Capital One Financial (COF) 23 Apr 202020 Q1 Earnings call transcript

Welcome to the Capital One First Quarter 2020 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] Today's conference is being recorded.

Thank you. to call like to now would turn over the Mr. I Global Senior Vice Norris, Finance. President Jeff of Sir, you may begin.

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

live the webcasting are we usual, Internet. As on

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note the contain financial presentation to particular indicated discussion as result Information of materials. does dates the any information, One future obligation new of the in or information, whether statements undertake otherwise. forward-looking update not materials any revise statements. a may in and contained of forward-looking or this Capital this and any One's speak as performance events date Capital or only regarding Please that today's

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with And Rich? call Mr. I'll to turn the Fairbank. over that,

everyone. evening, good and Jeff, Thanks,

the abruptly COVID-XX quarter quarter, impact. of and care and you, world I'll changed last and get we're begin of watching roughly virus. we transmission responders first of empathy into In extraordinary the of weeks action, the the accelerated. the for support spread an the with its with first as people first as overview Before of take slow tonight gratitude the results, sick, COVID-XX two all Like communities and

focused now One, and associates, we mobilized of on our to our XX% and Enabled productively by our transformation, and working we're our smoothly make transitioned positive are about and associates and well-being to customers home. securely we've of Capital serve, the remote an impact. associates the of do working communities part technology from to our At our immediate fully non-branch XX% arrangements

be our policies we've flexible social increased and associates at adopted leave taken improve and steps For must who attendance location, pay. Capital hourly distancing, One to

money and For to we're options social their our offering to banking steps a while forbearance taking range access for customers easier it customers, distancing. make of

COVID-XX that and sweeping shutdown breathtaking has seen the catalyzed the global to with are of events the fiscal a magnitude is the difficult a disruption. partial and not Depression. of predict of a speed; world intervention unprecedented It the duration Great since the magnitude three global pandemic, economy,

our these weather liquidity all we challenges. to well-positioned Throughout is on history, in resilience choices One Capital of our capital. focused and on

As is a balance strong. our result, sheet

and We reserves strong have position. capital a deep liquidity

stress resilient all businesses We've avoided obsessed built of and bad. underwriting exited and our tests. segments. our been in and resilience businesses segments underwriting the before of testing industry-wide We in also with annual in decisions decisions We've times years into choices and our stress good or advent of less

making long-term manage impact. and the loan origination the of resilience today we're analyze its choices pandemic in value on through throughout focused to of We always, the our model, we're and portfolios And loans. life and the measure from as resilience the creation

a position on including recessions, Our of emerging the in side. record track other the Recession a of businesses weathering strength successfully demonstrated and have Great

of We business. That the auto, COVID-XX. depending card help are help different forbearance we waiving on we and impacted takes a in working clients for are who fees and to forms bank, the with on working by the customers In are payment waivers. customized And form customers. retail impacted our In been selected is deferrals have hard short-term our commercial, primarily fee basis. in more

of As X% of and business, of balances. or about of forbearance about loan enrollments X% our auto accounts of balances, April customers XX, about our covered domestic card in active or X% XX%

was how move broad Our which our are mentioned the I've work cloud working essentially mobile of powering by transition from integration pandemic. quick investments to and to the transform already our to we issue-free our response our our technology. enabled technology home, to and and

Digital and and modeling rapid and and in of changes powering data underwriting capabilities real-time scope the monitoring. and enhancements expanding are effectiveness also

Turning guidance caused our now XXXX. of annual economic the disruption guidance. ratio withdrawing including COVID-XX, our of and by efficiency are guidance, Because to uncertainty efficiency ratio in of we XX% operating

we of wide payoffs on digital the our a transformation is of of positive outcomes. and targets effect is most economic efficiency into while time. operating and timeframes a to pandemic specific We're the pandemic and value. But delivering delivering over only the its shareholder weeks It a element its important runs handful range forecast difficult or possible of remain course. long-term key there leverage focused It's of one

our on withdrawing XXXX We are guidance marketing. also

assessment the with back near pulling marketing the line continue COVID-XX on on on marketing market of risks. focus of of our resilience, based opportunities. long-standing make our our dynamic we're term based decisions and in scrimmage, view at risks current on We Consistent to

government the forbearance should country of global the coronavirus decades up, Pulling and world. across and out. of difficult but of some challenges, the predict it's of and will these to The of the of more that predict increased the and significant stimulus even difficult time time to it's help entering down. how we're our all pandemic economic play will by largest in a shutdown mitigate activity to economic activity spawned that, shut it On challenges near the top length remain pandemic course

I experience and ahead, our learnings lies what bad by to most businesses, be through for through we deep continue our our and served will and balance transformation well X.X from manage believe managing times digital importantly, strong good times decades. our resilient sheet, we As

ready challenges. are We take to on these

turn to Now over Scott. the call I'll

Thanks, quarter. Rich. by items, billion $X.X $X.X build. Net billion of in $X.XX lost in the a driven or One EPS per quarter adjusting share $X.XX, first loss our Capital the was allowance

January cover allowance with in to X, the our in adoption previously XXXX, as The line of communicated X, increased expectations. I'll Turning $X.X Slide more detail. allowance by of billion, CECL

$X.X $XXX $XXX approximately Our first of approximately billion quarter consists in allowance million auto $X.X million and commercial. in card, build billion of in

an added scenarios allowance. our judgmental heavily The scenarios increase overlays in these we included QX economic peak of some variables sharp XXXX. too our not I by followed just the weighted focused economic a of impacting We headline unemployment the unemployment was into modeled several XXXX would you allowance. determining X.X%, during to to most many it encourage on one and rate of improvement get because then a

our qualitative example, modeling, due forecast we uncertainties severe added For and reflecting to and end. economic more completed risks after we the overlays, after around we quarter saw

On December than card coverage in X%. domestic Slide to since XX ratio see you X, that almost doubled has more our can

our ratios these agreements card only for was we branded portion in partnerships allow of The U.S. driven portfolio, between coverage difference loss our by estimated where is ratio Our XX.X%. losses. sharing the

X%, commercial over times coverage reserve oil and primarily almost X.X%, at the stands And now at doubled year-end. coverage two coverage to has also by driven gas. auto Our

have included appendix specific details that an and with slide oil our We gas on in business.

I'd like to discuss liquidity capital and Next, our positions.

strong times in on situation and As liquidity good of with positions and enter our accordingly, we COVID-XX capital focus Rich capital resilience and into of mentioned, levels the bad. liquidity. And we in the

slide and Home XXX% the billion, quarter and cash, end including requirement. you in we total well liquidity liquidity above the securities, XXX% Loan Bank our billion about On reserves regulatory of At ratio was the coverage cash. year-end see first capacity up the $XX from preliminary XXX%, from at X, of can Federal quarter, $XXX average had during

to slide I will cover Turning X, capital.

was our XXth. quarter, minimum capital March prior XX% the the Tier end and our first X.X we the well quarter, million on or share In long-term X.X% million about the repurchase to of common common suspending target. $X approximately XX.X% of Our capital equity $XXX ratio above billion purchased above program at regulatory requirement first X shares

the measures. capital QX, rule the to adopted we Reserve's elected final terms and Federal AOCI of of and tailoring in regulatory impact including new regulations, opt In out of

to on elected adopt impacts These transition the also five-year X. slide to We included regulatory capital. are CECL the elections of

paid points on year interest portfolio. quarter, points, that interest margin yields lower I than lower basis day net Lastly, decreased was turning prior partially a quarter-over-quarter on offset balance expense lower you quarter. to basis eight higher the average can basis, largely see driven slide previously the in X, lower X.XX% and mentioned by loan net margin count, interest This was On by XX our deposits. cash the

forward, interest a margin and our equal, rates cash by margin headwind interest mix, deposit curve low higher/positively count. variety view continued create previously and of net in rate decrease yield And Looking and tailwind. headwind pricing, are we as a a a to a net day positions to our including slow a significant a as near-term. environment impacted continue else have as be likely we will factors, the mentioned, our to generally All cash of asset elevated in levels

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

Thanks, Scott.

each businesses obvious and This of the quarter, recurring there in an for company. theme is our

periods: time distinct Xst changes mid-March hold; impacts COVID-XX and January quarter two sharp and metrics drove before two took when trends. weeks reflect through results quarter many the the of First COVID-XX last in

Capital a a strong too growth, simply but generally strong results and credit show performance there's Pre-COVID-XX solid much put trends recent in that on to extrapolate trends. position. One and clear efficiency inflection, Post-COVID-XX have momentum uncertainty show

quarter quarter, volumes. slide the in card were are on of credit business, trends our card by With the loans solid and continued largely our domestic driven summarizes in Credit Pre-provision segment XX, with results results up results performance purchase Slide which XX. pick shown is context, and I'll first first that for card year-over-year which business. on growth

year-over-year, addition loan deceleration the the growth caused driven acquired ending balances by balance. portfolio. late of of in the The the a loan Walmart Domestic X.X% emergence of impacts card COVID-XX in quarter ending increased

First year-over-year. average quarter grew loans XX%

the quarter offset XXXX, sharp through most declines the was X% of the up the of from purchase by volume First quarter first strong with of partially quarter end quarter. near growth

a with volume year-over-year and at an These the and of partially purchase declines the and decreases discount entertainment, retail. XX%. of spending trends, offset in weekly running at Consistent by were By end our industry decline increase stores. travel category were discretionary in quarter, largest was about restaurants first supermarkets

to X% XXX XXXX. points basis XX, volume compared revenue year-over-year. about down Growth April year-over-year. margin. of quarter by purchase average margin the offset continues to loans in XX% declined be lower weekly was Revenue revenue Through increased The first

revenue the the comparing of A agreement acquired first revenue majority impact expected which sharing of and the the was quarter math driven by net the to liability late of interchange release a resulting portfolio, on from benefited decline from drop the lower purchase quarter in volumes. XXXX, the expected Walmart rewards of

addition trend from addition the for expense rate acquired charge-off the agreement, Non-interest portfolio. Walmart driven X% year up rate of by year-over-year, quarter upward was Because point sharing put is delinquency the the not rate. XX the line the quarter, in on quarter basis XX-plus was portfolio, improvement Walmart of revenue. the affected delinquency The first in the pressure the loss by a with prior the X.XX%,

delinquency the rate and this in significant points basis X.XX%. Despite the no upward There by COVID-XX card were delinquency year-over-year X to quarter. on impacts charge-off first metrics improved domestic pressure,

mobilized build However, to first the solid card activity. COVID-XX reflected shutdown quarter business credit had delivered the results of allowance impacts. up, of the our Pulling expected to impacts significant economic the reflecting quarter, -- quickly domestic in we respond and a in

by X% of summarizes growth loans XX, the results ending in and about Weekly started applications of of quarter about to XX% quarter, indicators XX% were show of March about in consumer March down business business. Weekly the year-over-year year-over-year banking the were down down originations in XX% for of auto first and year-over-year loans. in an of our half But average year-over-year half dealer impact. and half of the an growth year-over-year posted leading down growth COVID-XX about Slide first average end The the half second April. XX% April. second X% first dealer in average in of the

points up XX were and compared Average from declined quarter the year year-over-year. deposit basis rate in market driven rate deposits consumer the for to interest sequential Ending prior interest quarter, the basis by the quarter points bank environment. the XX X%

our Our funding environment, will average paid deposit dynamics. factors, mix, forward depend market several needs rate including competitive going upon deposit and interest our the rate

X% deposits the Reserve by pressured loans from continued timing and the shift more decreased than our revenue deposit first higher in Underlying from rate Consumer factors: two the of growth from quarter in was rate year. retail banking versus mix revenue auto differences offset revenue to deposit moves, of last and products. cuts higher our quarter, toward pricing Federal

Non-interest expense year-over-year. was essentially flat

losses of auto points result $XXX year provision increased by the year-over-year, an The business basis X.XX%. compared auto in charge-off to the allowance as million build increased X for prior credit quarter First CECL. a and rate primarily quarter to COVID-XX driven

thus Moving to XX% commercial April. the lines customers in discuss growth subsided in our XX, far resulted quarter. this banking year-over-year. March, loan After of line from balances peaking slide drawing up About Ending I'll half late business. have down were draws in

year a quarter ago. deposits loans to up increased compared Average X%. also quarter first were First average about X% the

was growth was up compared X% strong compared income. the year million losses Non-interest balances allowance essentially loan revenue prior average credit by significant and driven prior the increased a driven from to quarter year flat $XXX of quarter. build. in Provision quarter, to for expense by XXXX, First non-interest the quarter first

criticized more to in of related related gas is the pressure remainder provided was composition the rate of loan first the on the little than and quarter commodity in the and X.XX%. was criticized and activity. XX. prices allowance charge-off economic to X.X%, rate the X.X%. We've a banking The portfolio of sharp portfolio. drop the COVID-XX in for of and by the rate gas commercial oil caused The loan quarter breakout across was wake slide in The reserves impact is build build shutdown for A the portfolio half non-performing oil the performing

quarter, One COVID-XX and first to Pulling way causing, customers, focus our our the on a disruption it respond the to mobilized communities. in Capital with rapidly our up, associates, is and

position pandemic, in are closely creation. strength long-term we're a and conditions and the and managing value weather businesses of resilience We our to monitoring for

how much to can fast, make makes scrambling of and I sudden change just am in can by coming heat much the world and in change struck challenges. is of swirl of anxiety. moment, in the a one the companies uncertainty Rapid before But in how so face-to-face how the two with weeks. leverage choices unpredictably leave the choices

a you the Capital I've often impact weather we And said times most you during that core choices how make on manage bad the day. One that the have the times. good how that's every tenet of

days, we have resilience founding our make capital, every and into we choice hardwired credit, From on liquidity.

a Our balance sheet loan is strong, we've built resilient portfolio. businesses resilient and

We actions we over have leveraging we've invested resilience, our and how two taking and further and to decades. transform manage work, a what and half aggressively we're to risk strengthen technology decisive learned credit

find the well-positioned how to through But strength to customers or There very we're with last. challenges our and ahead how to are predict the it's emerge economy, challenges One. point, other this side. great and certainly At may they -- the for the navigate times for opportunities for uncertain attractive to hard these manage how great be Capital long the and may on

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

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

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

If you will available questions the please Q&A. answer follow-up session, Relations have additional Q&A the the any them. start after to team Matt, Investor be

Morgan [Operator from Graseck you. will come Betsy first Instructions] with Thank Stanley. The question

and in with for customer the Walmart portfolio portfolio that set? I integrate business go taking to couple safe how everybody it the particular, wanted growth we call the relationship how I you've for the of into understand is business that Thanks the and thinking Good there. just through got next evening. years, and Rich, about as guess hope you're to means that card what in new

has So, The Betsy, really integration happened. good evening. Walmart

working they they And we And future partnership much in been -- have so I've the struck Walmart, a business of importance in card opportunity. wonderful the business with really their their how exceptional. and digital appreciate by

can partnership what optimistic for been And so we've this be.

At portfolio back that's as the acquired is the book that's the dominated the that partnership and we fully moment, and expected. of integrated by economics financially, performing

and Walmart to so bit that will, the subject the a channels coming probably a And place we to and and in mentioned originations. been COVID-XX along elements of with some in be that relative put opportunities middle the to is for and hard very of impacts working have all this, the of probably businesses, in I the demand our like of happens typically business changes downturn. what a challenge

by in credit the moving I'm find focused we the on how But what we're -- struck where manage to them. is And take perspectives to this very very still with the opportunities. same environment, also on forward

continuing be to forward. And so move we'll

follow-up, Okay. by quarters through segment, -- you of the Thanks. outlook the the just very very is as turn detailed a And unfold. for think to reserve reserve as went Wanted understand, we you to next that much wanted about how to which then appreciated. segment as couple

I realize XXXX, unemployment the overlays XQ but peak that you put qualitative on. X.X% the is

current you get baked So come should how so we a how numbers we any? when the reserve level reserve if do see can to unemployment feel like you've into builds, as more out, flexing just be the we much future sense

the thanks Hey, Betsy, for question.

run. -- when I didn't by the think go would the end We actually reserve do of -- we off and topped the reserve quarter, that the an we overlay. start the at saying up just another I did model

specific saying level.' can't of in I 'Hey, tie number here's I So that terms our in precise to unemployment a would like, get too reserve

how talking do had. on we some worsening about was to the to the may not the the the headline say forward, did that forecasts to as of late about quite add and of based as taking And think just just reserve the that economic going just be simple we this unemployment the in terms fact I just reserve general, that, size in of would tying allowance. I that

we on we're and allowance I the second in I virus, use then And country's the stimulus, see XX And some data got those have we're we've of books all is next response refine more going next about before of how is have the would to the all consumer which, the credit we the going also course, the the time to we'll by just data to say thing actually the again. to the going a our lot to quarter, react to kind books thinking think of close that -- things path estimate. close just days

this really that might be where to So on I'd I point, see at before the like allowance data speculate added.

question, Next please.

Next Fandetti question Don Fargo. with will Wells come from

Thank you.

So view for personal look color more that. on the conservative took your I Scott, reserve I is mean, guys at so thanks the build. we you that my appreciate allowance, if a approach,

know, what of the cards. reserve some think I your about was bigger bit plans talk are a may you in crisis, little how growth Rich, about the And of next I growth and if build the have credit what if just and terms offset might significantly. But your stimulus be think you I could that? some go wondering back loan thoughts quarter. provide card loan could a issuers I declined in on we to can

Don. Thanks, Yes.

about think seen from downturn, the I interpret that this several my and anything as then precipitous thinking experience we is across course, one. well, thing as haven't particular how of So this downturns first -- to striking

and debt. get that, for I've a and general of there increasing path downturn, striking, they be paying battening to requests downturn strain if past the line opportunity credit this obviously, down for because this behavior credit. lot minute. we're that When down have think, a but in be cards. credit, beating naturally a couple lower is lower would them sometimes here tends pause And more to a of in The customers one on to what feel to a seen to the savings But very wait try being I volume, in well, lower I want tend more conservative, particularly have that is logic hatches purchase increases, people of to at do surely, to of things intuitive seeing an what a already in happen bit, demand the a point, consumer their think

as during there's a gradient period obviously, side, uncertainty, I side, of after that that really there expectation that other on something particular and I the for things Now, seeing huge weeks changes I period in I feel on and the least will will be Great customers. is saw It's were them. case. just a we're quite a would also less. still that that to of at the of But when matter out that some that We Recession carry think that across demand -- time with what demand that cautiousness consumers of our that think in left consumers behavioral settle lot plausible some guess the wanted say is that

in of right Then sort tightening a to this what are One. the, into credit the adverse making make and of, out top of the here at heightened making Capital selection. on risk I to of sense choices want doing downturns our of very downturn, we're period overlay I and very, We're avoid that We're of new early of lot extension that economy. of free playbook our certainly, think, fall

near-term has little And, flow of opportunity -- very bit to for decreased marketing decreased growth. And growth will quality side. on the then a back response also that at a moment we're course, the pulling of into in a this marketing on the itself bit

these balances. combination and actions the trends on natural So our loan pressure of put downward

is Now, want the in moment a is the this time this reacting to the at really reacting, we're this making in is that choices and time. consumer how stress moment and I market's

opportunities to will a sloped is can and going opportunities really really -- will to do. playbooks suddenly they sun area. pounce not the probably point inflection and by The it's and way structured of I see single sort like the when business be where is, on emerge, inflection product quite then be be to and our say out. our going looking there's them come and One other always to have will testing we thing, come points to for the We want

point We geography. it business. segment, by varied sort inflection lines, months then many, of the vary found, many by across in And will business our probably by

be So will themselves. it's closely and present right the -- to where very And cautious. monitoring where opportunities and when we're but opportunities time very, -- now,

question have you please. follow-up a Do Don? Next

next from Sakhrani will Our question come Sanjay with KBW.

talked on doing about pulling obviously, guys marketing, back that first on even you're you Hope that when back other just result Thanks. the Rich, and walk we of marketing well. and going wasn't evident it expenses, us you you are pull magnitude about COVID-XX? as we're But about in you think could that how the over a through thinking to could weakness course of as period the this experience quarter.

Yes.

talk me the marketing with -- Let let me about the start first.

to pulling we're areas back now, risk avoid heightened of a of adverse right in the selection. So number

So include mail; digital some national advertising. side, pullbacks these channels, advertising on origination certain the online areas direct in and product-oriented

same originate the continuing we're At some -- channels. through to

-- at levels but overall we and invest the our are brand We we're on side. are marketing is national also in full investment to of brand, continuing down, although banking our

the -- with importance the trends towards whole we’ve relative been most are sort going national banking just the of our experiences kind of consistent bank. of of things things, all consumer the acceleration and about that fact, are In -- an the behavior incredible looking of digital to the on,

-- So that light one. saw on we’re a green

choices not of you just this predictions choices these and moment with making. said, downturn. set have talking phase is of am sustained am these things of always the are sharing this like calls that lines of we I time not in are coming I again, and particular so -- are in making I we’re So this

wonderful relative our transformation. So and in expenses and and to we our momentum tax in in have overall our company, businesses

marketing credit very in the choices doing, trajectory are expenses are this around character managing tightly and continue monitor on of risk we up we're the choices operating margin, tightening the more So and we downturn. of immediate the to hiring as that

us I gas because which of if Okay. help contracts know, around if of we're the portfolio goes some there sort hearing But this, well. into that Maybe derivative you price just just it Thank through and oil Maybe news sensitivities how you think clear happening through us the also, XX, sorts of this. you. as translates the exposures. And that and air slide about Scott, articles and could stuff help appreciate how I could oil. with you. the all of you about lots think were don't And hedging could on of commercial affects

Thanks, Sanjay. Sure.

excuse just off -- E&P. energy or So the on business. me, On starting

business in the is based an a And basically And producers did longer-term this which -- forward is So exploration that even prices of production slides are we and allowance really that you revenue disruption, about the those the allowance, see where when stream and predominantly the business. to the we on about going not was have, all prices. with oil prices. spot near short-term the that much so the lot

the So I wouldn't get market. in disruption too worried about kind short-term of that

what these and portion the this. on and up, at significant Overall, reduction of just and reserve gas, would I is going where this the industry it, the we with the qualitative of are incredible to We healthy number aren't When of reserves just when struggle. set we risk of just are struggling. use these reserves, that a that in amount added I say we oil on based specific reserves, names look a non-specific associated names just did of continuing pretty some with

we've I put in about So good everything that in in several seen there last spite level the the that of pretty weeks. feel we

other then commodities. about questions moving on on going to with the kind of And is what your

lowest from trading behalf our temporary really we a we did be the de exposure positions -- that commodity some and level CFTC And minimis. that customers. to as move the of appreciate for major register. some some could And for granted would that has does relief hierarchy. that the there not ask trigger So designated is price price registration. into of volatility being Capital us swap And do did could speed our commodities levels We which a which a net necessarily relief One mainly is business the regulatory our to because against risk participant, in on that the CFTC having

really and to going and was notify misunderstood broadly would CFTC waiver, rely request require to not derivative going the we're register. because that go reach that on we ahead the if us that to threshold did However, the we're marketplace, volumes in the register

have just a I couple of comments other there.

we're So, do I And provided, our these low-risk gas as trades, into service Wall to really and Street, back-to-back trading. Since offsetting derivative enter our we've with position. with so a here engage an price We commodity bank speculative enter trades. oil a customers. we our hedges then basically and into a we in trade very we have when trade and one, said, commercial in customer XXXX, as not does sitting

would moment, margin the commodities you on outstanding normal We in say, to hedging clears if there. calls. look And hopefully, just air that there's that, there. that I reduced the we'll there exposure and zero. But and out essentially And updates is to any see point activities. our risk Qs there's XX-Ks our And no this that at can

please. question, Next

will from Eric question next Wasserstrom come Our with UBS.

my taking there? for Thanks okay hear question. Can you me

Yes.

Okay, great. Thanks.

a on credit also question. So,

only know in segment, you -- adequacy about think COVID-XX the you for such I is in way? what proportion card the indicated loss that portfolio we the skew it's, will actually some than the reserving that think, if different programs As in the reserve you I But that in those significantly in the that overall is it it programs risk. significantly ratio content bear your of

sharing. our loss about sharing these charge-offs the only so arrangement arrangements, some of that one, allowance arrangements, loss, and thing would the significant in sharing in Eric, think just recognize loss those the includes that and in of loss say our I the Walmart sharing I we talked portion loss there, we've our

cover it And of to decrease really so necessary -- our we coverage portion that of losses. is as those does required amount a the consequence,

So, in there, book losses of much that that types customers are of are appropriately appropriately and end itself recognize lower coverage the of having smaller are may while a that portion that reflective the have our we we up given levels relationship. losses

saw think close mean, that. the is quarter, a community one think you to with the Thank the just had things great. have as questions of I that economic reframe that expectations been is and follow-up, that of maybe conditions I some deteriorate. struggling investment subsequent to the Okay, I to of for continued And the posed.

about across a like likelihood that needing the products? to another how there we Is under do true-up adequacy directionally in the of of context, so should different again, And April the a reserves think economic lot -- a forward-looking first like expectations? quarter's had provision Or enough position, feel look the that greater such really already? compensated a you trends lot do into that good you of

seen scenarios severe brought economic this, Well, to more first we -- April. seen emphasize we the closed on then stimulus some as we our since what have modeled. particularly other week the make some than hand, did to in to more scenarios, I that want -- modeled reserve the But we've of I just mentioned we we are I well. as books certainly that's really did been bear that adjustments

going are some going seeing it really I I that programs that see before bit earlier, now. said headed. -- that bigger in predict help lean might offset such And to of good I allowance this and allowance have be I this work stimulus direction. an either more be want hardship we for is the important a just have or think challenges we're of data really sense a don't to the to we There's I us to little about smaller. government but the a really -- right hard just economic And very to -- relationship where

please. Next question,

Nash question from with Our Sachs. next come will Ryan Goldman

everyone Can me? here

Yes, we can Ryan.

everyone. Hey, evening, good

me. maybe So question one a and for follow-up

capital pandemic this concerns of base eating that trading up on So the discount capital look, the the this Rich, a since company. if obviously you at tangible began could end $XX stock's to into

CETX in the your look, after I significant reserves. even amongst building is highest industry the When XX%

outcomes, this you think -- at like range know that be different and the just but when about how with going buybacks, about capital halting sheet it's I progression when hard of fact environment? about time, predict shrinking, think you you of to kind sounds think combined balance in to capital you're the So it's do the this

think even that really made is that about and this last and think the choices downturn that this I a made years, and over way good management have from number Ryan, downturn, the years Well, of we the think we company I position. sort few deepened over founded I in we of risk a the enter choices were this entered in philosophy coming the

helpful we time the comparing of and dynamics, compare would through around? be -- of feel and can it Recession experience that words little useful other though, would possibly Not do in resilience question? I Ryan, calibration my this of about about of calibrate that predict a downturn, this aperture And bit in but the thoughts be a going how to the -- and your that just sort some question about Great to

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Yes.

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Next question, please.

Credit Orenbuch Moshe next with Our will come Suisse. question from

about a detail? more particular, how long last little might it -- they what in Rich Can been take-up terms forbearance In peaked? bit card in Scott, and detail little has has more give you Great. a of have us little could Thanks. auto? you bit little the you in programs and or the about that specific that a of Maybe a just talk

Moshe. Yes,

month-to-month accounts have who Interest card to we X% enroll, basis. of And for said, we accrue. assistance, no received of one representing payment April continues on XX, as give with to allowing them fee of are late So a customers active X% balances. as just

months, situation, payments accrue For continuing interest loan. end I certainly evaluate want their that's to customers likely extended that. for this two And program with more if things can I the wanted monthly flexibility the to the opportunity calls who skip ourselves to auto, customers give and we payments to are is not are be there. are how like that knowing When changing. of only every but a initial say it's will monthly the added comment two on one things or chance, to But to fast

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that businesses a that we are key typically minimum of And auto across make size of the card number reason, sure is credit stakes payments car. auto, of get. much fact, that the in of course, if course, payments. in for found, they a their visually is you higher very can have other to -- the They're the than amount are the And keep that higher payment We customer. motivated driver our of the see can requests

of just And as put Any making changes the in out doing about business. about follow-up, either you to of see you the -- as kind one talk to kind we the -- the you're that about -- you process. the maybe and a a rewards respect next tighten of quarters within see come think hopes could you. might things we Got card or with little would you bit talked several as this of competitiveness industry products

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question, please. Next

come with Carcache will Nomura. question next Our from Bill

reserves this at seen their scenarios of this their you We've on severely under thoughts why you adverse differ set losses Can generally metric? XX% contemplated evening. average cumulative in sufficient quarter guys to other on cover levels Good share DFAST. any banks on about might

the Yes, Bill, thanks for question.

But differences So, are think there. I you points few the point. just go scenarios, about, others. won't obviously, you're of a against a there of into kind as all that's different starting us if calibrating

is that as which that's industry to the I and an you really in Fed under versus recovery a last allowance that because in The work longer that undiscounted first is the tail, models allowance you important as take offset. average And impacts our quarter, CECL, is recoveries the results one way the that CECL recoveries, DFAST, mentioned practice about when think uses our the rates. issues comparison of Fed

are bit versus Fed So believe, the recoveries, rates. to recovery quite I their higher our going industry CECL and a be average

One. sharing allowance that arrangements, that provision. losses Capital make to about losses we The partnerships we reduces second for in And attributable those the point our that allow in our is that our are talked have I of portion that these only when and would loss have meaningfully to

resilience is do that we so processes. how And and modeling our

they've to approaches, the those historically don't credit we all us not Fed DFAST I data have offset visibility necessarily that adjustments. modeling Fed gives because the into While don't make necessary in think collected for that the

in a others. couple you that sit we of should just terms consider to relative So how of factors

question, Next please.

Our will with question Hecht next come from John Jefferies.

afternoon. Good my taking you Thank questions.

is, go the the prime you in different terms they for your Wall extent while. time. guys be unemployment consumer compensation increase in stimulus, was a think book prime -- that still how decrease to that time have do trying around? of Street income CARES information mean, if period there this one pay either a unemployment, for I'm this Journal substantial for for book some I undergoing whereas non-prime worker How it, a is it's just about lower a I'm First might think relative out stimulus through the a put to performance your think in in benefits of you a of versus and receiving through Act, for them, today

I striking the the But -- the the was don't I me, the it. things the have unemployment think those benefits and by get that benefits, what's to higher. struck who calibrated for there unemployment John, front numbers the back fact but Great I about benefits us fiscal we've about of -- to striking stimulus when many specifically are here, the all Recession, where are of probably like right gone in

line of relevant significantly eligibility the the -- and higher across higher. It's is the range a incomes, across entire is

the it people's be much the can last credit how of very folks. to tends would was But income, much quantify always -- move weather all slope, be at one the as surprised as an not say bit to income to think in on those across is spectrum. by thing the no intuitively, time. of you that one an quite good and -- that So relative there's subprime hard first are I quantify the there of will if to to you it's things -- some much. think much you have but storms along two you that things prime But I versus got top showed effect business ability the that I -- because our make impact can and it to you've market, is, how impact a respect or like the their income other of impact way high not a individual prime as think think With subprime, on side. I I There if some slope take, prime, be I might

of positive people in the all will and might a create is is All that a their don't net net people ability extending said, the bills have life for who working safety that pay wider things, or and -- that their to, fact other some their to necessarily benefit and I buffers though, bills. government hard credit have that card have broader among -- I the for pretty fact the deeper, think of should think consumers and that that

spike-up -- -- only And in. a number in our see those time the to rate, say I data, small it's want while days of checks do could we coming that of payment some individual were a around

the be confirmatory we intuition of would that but have. thing, short-term a would that be could that So

Okay, stay-at-home a action, different digital very bank… that's then situation behavioral Difficulty] is the to separate you have helpful And the color. of or question any [Technical seen tied types given

interrupt you. John, Hey, sorry to sorry. John, I'm I'm

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sorry. John, I'm so

Let's time But… and have try move then might more we on. one to

in digital John, close anything there? seeing on bank you of you invested particular consumer our saying the terms that to business, that be question the we've the we were Well, -- heavily side of given have? are Would that

-- to stay-at-home going have the the given you're situation with a interact Yes, digital that particularly greater digital channel. opportunity we're and to over

we of in some Well, thing about probably America are bank also a an the well, and we we have branch-based so have to the in our best only is, we as certainly digital calibration bank, calibration. -- because interesting can geographies in see not position a a have

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to to the that have the as a I for we I capabilities customers the advantage, built digital heading pretty this to a driven and really think that And help going that much behaviors anyway. were is do everything be their an customer think, banks all, accelerant digitally, society, can the who

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please. Next question,

from Our come will Morgan. JP Rick next Shane question with

questions. for Two thanks guys, taking Hey my question.

basis how or loss wondering on as to about any the XXXX. you XX past, the benefit much cap COVID-XX? a to in talked flex there's we that charge-offs that in from rise expect I'm agreement related if First, could sharing the Walmart point throughout

basis impact talk that I just calculation. are of And Look, loss ongoing going you. in about absolutely an delinquencies either that XX on about how to total, of -- given the to the could the basis, of that Rick, impact variability there's point forward. as we part a see level think movements that think you Hey and rates did we yes, Walmart, about same in

up cap and could this you to our sharing but really on relatively a chance, asking much. because with all that, that in percentage share will by stay them rate contract, loss Walmart, anticipate the that impact move loss But would small were way. significant and a it bit it basis so a overall so not -- loss it's I there's if is the not be is still

student has And seen behavior surprised you I'm Okay, you're curious great. what most. you, And serious far that for you a of behavior. terms then, Rich the look, have human so of in consumer

I'm by. struck surprising, anything sure certainly been I'm not has

downturns this of picking a other interesting have that's but thing then Almost most start on the -- things other that. happen feet particular kind downturns the Here's following little descent up, slow They it's about all kind of and downturn. into characteristics. cat

economy often, the on there other resolution needs other of structural then come are bleed to but the is, This thing problems in problems that. And the from And so problems. structural way to problems of point, it to market fix an sort all that fixing those is the that structural it.

an vertical quickly. entire the really that and just from and sort swiftness So I of going the think what's descent it's this economy that world happened of this through so fact extraordinary is the about view, this of the so thing point

them, to often and than including used consumers over by So that said years, that more have things -- consumer we that struck for the a on second say, a see there's with the me that that behaviors I institutions them who institution in consistent side, financial served who's I model behavior are I I've years. the up the lot really I'm serve early at fact, are have -- struck believed a saying that rational the been the back for that let is

years, I written just and are. are consumers, rational about have all how things they always the that speculated been over despite the struck

in around, at Recession going This Recession. was time solid, into very the was I struck Great downturn. before Great some irrationality during There balanced the this shape rationality. And the so their a consumer was

a think about And things bank whole the This once and came side, on thing. that I is right the downturn recession. at as other any it's to purchase think we the payment downturn savings that I see I part guy. bad the world we the on a all rational to the consumer even volume side little delinquency is what side, behaviors and things, seen, have on behaviors the side, and on our that of other a this what should calibrate without That's a side, of

it's of And a without solutions. so a what's implications easier politically lot to is guy mobilize downturn a the bad

For consumers, I but a this economic that's downturn in be its going political point, is guy and and to think that resilience. a good

people it's still an extraordinary doesn't all People up, an very and engaged, high is people thing It consumers; are, I is is about we've am working really amazed associate, the or morale and I'll productivity human amazed, engagement behavior they're home. about say is are I seen, from company. all how going that I'll everybody, home. talk people. and everybody a -- our other opens other from thing certainly world that productive The final the just mean and in, This about associate did about to the at it's when we point a point levels. the behavior am survey stay just

this that -- and us But the years some of think point, I experience are position on digital. good happened companies by the for compression think that learnings walk company's just the associated there. the away productivity in learnings that a most digitally is And ones a earlier to with in that by certainly all I productivity what certainly or or side back extraordinary struck think to going and my in behaviors from every there's I

Next question, please.

question final come from Autonomous. with will Brian our Foran And

the maybe at is like timing is I more there moving and but part call know changed? the flux question? gone some all, call's the is revenues of effort any is. the data that core cloud target, and center the understand much of and effort on in data the Or that? Has I long, the OpEx, dollar flux, pulling just stuff expense center core centers, retiring the given But changed the volumes on it totally just of how to guess, strategy crux

happened, move things. our extraordinary up single we incredibly to a that I served bit. No, not by are some many well the for scale have the mean, ability so cloud, to things

So, everything transformation, this it, is experience about technology validating. felt the the strategy, we cloud

itself; on same this the mean, the fully very already we I data cloud. are to year. of respect With in we exit center later are timing the

So, get centers year of the there to do out, data with -- associated actually then is there still -- a open center. the but just much the is of you you're wind data think what all done but you period once because down activities are you -- well, a

the we're this the cloud, schedule of talking and year on economic and the is right going those So, benefit in associated XXX% later down wind we're moves. and

Thank in us it great your for any you for you conference think Capital thank today, to and further up available this us. Investor on you I wraps The Well, be a joining Relations for staying this questions. One. later evening evening. team the call with Okay. evening. will that interest Thank Have for answer

and Ladies you our participation. your for for that Thank gentlemen, does today. conclude call

You disconnect. may now