it's trend interchange mechanical that the of seen the revenues. really as on in we Chris

all dynamics that has its own especially growth over question think the is a I any but quarter what's thing bouncing bounces very not looking your quarter does been it. in it's one to almost and and striking to any at had comparing one Second we're number quarter year-ago it behind place be that only this it's quarter and bounce, rates

in kind growth structural the less penetration purchase the products So marketplace the growth of the interchange rewards and that the the I One, including of volume pleased competitiveness think players because are the mean bases. Capital - customer the way even see all growing I competition to of see race to marketplace the the you this in it's is growing up bouncing in pull that than that of broader rewards we we ball. case if But it though from tremendously interchange also intense is that I that great

face all into the base, broader this of solid our manifestation that posting the I pretty interchange net Capital the One's extend that's fact You of of that. think that and a of in and customer to all competition year-after-year see growth been moves parts

this spender we're make really this that think to time. collective And we wouldn't while particularly the and business. competing of we continue pencils quarter a of take bank. that this I that heavily in booking market what keep to the one sure that's very I our While economics is believe something investing intensely, and And we're a high us franchise, sharp top economics very can the over so of we're - is to reward in

is that growth fact real. interchange the is that there real think I

and the the provision loans and subprime mix actually are rate, way on here Great. so at a in Thanks. is includes expense to why Subprime is negative, our dollar follow-up fact. reserve reserve rates ask in the the slow shouldn't on in gone basis, different card reason a as continue at negative, credits you building, business? so building If it's improving, and actually looking are from one Any loss - looking is could growth are down a Cabela's mentioned delinquencies slow. the I loss they

for to really the question. reserve thanks it a Look, comes just Chris would I that when that's say the process. dynamic

of of XX about just our will dynamics and billion a think we'll to $XXX that number really that in that there well know that as amount small the are a card given talked as Rich we're portfolio, so that that putting got are of forward changes going things point impact we've basis $XXX drive expectations, overall a You loss be rate. looking those think the balance allowance the on million for And a growth sheet. I the I move. forces. There's the allowance, all

That One. this this questions, in and And you for much joining today. concludes on after be interest have the Investor you for will Have evening. us continuing very thank further call Q&A Capital our here great if session conference the our Remember, Relations call for night. you call. team your Thank a

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

now may disconnect. You