Capital One Financial (COF) 24 Oct 182018 Q3 Earnings call transcript

Welcome to the Capital One Third Quarter 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. third 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

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

legal Thanks, agencies. adjusting are Jeff. regulatory billion or to Capital as two the share. of tonight's XXXX We ongoing business I'll related share to been the monetary or quarter. Part had which enforcement AML items from has $XXX in of part quarter, had begin on tonight per investigations Slide had million earned on gain million in imposed this by and One slide $X.XX our legal build in sale of $X.X the various page penalty, We exited Consent Order. the XX a OCC which $X.XX million civil X. reserves We was which outlined third deck. $XXX an $X.XX a share of net $XXX build per for is per our of the AML pay with

often our OCC. XXXX a is of with resolution the case, next represents in civil matter this our the monetary placeholder penalties. As fine for the This step order had

legal risk. reserve terms made is to order. The investigation build against AML significant of of the We have the related the progress residual remainder

share. filings. items, the As category. investigations OCC other per Net to earnings continue our business, recorded provide updates were will cashing in other investigate these AML besides $X.XX our former of our agencies issues check relating in primarily we quarterly of were adjusting adjusting to these items These

to share XX% linked-quarter domestic and year-over-year at in businesses. and had to the notable was by In items, one or $X.XX down optimize auto down item capital our of future credit card increased basis Provision coupon X% to leases allowance investment for a capture quarter benefit these per driven earnings. were impairment primarily we for related losses charge to $XXX and repositioning portfolio adjusting million which an addition in on

credit in Let to in of our are detailed supplement. the me allowance in in quarter business. our auto and $XXX Improving reserves increased million as our which in movements million commercial $XX in our our businesses the $XX earnings Table coverage X domestic take our resulted a by a We release million we results card moment explain allowance release business increased across allowance ratio.

income our This our be related to discrete from tax in annual in business increase exits and to rate our Lastly, reserves was increases expect is I before non-deductible corporate tax expenses discussed earlier. XX.X%. now based effective XX% that the items. rate the We quarter around on XXXX effective higher from legal gains

margin can driven see X, the Slide by quarter linked Net of by deposit decreased year-over-year, of and interest absence driven non-recurring items increasing the the primarily basis basis points Turning points experienced we that net count, XX quarter seasonality, second XXXX. primarily reported you increased in that to X margin interest basis, on a costs. day

going forward. continue deposit headwind a that We be to believe NIM costs increasing in will

on X, X approximately shares, $XXX Basel III basis ratio Slide the billion of purchased common to In we million common $X.X a our CCAR XX.X%. quarter, XXXX equity authorization. Tier million repurchase third our capital Turning was where X.X Standardized share

our And calculation growth the capital in as the to to as incorporate on I may we CECL and last effects let existing of to our on that, capital regulations our Rich. quarter, continue believe ultimately the CCAR We need with turn be and sufficient power impact me have as itself of CETX. how capital earnings call based to well mentioned distribution. We frameworks around the over view view XX% capital the support CECL requirements. And

posted revenue strong in driven by for credit and in card improvement provision Slide Thanks trends and Scott. largely strong are of significant card business performance domestic is growth driven losses. segment X. shown I'll results our begin Credit card with credit by on Slide year-over-year income which the on credit pretax We X our business.

retailer which discuss have we in a long-term cards partnership to shared from capabilities, Walmart digital largest vision retail credit digital be announced of exceptional how turning is the I'll data card and to label and to briefly results, partnership we a and exclusive quarter be and issuer new e-commerce experience. early can quarter. Before analytics part innovation, co-brand third drive our and great There is of America's payments adoption, a private strategy. Walmart deepen a customer create relationships, central of winning leverage the

our In Walmart's to agreement the we're Walmart of addition new the of credit portfolio partner, the to acquisition be discussing potential also of card receivables. in existing process

a potential expect you'd there process until will outcomes of As course. its be runs this range

significant up guidance our In that forward-looking we the our third come. of up, for the to years exclude the believe of potential deal Walmart. generate domestic all Walmart with ending quarter, like statements now, X%, quarter and larger For loan of balances which compared $X.X Cabela's Average were average year. relationship in the we drove grew Pulling just X% of impact about loans. and card economics to billion completed value will was XXXX the before last acquisition quarter end the portfolio loans the the of increase or third third about the of

increased prior Third quarter the XX% volume quarter. purchase -year from

the Credit growth The margin. from down was year-over-year. loans our Excluding continued XX%. remains growth bit. overall partially in X% off the portfolio average into to prior about of high backdrop, and of seeing down from XX-plus Against on third of card favorable Cabela's, card booked revenue good continues volume at result of XXXX. year-over-year our purchase surge by to Pulling expected in margin the largely was math Revenue credit be XXXX XX end trends points continues quarter volume delinquency compared The basis the X.XX%, as partially decline higher XX basis improving domestic margin rate innovation double-digit the and X% increased loans Supply that has for booking down it in adding the to although prior points from pipeline. traction basis impacts a XX.X%, why driving growth. performance Cabela's up, Improving year said in a the rate year settle on our most competitive momentum. offset rational. but in offset quarter quarter Revenue points was a pressure from The generally XXXX, marketplace a rate, purchase We're during intense card a that's out domestic improvement that turned gain from the charge card was quarter was by XX the margin I've is year-over-year third prior results is quarter. growth the guy. of strong is up was X.XX%, the credit year. significant credit. marketing. side in quarter. domestic about business to Non-interest expense was the driver XXXX, Growth We're charge-off

business banking XX% Slide quarter driven in and XX auto Ending to deposit grow. in prior X% The rate basis compared up of continues year-over-year. deposits investments the account marketing improving to growth the loans with results to prior decreased driving versus in year we X% to strong Our are increase both a with about quarter. up and home continues auto average strong in portfolio ending credit ending new income increase second bank in Competitive XXXX. third opportunities third summarizes returns. quarter to business our intensity originations the the see consumer loans loans for loans year interest and continues still consumer were point average attractive grow to drive XX the but compared the by sale in quarter

X% for rates in the revenue prior as growth the deposits. than improved exit our credit by Consumer driven by to The auto quarter down interest infrastructure lower from strong off increases stronger losses driven the portfolio the expected traction. last banking year compared as year of decreased as expense quarter allowance loans deposits credit release. primarily of mix the costs. and our loans quarter The changing from auto of interest loans decreased result to home reduction We partially XXXX competition well an and year. from gain Provision revenue as a prior X% growth charge and value from branch retail and for the expect business national sale further offset higher average third was Non-interest by performance rate product increasing in quarter about third deposit auto drove continues strategy banking in was home the of auction business. rates

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

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

year-over-year segments loans trends Both of and up half loan and was loans rising deposits of out loans and Several with about were growth many Commercial in about commercial balances driven investments pull to quarter average into bank Third prior up the of less X% us attractive higher were the ending are behind down choice X% in into were several ending up flat. roughly rotating by XXXX. rate stronger deposits back year. choices average With from were our second X% linked these customers ending quarter X%. environment. deposit interest yielding business

Third the of charge driven equivalent quarter down XX% quarter technology year quarter on third prior was rate The quarter revenue loan of was business for effect yield. X% for rate investments performing down from from rate result X% expense the sized X.X%. was lower Provision was up bank driven was XXXX credit the sized Non-interest charge-offs. off tax lower the the by of credit the initiatives. losses other X.X%. primarily commercial The was non-performing The by the loan as for credit and quarter rate year-over-year tax X.XX%.

third place. eye of business staying market watchful to We're our transformation drive favorable lending businesses. improvement underwriting and in we strong increasing performance credit we and the Capital credit While to non-banks One continues in quarter In grow of the choices. competition conditions banking keeping saw across our and as disciplined drive a market solid another terms continued from to results our on less origination digital drive and remains commercial invest quarter the our

and Looking for good account card in to originations we our continue see ahead, businesses. credit opportunities auto

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two Scott efficiency discussed operating XXXX roughly the way to will to drive be hard to adjustments, our tonight's expect the tight. flat infrastructure net work. but it XXXX transform with After and technology beginning years will of ratio continue full as we we to of the continue portfolio of change efficiency significant repositioning. improvement be at call We operating we year compared work investment

achieve ratio gradual efficiency any year, we'll improvement given While driven digital the productivity to be believe over the gains. we long-term efficiency vary and growth able can in and by

capabilities enduringly We in revolution great and continue Pulling franchise the mostly expect long-term as and an our efficiency operating to will brand, improvements digital our improving society. come scale, with total infrastructure efficiency ratio up build from the to we transforms industry succeed ratio.

relationships is grow value. changing accelerating in engagement and to shareholder new positioned technology long-term powering and to with a We're our existing ability succeed deepen and digital customer new well and is customers. transformation Our rapidly create marketplace and

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

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

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

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

Instructions] first Wells come question [Operator with will our Don Fandetti from Fargo.

Is just were that not any clarify fair, it the can't saying there you nothing is like it? it's to, want price, to that say know Rich, on you you lot just get fantastic just about deals. meaning portfolio, are would to own to more a I other structurally a of you cause you it, buy economics Walmart and if would that

this for to at buy price to quarter be terms Don, back the us negotiations which over two. through or agree it to book, us, be needs portfolio next understand determined the and we attractive to at a the will

Got then sort just it and of.

that. beyond nothing There's

cycle in the little would and we it talk are bit credit opposite. and eights, of looked then the of in you the a market the environment? the is numbers, you sevens, if just is a and sort obviously telling preparing where us weaker it, the for your think suggest multiple low is sort yet Got you turning, at are you Could high stock that the in cycle about

of of implications card in catches the positive and this is, – most great because true, good be ways, forget a but I things lot I our just ways, we aligned rising think sort question, and the of so comments thing is, it know environment We a term the sort those feels these make issues consumer calls, not Don, supply you about rates, credit consumer. the deficits, gotten interest and by can too in make a recent even at in but about a quarters. supply, struck growing the card this that's A couple that and, have one so though industry, issues, indebtedness just some many I'll about attention longer economy effects we help, that's card out many better bit government how point and about but on right issues of will comment. can't in also talk of out so related good almost cumulatively can't the the have trade of to It's going times sort of planets some moment, maybe with now, been the to there how there, little on

the we're So what given bit about little here, we we environment sort is doing dichotomous of are of dichotomy, a taking a feel strategy. the

extension dichotomous of so by the doing, originates on, what leaning of but national on mentioned of that course some exposure, it's but accounts, exposure even side on marketing lines we're really on doing the So new creates thing seasonally the programs product definition build marketing, sort we I really lines comes balances. feel business to into and successful that we're and a we cautious growth we're and by lot not of accounts high the compensating doing about is going the have obviously good in really rollouts opportunities, of growth card the of, of being and credit we're more we've the rollouts, banking, growth as because the opportunities got where

back year years on the credit things really and but lines further see to initial for point the caution not talking last kind kind of doing, this two, line we've about been we because that of or so, X.X of but increase just lines, dialed even at probably on of we've more this within we're So, in our anything own the of portfolio marketplace. some really concern out intuitive relative

of generate on in careful they're need window don't to accounts capture forever the Our then the you philosophy -- capitalize the to the available, is, extra let's to if extension you but window, line. because build about not be continue them -

please. question, Next

our Sakhrani KBW. from take question we'll next Sanjay And with

Scott, I charges understood to forward portfolio make wanted investment its on I the impacts. the on impairment go sure

it's segment I want just going elaborate the other, going earnings and to guess I that, make think in I forward. I to heard in you income, right? sure it's Could benefit on say you other non-interest

this in so does Yes, it right, rotation, was income Sanjay. you've in terms of got the segment. other impact, securities non-interest Basically, it it's the impact and a

around that loss in identified agency of mark QX, in a in we billion sitting around MBS that of and AOCI. So was $X AFS had million $XXX was

creates our into sell a that what had to and we why us we capital and basis is for impacts and the recognized tax of the $X kind we've forward yield out In it the efficiency position caused us. that that securities we around reinvesting them that's that know, That those deferred those agency QX, billion improves those a to of of going it by and selling so identified you XXX go capital securities, On the earnings, intent $XXX MBS. AOCI move current mark in As asset the million. securities coupon points. QX, increase basis in and been on to happened and

a I by them, our put after bit to mark QX, rates before portfolio, this entire we’ll bit, in so kind is able a have those move and probably few We that picture improve to the net margin that's we're available we of just see a the a more there. that would saw on sell during on for little And that so sale. the just of go-forward we identified basis, those interest So, now, expect also basis we a held period we mentioned points.

then question, second Okay and Rich.

some I is your peers. guess digital and your one of specific provide transformation to them maybe anecdotes? your it's just is mentioned feel Can is growth. accelerating and the how you Walmart You you mode relative helping that

pull up way transformation. digital Let's on the

transformed going going to the most to experienced it the on spending every as works, inside, risk in how order to to is this is anything it's deliver management about that, itself need company and thing, business. maybe be is is in banking digital needs be it from given customer how talking in intelligent, think very time bank outside experiences. everything But and I we're the change are the that about to the other banking real-time, works it than a thing end the totally important more just clear

not aspirations. we're product what of inside - same the of But leveraging company we feel, build So bold everywhere struck that company up lot rather ago, we because uses destination customers, helped into can on the that really and one the customer inspect - on that see. technology some by technology transformation shared years a machine - each than a we want see, we a the of like does innovation, declared technology the the on of as benefits. look banking and technology all next. work benefit everything to path this does is, years side, this in thing it starting lot that something transformation one it's sort many cost all can bottom necessarily feel basically transformation is of a technology can the of stack it and they it's like have costs, a now deep this been the of needed learning, a experience, have the of not working that and so being we have bank outside something and really transformation years lot not stack at lot world banking the the the investors can accelerating a feels They for Frankly international accomplish down on product to

see there was So probably we Walmart where it the of our is, often but are and great it lot we example transformation that, that of that's a that question everything why a decision. but itself. is and of a the reach payments specific investment in digital capabilities in it the the and we're on factors manifest that selection very asked made important believe that outside so how certainly went into Walmart is - certainly journey can it part does I did, shared

in We that some the by you it experience look that that we also customer of Net see the see Scores, rankings at, the all Promoter out external metrics there.

J.D. just ago, example been weeks year has Our a dramatically the One in out One an ranking ranking, number best few came of number that banking mobile ranking again. is again apps customer in Power each one experience in one does improving. Capital was XXXX as Capital that

and there like you out giving there that a doesn't information, - deeply we things. based of is it's people are help at I that be out will really on use of set and their growing monitor scoring, whole these rise don't of fall folks some really credit CreditWise but direct scores look tool. customers credit things Now CreditWise of would company understand are and our a to experiences credit sort and to allows ranking manifestation There can lot wisely. our tool a gateway gateway into

get bolt transforming cloud, infrastructure, learning. machine transforming going talent, look business here's years prices the we can't finance software data independently on That compare that for car on you basically world can't auto - involved Auto is is the in our of at search product launched capability technology shoulders in real-time If for this all pre-approved going any rebuilding couple think the which thing machine and most a for kind bank. now that America, attracting of product that ago on of our years that's driven in is to class environment, fact done, and you side the automobile to in this negotiate on cars, how national unique been One work of and Navigator on learning financing how engineering build of unique, inventories, buyers any technology Capital in work I the you allows stands lot transforming nanosecond our a

of controlled market, shared along the not product, cyber way it's these any Sanjay sort credit expectation one maybe way than maybe path, there. dimensions, where struck is all and management, up thing environment security, at on I'm right what very I'm experience. integrated says, the personalized surprised looks better But by in industry out faster offer from better is, is into their our not and and well thing that's a things and deliver service frankly and of one is, world very, same interesting So product I these it economics different have in the that's most believe have another of complex which the risk side shows for an that's happens real-time transformation regulatory This fraud, what other this is to all one that going important better accelerate the benefit the the just another operating here, banks and really in pick to because the the on controls of transformation but be because one well way this Better that lives. to benefits on it all in will customers, is this this app high. payoff is is opportunity doesn't a requirements versus by of

the final want - different we're in will our ways more benefits the But benefits on this. efficiency the as the will that's pop dimensions is see I it on thing that of it that, manifestation journey show say the - up is but these to many So we come investors. from that for up

the the couple striking like is continue are investing Even to of digital, investing. one digital. in we it's not immediate. investment one to ability obvious this of We're invests a in journey is, though get efficiency benefits years most more on the embarks technology then not Now efficient. of invest stops and suddenly will for benefits What's when one though

invest one But has day technology be saving cost and of probably see meter continued to that come the the lot look shows meter and XXX% continues the way everything the operations to this legacy technology is digital more, around sort direction we'll really the will of We a analog investment until on and the up of of basically itself of that company. significant. cost of a ability in benefits to change along and the while We in, always do we from the it in increase channels digital.

Next please. question

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

I that Marketing So in fact could flagging be and loan you've it's going again quarter was for and Rich, the the just guiding growth third quarter start reopening, seeing but mean marketing as hoping to the wondering, you up targets, do increasing will spend you window we means up I in expense growth. this the lot you're are a don't with this a was Thank set that in I for to for was think fourth growth you lot been growth know up what loan overtime. improvement you. the

of some nice customer the What lot into some we're XXXX happening growth lot account is reasons done not is wind and we're that. for have traction already had origination goes outsized we're the So a when probably of new that way many and seeing of I side, initiatives. purchase we this this, XXXX, the on innovations some very seeing XXXX, these sort see numbers, to of in the of We've obviously, new them accounts the volume a just along you size growth. don't the a that so of of terms with of of window talked in generating the in about leaning things traction marketing related we digital but we that see saw

originate the growth that is line to more what is we only has credit It's on again stress of credit So of be a a function going it. about to we mean that, want I the not thing because lines. loan entirely I

point. dial we lines driven and of market driver is up overstate point, scrimmage place stored lines the how we the how can to but point be And line economy, sort of they harnessed a that this opportunity growth. call later about excited so accounts, the at feel, want from which that generate by of I about loan be primarily of we will of card biggest those view don't represent credit we're lot a to What the when will be open of the ability the a knob

build just then will the be us AML. Thanks. get $XXX you fine the And made of inevitably maybe it. out Scott, what remind you Got investments for reserve need million million additional where and Can OCC highlighted with related for consent to remediation to orders? the the are to $XXX you

on since Consent been Order we've so that the on Ryan, working XXXX.

I made we've substantial think progress.

large bulk and resolved been accomplished the that needed think to I so have see gets think that do we that of hopeful thing to a don't the here than us cost we of we're and work has front headwind sooner later. I in

question Next please.

take from we'll Carcache with Nomura. question next our Bill And

to follow-up in, a hand, cycle the stabilization standards like could On so seems just reconcile opportunities are data the where inconsistent you on earlier. hoping from can the maybe of be one pointless appears Rich, wanted leading at difference was then seems which of points showing we're about it us point expect the and looking your made one underwriting what you us I we point. a made see growth give auto for leaning growth to versus the a data XX seeing in whether at continue the months to leaning growth in little to that in help your the and some card with and what growth see the and bit into in as to we've between a we auto. up into slow, sense you I like gradually But about in last to you both card been talked XX outside

Sorry, other particular says everything that you just? what at indicate Can direction? would pointing in the are you

the of growth in pointing out, we months you card decelerating been it's It's No, I'm growth auto, year-over-year positive. XX at is, sorry. just from just the if year-over-year in year-over-year to ago. still and know I XX peak the growth look was that

on wondering growth. could point leaning comment So into if about just versus that [indiscernible] the you

So let different they're card me auto stories. talk and about because slightly

Let due situation me start even and has with the the cycle, over two anomalous auto. players had kind one probably The of significant credit along auto demand the we're the maybe last don't I the back business. or industry changed two in to in situation where know, moving supply years pull though of

into us leaning ever more that into that, opportunity overtime normal, we've but where and to said remember Capital since let growth the been will One opportunity we that that So leaned opportunity like but something all we've back regress long, the it's car are been prices down to used some The remember high they in are point. for at fear the some industry way only on about that of so stuff. we have be cycle, we where got let's forgot really

we've And be competitive growth technology lot dynamics slowing positive still got in a benefits that our not auto used as driven as they so, some is been some but those growth the exists they're is of there the still and to business, space. in by it but big so has

think jump but still nothing we about not a from it's feel opportunity, good on. big we're change the I trajectory be that some that the would

me struck the I've stability let card kind industry gone just card and back that sort of the been industry card of the side, On things by have the in on. describe

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we're as One So like probably see on could being that, leaning really we're sit saying it's opportunity, then that marketplace good sort the of growth opportunities, of it tables industry into it kind league end feel feels for gives growth as here much some the and a of low investors are posting leaning simultaneously the you I some pretty of color in growth. but wow, and these sort I you earnings calls how inside Capital the we're got numbers won't of like into some that

Thank that's think the I So context. you.

follow-up. Rich. super elaborate it. on Thank That's that that's you. just you, Thank you Could seeing competition a and you if just the earlier mentioned may you're I that non-banks helpful. quickly from as

the commercial side. on about talking You're

Yes.

truth about the recession sceptical look but the little a this go lot thing, go of of there and performance their - bit kind you after if I look big and way is which oversimplified little be those. start to I might with inverse in So a to, a maybe true a and particular things at is back at for of says happens oversimplified maxim, be, back recession next the best did highly this recessions which

seeing did I out out for banks space, looked the is the banking business, that always corner on and of they in limited put how certainly that's the to to driven growth many been for so because so, consumer and opportunities so being good is of of generate by to are was your the over painted the there, of opportunities a cautionary C&I thousands well into we opportunity I've in much national bit have that continue looked little it taken asset lose we business a in generate but thing. little of of players recession scale banks at and banks growth the struck felt the C&I then side few so so what last example by there within a general side so kind that and lending So many and -

increase multiples of on more generating to Sponsors It's been securities in and aggressive and the being chart when weakened for is assets as the used, assets being low caused are edges rise economy accept has to debt know for the they're in looking that Additionally its still see the give regulation EBITDA paying out The accepting provide now and at investors you And caused of has are rise to have are looked marketplace continued there. weakness these what yields in the higher you of so policy assumptions sort price. have higher just more made, other continue all by of finance their investors I inflation. prices in interest and Non-banks returns. credit continued way them. that and assumptions the competition there searching we've other seen to just this we like to years risk fall, of aggressive people return. terms. seek will, striking returns. And lower have aggressive spreading and deals the as equities virally way just marketplace. accompanying rates, an yields that curve even involve unhampered to day structures to are things attempt to ways sort to using the if companies, through low US pushed EBITDA. of of this monetary course around percent assumptions on to said There's wide from with the And the range a more out has Investors lenders

magnitude. of of trying observation the on the general a different banks a things generally stay and be I that the parts banking don't I on direction can in very side put strength not and as around marketplace the would you pillar wall so same we disciplined. to think Now But see these of the have banks, been think if

of those on quarters, sectors the growth look maybe fact you done loan [indiscernible] but much like So pretty reduced quarters if call, have last they're on we thing the probably what we in exposure heard pretty less as we to of the six which of at we number identify in vulnerable the sectors kinds this, disciplined is reasons dialing been One's trends that having are we need specifically the doing other case driven to and and bank for the all resilient by and the has reducing we've last particularly watching been what areas that maybe this and are one exposures about really structural lot to these so every it, commercial stay the identify that we're side have in back of in a calling about a that is, obsessing that Capital or concern.

we across cross that think market as at So serve calibration all a places One. Capital I the

marketplace in think into it's subject consumer on side. C&I, that to the talk the lending the are particularly I know I probably classic that lending bit you more commercial economic is the the that better themselves one along about on be cycle, to okay, going looks side when lenders feel the C&I but quite conditions I going the calibrate a further ways

please. question Next

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

Just a couple ups. of follow

non-prime understanding was [ph] to back my a buying was going moment, One. just for to Capital Walmart that Rich, assets First very anathema historically

to I'm compelling it what about So perhaps wondering relationship I with this do Walmart more itself particular guess makes portfolio or the so.

with talk we this we we view whole conversation is banking this portfolio, portfolio in an company us a on; and deal, a don't conversation an an that industry go all that it, on really has deal of should acquisition. to about it a unbelievable industry an this about in when transformation call on having Well in how of a parenthetically all is don't extraordinary a a franchise evolving. the is This about this partnership is that on revolution that one extraordinary is school is in

relationship. from the start where seen strong partner their a with out the as franchise. card company of the of very the deals with program maximize credit A that for benefits reason we is, we've there, retailer function the how can profits a motivated a themselves right about So partnership just Walmart and card. lot objective big They're

drive out for want about agreement franchise Walmart But and sign we on out the way have really to vocal lot a as the that's and us leveraging and where very grow virtue things and this because around we've seen economic what might just in a build of their go the to is finally that there, important contract. and two be the is digital and of it the we we've nice talk aligns we've gone partner. their contract and So industry that, think been so by objective it's parties different interest partnership in we really best strategic of functions and about focused the transformation terms structured to

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the thank quick like very it cause for I that was just compression then and forward, understand might that you many seems in drive Great, also net just margin. one the significant compression this expectation the interest evident trying on go going of of in to follow-up period. NIM were expansion that forward recent with that dynamics

trying just to I'm understand causing So like in what's this change cadent.

Eric let quarter. happened and and the what with back in NIM me quarter the just about talk go

factors. margin three basis which on XX is increased interest points driven really by quarter-over-quarter So basis, net a by

the all last yield would had called that of items card a payments typically and second position that reserve after business quarter the forward. the we an expect exiting as impact of home we as loans second tax seasonal of had excess several being lower the First of go had then we balances build, quarter that we cash didn't had recall impacting that the increase We quarter. were in UK I PPI out consequence and some our season customers

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and basis positively. a small Now those that quarter cost one drove there continue will things that's the be were from the thing I continue to on going expect headwind all to quarters performance forward. that of would that that to a linked the linked moved deposit say kind I of a headwind

Next please. question

next from Orenbuch Moshe our Credit take we'll Suisse. with And question

I you little know about kind how credit given adverse and is risk more in the of talk talked grow rely then a you and that of we Rich, over the in you partnerships. But growth that be little a that offering you've about to trying do about think and is focus? you it to talked about balance not environment, how this I think been bit it. a should lower can of it on mean, the selection to going how lines you bit bit said

of picture don't as a sort we're that spot. of utility continuum spot thing are all for starvation extension, these say can and opportunity within be but credit and think spot the to which I - actuarial that frequency is, under so see size This of within there end of circumstances performance. all that I to when are so credit on very cause analysis we of have to science of there's lot have relative plays this asking many can choice. or then we credit time. you but to It's adverse times quite one a many, we lines down you're credit it that. repeats dial the role and sweet isn't because paint initial line many have many the question, also me, the itself that by selection, selection that people we say sweet greater an and cause there's there's around big positions Moshe, of there positive the just a we times spot ultimately choices customer just a over of the of just and and the that balances are relationships because sophisticated so increases view do that we we monetize actually a mitigate years to sweet sweet attempts of higher there's choices make, that the striking on risk of dialed the as affected range gosh within risk testing selection granted on it, other The made some in terms the one doesn't but what Well just lines a Moshe and that want

thing a the example, is moment, this over and but you For at at industry card card industry the look years. the it's probably even around that look true the

that dialing So often is who line growth the companies up their are year in coming increase loan the particular programs. greatest to

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much enables So growth and us we're to is have same to this prudent that at to feeling sense? just that for time. - Does go Moshe and lean back we hold make in we the really pretty so go overlay opportunities feel caution see the we the without

to you and about does just do Walmart? Walmart talk or of take on around a for the approaches just might it rest whether different questions of not your Walmart. you and Yes, follow-up depending kind on moment from Could the the the you both do portfolio portfolio buy relationship

what. to relative take might we is, approach different the Sorry

you portfolio increase do would things core would portfolio or terms that mean, your the in out your Well it that found buying you of and size were. obviously out - I you found or there you any that I you XX% if differently of if mean so weren't growth, are

Our core growth one in minus Walmart.

Yes.

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we a weren't in go didn't portfolio our would move we of things we be way when about, position between be QX and the may move as that, see acquire the acquiring XXXX. forward talked if we might position would into getting capital impacted, may XX% of see capital that that our accreting One Rich that so and portfolio all now forward Walmart us needs above in in that to event you capital the and the in

going able XXXX, to would level, with otherwise we I higher until plans would would. CCAR we probably think that a anything we it's than unlikely do that into be end capital with so capital distribution up

please. question Next

And question Rich we'll with take Morgan. P. next Shane J. our from

accounts. at skewing this one loan we on digital investment One a When demographic. we here? the look Is a balance you growth going passives drawn could what younger be and at is deliberating low that see look that the conclusion towards of were that of we towards the

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I've creating has on present and context Capital founding has in that first Everything from very One I think focused days net seen been gained Everything of second. the good shareholder its paying is ever value. long-term value.

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Next question please.

our And final with Betsy Stanley. question comes this Graseck evening from Morgan

bringing understand have. So the this relationship Walmart that make offering that efficient delivering only you have Walmart and you something could for a this together digital that because but what the of you One, is much Okay, more so if in mentioned Scott more in just was that bit when to might so little a buy to to or you And be event from the understand us that whether couple Could book. you understand ups would wanted share capital that's buybacks sense XQ back holding just onto not? to that enhanced I customer? to as impact wanted then to really I a you you're going is or mention a not you here. more follow to digital give Rich, you about there table label what did the not wanted of it about part other experience interested relationships

don't there. why Betsy, start I

well power negotiating that be end capital capital ample we to where accrete current have and think we to as agreement to a support Walmart today, billion transaction starting to something I going we're acquire. as be that start position able up earnings plan the our successful capital a for should $X.X

that on question with digital you Walmart. thanks. the the on regarding Okay, have side then And offering Rich

the use reluctant Yes, I'm to word offering.

similarity capabilities I think and the the it's more between really two. of possibly the really the journeys

to Now for themselves. they I want for speak need Walmart, speak to really don't

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a this Thanks thank answer today you Investor Capital for very may thank everybody the good Remember night. be further to in you One. and here for team Well will have conference us joining on you much and your evening call Relations interest any questions have.

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

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