Capital One Financial (COF) 26 Jan 222021 Q4 Earnings call transcript

Welcome to the Capital One Fourth Quarter 2021 Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Mr. Jeff Norris, Senior Vice President of Global Finance. Sir, you may begin.

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

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

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

Andrew? Young.

$X.X and start In on Slide of X Jeff, diluted billion tonight's $X.XX fourth afternoon, common Thanks, good per everyone. earned I'll or the presentation. One Capital quarter, share.

X% described, in expense in by in of grew as $XXX in growth operating by total million partially in was rewards and in charge-offs Card, X% loan our quarter I Ending One held XX.X%. full an For earnings a was upgrade were Capital liability to million. year for period income on increased which adjusted Full the Revenue quarter Commercial end the offset in quarter decreased legacy while and Consumer quarter both increased ROTCE year by were results driven loans an noninterest and Domestic net or $XX.XX. the for by rewards XX% X% year, per $XX.XX increased the Provision noninterest the driven share. Included XX% million Banking. program, $XX.X share earned linked-quarter linked relief basis, just investment On the marketing fourth Both the was modest per basis. in a loans allowance a expense increases expenses. average X% grew and full $XX $XXX billion .

to Turning in in the will Slide allowance changes I cover our X. greater detail.

ratio company, balance total allowance The to in total $XX.X the bringing quarter, X.XX%. For the company total released of the $XXX million fourth we coverage billion. stands allowance now at

of X. allowance greater our Slide segments each of discuss the to Turning in I'll detail.

improvement the the coverage in driven balance a each by in was impact in continued Card, $X in modest in see allowance driven billion. decline by Domestic allowance segments. and highlighted in was declined earlier. ratio auto In in auction our our balance balance growth decline portfolio. Commercial, the our drove Consumer flat Banking in And can credit coverage strength the ratio. of As allowance both the card the segment, The existing that the allowance at remained balance In you of decline I coverage graph, values

In addition coverage loss segments. in was ratio the lower by growth aided also allowance the decline, to

to I'll Turning Page X. now discuss liquidity.

was You continues coverage well our XXX%. the LCR to The quarter can during preliminary ratio XXX% be remained see the stable and fourth above average regulatory liquidity requirement.

to gradually and as used Relative We were fund investment down loan $X run share excess liquidity $X continue about the down and off quarter, prior during securities ending were to growth built liquidity our about the we to buybacks. and cash pandemic. equivalents billion billion

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

the linked of a cash and securities reduction levels day amount card in that quarterly sheet card here basis NIM higher The largely loans. had mix net quarter the interest our and will NIM be we in X.X%, securities points of was was in than fourth higher points a count driven year than a margin You see as quarter XX quarter. increase well can Outside the ago interest function balances, balance basis of higher QX as effects, XX largely by as change cash rates. from and and

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

common Our was quarter, more assets. capital at the was than by share in offset XX points the Net end and of basis the down X prior fourth growth XX.X% repurchases quarter Tier from quarter. risk-weighted equity ratio the income in

common XX%. In of We billion $X.X $X.X quarter, fourth which repurchased capital to that our is estimate our the continue need CETX stock, completed authorization. we Board billion around

billion an approved $X I Rich? Directors to authorization of the common that, to Rich. Board turn over additional up call has the company's of With repurchase will of Our stock.

increase margin, quarter our evening, begin growth on everyone. compared I'll drove segment results XX. revenue of our XXXX. Credit and coupled of and largely Credit loans, shown which purchase Andrew, trends, in results business. Thanks, with on Domestic Card Card Card an the are strong volume and function year-over-year a Accelerating fourth are XX in Slide good to Slide with revenue

of payment was billion of by Domestic charges charge-off and result in performance the every can the up the The Card fees improvement and year-over-year. Revenue in basis, Ending traction XXX Purchase was us metric revenue X.XX%, XXXX. fourth offset up and rebound a in up high around On line rate strong points by business XX you X%. line year-over-year basis in Total of XX.X%. drove XX% XXXX. a which fourth increased XX, loans. partially the net of X.XX%, was XX% The most increase purchase $XXX year. the increase. on year-over-year delinquency rates, getting biggest was As in The origination factors Domestic Noninterest growth in expense XX-plus fourth is expense grew was margin as an the year-over-year. growth, typical basis XX% quarter. Card ending quarter. charge-off end favorable marketing balances of delinquency also Domestic quarter XXX points spend strong volume driver posted see the benefited growth loan Credit expense was company volume XX% revenue Two up from the ahead The quarter the increases, growth from purchase outpacing growth of fourth continued with Ending million velocity, proportion our points. quarter up better and marketing. and quarter and and higher basis top quarter of XX in than from year-over-year in rate was finance was XX of the revenue. remain recognize margin credit to or basis up we're volume loan Slide year-over-year new as rate the the well growth basis fourth seasonal strikingly points for purchase growth the driven a Card results for quarter account was up rate the XX% with accelerated prior strong. the linked to was compared sequential quarter, about growth loans XX% and noninterest interchange point to quarter enabled volume $XX.X loan loan at

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

Card grow business our attractive enhanced see opportunities our transformation. to and are to technology continue by opportunities growth We Domestic our

We value continue competitive watchful business significant At invest deliver eye we're our Domestic the and and marketing drive grow we growth same our franchise. Card up, is time, to intensifying. keeping the continues into on which our environment, to as a build build franchise. Card lean Domestic Pulling to to

the growth fourth continued Banking auto, in Consumer in grew Moving Average increased Fourth quarter year-over-year. year-over-year XX% XX. also our up in the by business. Driven Consumer loans loans quarter. Strong to ending XX%. loan XX% auto fourth were Slide quarter Banking business originations

in and Commercial year-over-year. results XX% XX XX-plus and quarter quarter was business. the noninterest driven deposits deposits loans, levels. auto liquidity. basis dealer XX% delinquency and deep auto up a below quarter, our partially year criticized in by elevated basis, losses loan Fourth we our revenue auto also grew ending fourth charge-off expense the the the quarter release was X.XX%, points. Banking performance Fourth year rate by rate originations the expense Average growth year-over-year. Slide loan X% was loans were a X.XX%, Banking marketplace. rate a average revenue charge-off capabilities up quarter. drive levels the Quarterly which quarter up Banking driven criticized linked industry to yields. points. was year-over-year quarter up were an our quarter remains Noninterest quarter basis balances growth quarter On driven business, in Noninterest in selected strong Consumer in auto negative XX by shows up year-over-year auto provision year-over-year. well for in Consumer fourth strategy the On hold pre-pandemic ending XXXX digital XX declining $X.X XX% and for performing XX%. and strong. offset Fourth annualized by continued billion in in by delivered Ending up fourth down grew loan quarter improved Commercial rate in X% XX% market were customers loans, increased points. Average XX% prior rate growth linked was The X%. X% X.X%. credit X the allowance In was credit Bank basis, X.X%, rate remain of loan XX%. rate government fourth from the $XX was deposits with In in were million continue quarter Fourth the strong auto quarter or quarter, were basis from deposits delinquency nonperforming And year-over-year. prior and specialties. the deposits revenue the charge-off middle up relationship XX% growth from pickup competitive intensity as year-over-year Our income. The Commercial the increased up to for saw fourth business. growth a of

business Banking fourth we delivering quarter drove continue throughout our performance results. strong momentum Growth to Commercial on as and thoughts evident Our our loans. is results volume positioning. is purchase capability. some Commercial growth strategic quarter, Card revenue, with we in the and our our close tonight I'll In solid build Domestic

remains Credit our strong across growth. We our shareholders. also and strikingly Commercial posted strong return to continue to business capital auto and we

we continue As XXXX, attractive our see businesses our enter we to to and build franchise. grow opportunities

into these continue marketing on growth. will drive lean opportunities and We capitalize to to

infrastructure technology do about And how banking. a For it's many ever legacy than headcount increasing years, embracing spent before were One and and are original stakes that. and modern the changing increase. The the tech We technology All the sweeping digital for have fintech, fintech digital growing. in be leverage to before. modern are technology tech we've to any existential Capital realize underscore capabilities Last years that for and that companies investment of an into tech even are our realization modern bottom to up well may change in continues benefits faster transformation talked noted costs which is capabilities growth. quarter, who who war of positioned them to is our technology to very are significant transformation. scale. these we're an technology, these I driving from driving developments escalate, We've the The investments. game flowing talent have to capabilities and for labor issue we at breathtaking and technology the position and rising the up. stack the is many opportunity Also, investing built drive players are grow

long to operating journey We on have drive been down. efficiency ratio a our

near rise the tech our cost and in term. the that growth do revenue investment, we're striking in to belief through powered living improvement growth Pulling our pressures modern expect pressure on these digital the will up, annual gains. efficiency But longer-term not top time of We talent, in operating of of change. productivity extraordinary change by an the drive operating way digital opportunity efficiency

the that powering the stack to Jeff? technology creation engine we'll long It's modern revolution is performance term. to drives be our the up And it's your and our accelerating on growth in setting And banking. Our happy value opportunity. enduring over us digital answer questions. capitalize now

you, Thank Rich.

start [Operator the session. Q&A Instructions]. now will We

Q&A. the start please Justin,

[Operator from Orenbuch with Instructions]. Moshe question Suisse. first And Credit will come our

specific guidance, was just efficiency kind relative the it more ratio deteriorated, -- I your to the I would Rich, kind it's increase Great. in of how I highlighted. of if want not though even fourth forward. because were give an really expenses because down to dollars. actual that circle efficiency the but that in the to going generally guess that helpful tough it's was quarter, about than to you think the ratio to comment PPNR expenses to back know in level practice quarter, quarter quite fourth it's be look third that at It's strong, not of revenues

expense gating of any So about terms is can levels you you factors of in kind there -- when XXXX? about think into are there talk

the of certainly a point factors -- point specifically fourth that we quarter. to factors going about flagging real of into These And journey are different to of investments toward continues be that the years want and And the to and some the is maybe more we've the done opportunities really stack, we're our annual things will talking the it's on our about fourth point make that fourth and of near the leaning ago investment investment don't into fourth in some term, this, any bottom continue know opportunity opportunity. Andrew really efficiency. to in We've at do. and began are continued tech the about quarter. of the translates comments top efficiency efficiency were important. been in comment what the I and And but journey is drivers efficiency a But efficiency. my but in operating -- very But there probably quarter on tech optimistic specifically. I'm just the our number ratio can what the same growth that improve we're costs you manifested Andrew, the and about opportunity when Moshe, ratio collectively, themselves very only pressure the the is quarter, the tech about than that which these stack. talent not same can in if we're the

in by we that aware typically cost seasonally higher the driven of quarter, marginal well you're largely Moshe, have expenses Yes. Sure. the growth.

this pattern, a seasonal of things incentive Beyond are quarter, which that few revenue fourth saw normal in the is compensation. first that there other reflected some were we driven and

that drive the We of help also Rich investments, just side that of described, project services will chose growth. to some some other technology and future in work professional is the the that make to referencing Rich accelerate

in expect factors, marked-related items the And of of which And little will but head of a year. work, off. so the likely fall project incentive would of next some will as the those continue bit couple some I edge seeing we're bit, compensation, of pressures so the of accelerate we that a leading into some to wage

maybe industry's talk about follow-up, was quarter. a just billion a it to specifically month as in of just December the And largest mail was in decade. just $X marketing, about the volume Right.

So the half particularly it in it you we do you're the little of talk you into typically also level was do for fourth alone I Maybe in know not is go about was do -- in high. that about could see that, as fairly low how and you think the high XXXX? bit we that first just marketing quarter, long although How if but a XXXX.

out, can you Moshe, is the pretty that pointed you at levels. competition is it's high direct mail clear back one from And see intense.

XXXX. advertising throughout increasing media You can see

earnings of card course, the an calls players increasing And indicated see have space, rewards competition. you expectation can in there. Of intense competition also pretty from is

is very have say, as eye we I that a the we careful struck a on how very would now. in right So am that, consumer eye very careful a on that. place even by though, good have I

some that the we're at And there. I'm there's capacity Capital really growth think struck One. I by traction natural getting

and We very at across the point competitive we're really like origination the continue more upfront other such the And particularly seeing. talking And some thing this competitive results intensity good businesses, environment, much in to in our about really we opportunities see that sort the and investments, I'm not this resilience. there. sacrifices bonuses. the upfront seeing, point, as in at and marketing in business we're the card of margin is

to why of have relative the competition. we're leaning really look really for. have we And are experience flagging, we So by in. we're know that's pleased what also and we competitive that the on cycles, issue on to we course, very you our eyes to important by struck our And results, why that's through capitalize opportunity them. that But mentioned

question comes next Betsy Our from with Morgan Stanley. Graseck

the regard to have growth. Rich, set hey, loan get could the And on you that from cycle that I investor to revenue growth sense reflecting question of get the this loan is front -- this rate levels right in wanted questions get. you on, I a because with opportunity peak you seeing is I'm we we're asking the now

legs Was So utilizations, loan next accounts of I versus increased that you by the hear think on would we new the And year? go it what terms you the quarter. growth increased you got in line fourth about in offers? rather from this being do to as driven as what's acceleration the into

Betsy, great there. questions

good our now. our that very opportunities feel growth right and seeing growth we So about we're

industry. volume was of growth start the we've volume. with significant. growth volume really And Obviously, me across XX% lot purchase our purchase purchase Let a seen

optimistic in our in quite Of the effect. loans talking course, Capital a and like of And I've the high been that, poor we the the sort course, purchase are But payment of the specifically, We're Capital rate. really One losing of don't lot of just that trajectory. growth was One, other to of room, elephant card various out franchise. seeing building the which things that's originations for another been rates of some has spender that with And while about traction a volume about a the loans, not programs. of kind by are disclose accounts, in issuers the driven

payment of That our rates, really even quarter payment what's for loan saw you One. the muted Betsy, lot that Capital high includes I in think some some But And loan still rates traction the very what is striking, think look see, can I nice the But growth. despite players, so we a here that, in very you levels and there. still, to electrifying of trust growth. on see the have

are So what's are years dramatic of leaning on driving growth the thing, In more the build the the this seeing, we're not that? as leaning origination and a like Also into of into stands on over of line shoulders number we big but think those well. into line ways, time. as opportunity increases, we leaning credit I well, many a having seeing in and hard this environment results balances credit

to high that to healthy for it and the metrics, growth a the opportunity does good. predict love base, rate. growth credit is as hard the rates an payment addition very But Parenthetically, I going we think for consumer a be to the think payment still by loan and what very affected we of it's a So indication side. customer in one because growth, healthy loan I other love see we

Betsy? Do have follow-up, you a

me? hear you Can

Yes.

Yes, we can.

Okay.

for that opposed billion. number? just a what give time do you $X as about that was billion if Sorry the drove other pivoting Can any that's a I decision $X that, sense and there saw us to to Board the authorization to as on frame view to over Capital.

I'll Andrew. that. it's take Betty,

to into number a drive factors programs. So we these take account of

from capacity which this each unique actual pace authorization the as forecasted future for happens capital a needs repurchase to are consider case, the is and levels as it CCAR cycle, authorizations and So midpoint each at of year. pace our the and earnings as of and also of amount effectively factors, market driven the by growth And as as of to number shares. results well our well always including repurchase

the take that. into we all account of out amount those of and factors pacing to the So figure

we under are previously. we given we to more have have execute flexibility dynamically so will and And we that manage great than that now SCB, a deal

comes Rick JPMorgan. next Shane Our from question with

factors. high is book the a transactions? some Rich, the is, rate, Are composition the the we've sort payment idiosyncratic One off in started when contributing that that the some of And that the XX-XX terms on transactions wonder scraped by we're large are rule thing of of we of of think factors to is getting alternative rates? lot payment anyway changing aware there products? all to of of about economic

out Our a players large transaction not some thesis explored. of It's alternative is getting I have scraped there. by off that the

payment rates, that really have seen rates broad-based. of market period feet, in think this payment are It's going would asking time. of by across though, any say really particular seen segment, of our top that over for. pretty is our think effects I be about their a investment question the great It's the the huge exist we business, to or I been say, from people kind or investment little they are about: own and spectrum are not fintechs, in how them the dominated look I broadly thing very on let's whatever. there on to One cat increase card of things the business

on We growth which story also business. is had gains story, of beneath going spender in and heavy have the growth the continuing growth our ourselves the another side

years your our in of the think really products of business, time but been is manifestation for in to good a going win kind and the investment heavy side is in maybe our growth that comprehensive part experience which we've see, more so in the is a of -- investments the marketing of we particularly of what that market. I number the effect see we if And is over what anything, on, spender rates

Bill from our will come question And with next Wolfe Carcache Research.

payment normalization comments. together? Are you those rates? to expect credit about Rich, I metrics you wanted payment at the your of of normalize to Or concerned on outpacing the up normalization follow would all

right in like X I would always as rates now. for, driving them. elevated payment kind watch We payment always general not And Well, rates things are and business a funny something thing. decades, in that been talk think just really this X it's I've are of you people about. know,

elevated rates, even the we Some drivers before that rates levels. started attributed some to payment unless to we portfolio. towards gradual main payment years probably rates, they're our keep first obvious pandemic, but going correlate payment with to the also mix to noticing in not spend for about more they're if their we ago, buy spenders elevation when reasons, tend long the And of talk to is But for people are very more, in change spending spending open paying own be X there.

certainly between build what So consumers, that, I credit on a math. clear way, sort buy. that to improved, spending of And whole And not that the I that strong then across rates, their it's the is balance I divergences And relationship point, down and back unmistakable the pattern to payment are open really when And it's studied and rates. how effect their of a card our an continued have to is and that, could as the expect important gone unmistakable. segments history relationship like one-for-one. of bunch factors for impact credit really given though, sort going it's there's happened government there in spend happened behind and think just while there your factor, just to those and is that we there. been watching the consumer many And company, has sheets some almost, think balance pretty resources used payment more like think, be Bill, payment things stimulus business sheets. various of and we the in came on, pay healthy what of rates payment our of could

numbers, have various look topic I the goes losses credit low normalization, we think metrics of certainly magnifying a and ahead the to of about what the normalization. in moderate and strikes And early think surprises very a the when those the is mind with the are of things rates, are, of can normalize. credit. inevitably but think see payment kind glass I example, an little seasonality, of normalization sort behind that's Probably out natural a and bit when us of and and signs these of record you normalization first we numbers levels of that And us of operate you to On assumption normalization pull how thing. at modest my for

So that, I rates I exactly the follow, think follow. but expect not to payment should would that in lockstep,

side happens the what lower trade think moment, the things and bit sort a At really gives to a so of credit of little trade. for rates, credit. investors And a house. financial And is I boost is the the as loan growth the is payment growth spectacular lower that of loans but normalize, of offset on

it at looked Capital if for our our is full -- significantly of now at over Capital other at at you risen high manifests portfolio. sample anybody's trust end traction of And in period sort representative course, being time. the and going look absolutely it's of itself of Capital trust, of just purchase going on, reflects terms the securitization business an by the so player, other the because thing in the look also spending every the lately, a but on kind another the trust it of of I at haven't One thing So that's which wouldn't rose me which, year-after-year if for that One than of surprise think more One Capital the side continued And I tables even is competitors. specific at of it league One, even not way, true that's probably, data of payment you volume But have number rates at particular, this growth. if probably

slower? expand could the occurs of extent takes I that you or some the That's discuss your in the of If a a follow-up. bit Maybe and normalization that Rich. confidence little bit and puts are super level normalization in helpful, and what on squeeze to related the rates could a payment maybe faster

payment of X I rates, think again, I, to go the Well, back just drivers.

strong one spend is the So with levels. correlation

purchase So has happen our manifestation for outlook one really going and what's volume business Purchase an consumer. now, to to to it needs incredible a of businesses. strength an right volume in card in the

gravity it, an But would the of plausible, to And And If the strength all continues, would payment pullbacks, And be of big that. part rate. have consumer of during boost a reverse that normalization, catching normal. on extremely strength be real the understand the for that's has I is that get the believe we and there. normal just tend side up numbers would business. to have important to pretty then to really Some word It that, up. expected. there's the by course, these you It pandemic. of credit is upward that got way, pull

managing is are payment me expect rates to We to the that, pull certainly that that. happens, the as betting But payment is that of rates going business count down. driver

will And Ryan come with our from Nash question Sachs. next Goldman

-- an and are of time the in expect you give actually frame? of do see tech parameters on But can rate So clearly you over you're loan the increase? I long backdrop maybe maybe of And to exit much pressure. revenue of some phrase an some you pressure you talent on a guess, are, just you and And in Rich, the expecting some the ratio. things if intermediate increase given all to your this these prepared follow-up to you will ratio what investments offset efficiency maybe some efficiency are you last? actually the that just making questions that how team can noted that remarks, just was pressures? these about growth. doing you is are much used better, I I'm we And from the talk How us wondering, run wondering, the can earlier, XX% tech

Thanks, Okay. Ryan.

are tech companies for in of So more this make than lot to What costs you we're numbers as is pretty not long last, operating much my stand their is supply And a cost, tech kind room, when X at is and out point There's are I of for world we these absolute in see market. an that a just to I seen that investors decades building a now share tech imbalance giving them drive How I've waiving back It and as the I've that, the and with elephant we'll company opportunities factors of tech every of And many every always in the headwind imbalance think I'm have we be that that's is our days the most need to really And first ratio about things And into biggest an that room. our in struck to elephant that want to understand on in they talked this efficiency it, labor And is this savor really we costs. this. running labor we know company fast and in in you and labor One second. company right is going that banks sure see. company going we others. the companies, some to it may go and to guidance. of demand want wanted for this think and a Capital think explicit the so change to I well. one, can. because or

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pressure going and while So ratio I wanted giving call with on your Exactly of explain end come phenomena explicit the I made word growth on that the use But we're the the the revenue And of wanted back in investors that what are I that things the out number question, a quarter those comment that share real, guidance, the to efficiency in is to to to in end efficiency X are pressures the lot and and just depends ratio. same before. things. share that. not

a on And come growing. you're looking But growth just accelerating. color rate could little. we any year? heard you're really in another a helpful. spend, competitive for follow-up we're levels the of the the is maybe to thought some that of investment. that stage half JPMorgan are can good that we've in just the pace are to if I help obviously at down intensity, all step-up? the understand. run maybe Do us understand you on of to thinking marketing and in the you of really, us back As side. marketing, how saying traction on parameters provide going understand marketing about about And be you I you the Discovery's Are I seeing question see think, Moshe's just where Amex And would think leaning think is I

comments everyone for days. investors is these striking that it this understand bewildering to about making equilibrium where is Ryan, the Yes. and is probably a little

Ryan. philosophy, our know You

-- a make marketing we this what other start Sometimes year put always marketing this We You and in the but I what long what." and we really mean there. time. precisely I is is the we matter by don't year budget, known we a start no in the say, don't dollars, everybody have each "Well, contract has saying, for

Sometimes the we expand it. But nature it's very opportunity. focused the on of what's

opportunity them strong a those there windows have get are pass. of you you also capitalize belief We when for And windows or on those growth. that

go itself doesn't the marketing and allocate of business lend kind that. also the budget our every quarter just or to like And that parts same let's different so to of anything

fourth because sort practices of are, affect be lean here manifest generate credit can is the and we the now, message lift competition out of can't, programs. right lean-in all still competition But we we It what at is at roaring average. And to marketplace, making productivity I we And that a and can at votes. talking Capital the lean My in you leaning necessarily of I'm way the And see affect of The we've do into in far pandemic, levels are opportunity to look the choices a look can what's response. how we quite We pull would So One do really the and quarter extent other is My of that its generating the resiliently, of and metrics are really them of side it starts up And One, We investments and really where is the pricing. brand got that everybody point advance, a there. way of when they're you look we things see at X starts the them. going to points. we our to in into many about ways. kind worst themselves watching you to that. to high we of the it It at is consumer was tell this pretty our I ability of course, not the also, we different time can an when is other thing doing opportunities, when at so it making. here. into we strong underwriting continue the for look investing. efficiency level you, this closely the we're And as we're business. that higher is at what of margin example the the lean-in, look as on at that. the if sort the affecting opportunity marketing on margin. into marketplace society is

Sakhrani. Sanjay next from will Our question come

rolling investments mean Maybe a growth growth shouldn't maybe sense revenue given to I of Ryan's you're peers. and you So of are with specific where rollout? the now, just product we separate buy what you're of products little question just ask accelerated average expect just you're differently. the some give about bit above these targeting could to pay that a making? of the revenue what might us and be unique thinking sort kind be Like later. are from we that out yourselves I'm

Okay.

So we're revenue specific guidance. giving not

we certainly up we going with there. keep that momentum and quarter, you and the the our pleased commenting saw are picked to in hope have, that momentum We particularly fourth momentum

one of growth. we see guidance, good account what We're is We're of the the kind growth, the we lot the think thrust. with very of to loan revenue rate. always I is That hardest see there's the originations on side, that from there. to marketing there. the have But able the purchase a specific been and like trajectory very we of of important generate enhanced because pleased payment its a sort So a which giving linkage but we're we predict one part not to volume do that doing

In I the -- whatever. think or driving see occasionally new a on is product terms with growth, you'll of TV what One don't Capital

the way. up coming always new is by so with are competition, We products,

not together, is there the This some result of new now. growth the result well right of product is coming driving things in working this. surge particularly many Our that's suddenly

our really a driven and experiences lot by for of think is the opportunities and customer on transformation. stand I the tech it and shoulders expansion that capabilities of

I what biggest, And rates We're question to the can we will growth. to giving that hopeful some growth. guidance not and strong that. think, to payment we're happens on loan what So does drive continue be

of expenses. I'm the inflationary pressure that think Rich, seem And that I'm questions if maybe ratio? just sorry risk operating XX% efficiency passes is guys the can point, else to there too? Or that is sort else everyone the on of transitory. is. of same terms in another sort for follow-up asking only Is So you you that work something some there? sort getting at back to of back get

operating expect get engine near tech to imperatives the improvement. more for of of are to the cost needs we toward marketplace still recently, we're as productivity efficiency improvements The technology modern the tech to drives flagged rise efficiency talent in particularly cost imperatives destination making the and But we today will the and talent. one of the the term, and current of growth are investment the the here we the But the of we the the pressure in same our that striking capabilities that efficiency So the incorporate have investments over driving discussed. time. revenue digital timing, modern marketplace gains, ratio operating drivers continue are rising that and

And in declare efficiency timing to the same It's the There engine are pressures technology journey. time nearer same So operating a destinations. continues payoffs to powering same journey, position key delivering some element in it. not journey shared you of it's delivering important value. the the we one of a we're operating be long-term with of over but of and shareholder the the term, positive leverage our

come And Fargo. with will question Fandetti our next from Wells Don

be just expenses helpful of a also agree environment. I'll bit, but some the gears I would the kind around sizing have it little shift to given do

from little the getting are Auto signaling to guess you on of of that? the you lending, that cloud, a I I growth penetration public auto which that? really tell bit outside size Navigator You you have there? good on are benefiting think really story can that. And moderate might you And a is product,

auto in valuations. bit car A for lot Don, that's, create the used high demand, lot an cars, have certainly for aligned a really strongly. industry history. point. of the been, very of factors look used But a lot it's been cars, growing we for Yes, our importantly, a and one that decline of And business And demand data has leverage strongest because, over of industry, capabilities leading if really opportunities those periods think our we to to for market and beneath starters, us continue to our and we time, attractive things technology, obviously, all that have normalize underwriting risk-adjusted identify resilient part by very the underwrite, And prices a as eye an important on keeping way, of we in and car that is used very significant returns. the very, a assuming high those. of

on not count have we the to something industry So don't that, going Whether fully does be we'll that's long see. term to sustainable.

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say though, auto the one with said sensitive the other in that Let me of a thing, Card more because lender competition I've in consumer plays an than holding is to the auction. always is even and to between role dealer growth Credit the business. auto business the business the respect that

in to overheat metrics be to pricing that I auto lender very it's we have drive some understandably along tend And move competition who the really And could business of on a toward most And so market, flexible is their and a might thing the quarter. affected robust last seen expect the and the terms. way. think those natural pricing dealers and practices the

want point. So a caution leaning put my are decline effect think, into thing we still It's the overstate I of that I don't a there, talking competitive out our bit very of the to quarter, the in opportunity. but But we're I was fourth volume about. the

question Hecht John with Jefferies. come Our from will next

going fees late factors, so on margin. to maybe then, Obviously, interested that other NPAs, forth. like guess of net to moving to you're of yield I'm some I the the maybe on a want that offset suppression going rate your do beyond I each so what get lot might you're of get to there's with and through to and hear interest of evolution in margin. your But thoughts talking hike the mechanics some

of you us those what to next So maybe to come as sense can months? play factors in expect give all few the a

beyond why maybe don't while that it of the horizon Andrew. out, the John. you a you play up. but the will take with start few next just equation some for It's I that factors expand to brought Sure, the because I'll the side And months rate of described

current sensitive. is Our asset balance sheet

'XX. at point it's around X but hikes is rates basis amount in over think, XX few the retraction in number, as time over I a a a the so last while moved checked volatile last up, XX-year, it last this will fair currently, tailwind move point market At months, the expecting clearly be about week least, a So to it's the I NII. including,

showed about relative impact of fund XX equates believe, months that. XX higher the And that rates so by the Fed In our NII that shock an to I X.X%, basis next the point basis the the XX that's average impacts for indication disclosures, we think is And number. forwards, directional I to full points a of can QX you year. get of

that's just roughly $XXX under So million.

rates. that's the effective So dollar

of talking that the If impact other you translate side is that the though the big X the card dollar just NIM, are that of the more potentially about card question, are I effects to in the card And highlighted balances to going your into balances. my factors NIM X some will you impact company it's the factors of NIM. Even described the ultimately to margin, overall points. much quantum things

and more a The it is like its an high. cash normal and portfolio $XX something really other is you saw investment we securities, levels level probably billion that higher had which $XXX what at peak, was billion were cash than at also

you benefit So that which the see could else then And I equal NIM. finally, described. all cash securities coming down, effect rate just and

ultimately rate are run So things on really, have and primarily on biggest the effect at that X the looking a NIM will those basis. we're

only few quarter. terms In thing is fewer days X I in the of the know next there's first sure the months, that for

else all the headwind other NIM going So effects over are NIM, longer the but point that's really term. what's to roughly equal, a to XX drive basis the

guess that it the products neobanks. that targeting like is lot unrelated several I be of an I over a have you out really of quarters appreciate detail. That's guys and fintechs follow-up may seems put past great. the some

I think protection or you've moderated canceled that. overdraft

payment mechanisms. You've got early

type that banks affect get you you these how speaking, that against system? these your the I cross-sell? is, Do You've Does generally got good overall the direct customer are base? able guess I do to, auto disrupt rates? guess, products. impacts it how trying retention to quantify question are new Or compete

I And on for the Yes, about the talk have let's John. Well, investors reasons fintechs. that. love that focus

fintechs a original I amount with voting going been of that the important just really feet speaks be that to investors community the is First to fintechs fintech. side, the the valuation on going in into all, to their venture rough drivers transformed for investor poured bit an think although are of last capital to the of them belief, of happen. And that the and little the banking has fintechs, are making think, money is be we're I

to They build need. is There's in start have building the Fintech understanding the as of start They got most my stand also fintech lot companies heart and So in one the But a we has that's all other modern a maybe don't and one cloud. Everybody successful thing, the but of fintechs I that on start phenomenon they fintech also the of they their been for another challenges the with with business. for then soft spot scale technology very in build starts on, have face clear, and cloud. well. you thing things, that shoulders parts technology. going an one the platform to of

striking. modern fintechs businesses and really The move to ability technology the and quickly are So have is also enter unregulated.

now of they they're of consistent as believe side being the least tended for regulated banking a surround has be banking of spaces and into it of absolutely go one investors path But biggest and One. transformed. And in move it's of back side big growth operate into regulation because And of as of this sort by I the America's striking, many business. a think a And payments reason that of the success all whole to almost has think really to those kind Capital be lot that industries. is banking as a this the I are process transformed the banks. And things in and that the have of there's is and also, as and companies wouldn't of so really that terms So vectors some let fintech an fintech and of ways space. in the beating But in favor Interestingly, say vector in to doing itself platforms to became I things, I original the as industry the it a striking. transformed other taken there has space, crypto. far, the relative the unmitigated I do me that that been biggest some with long

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And our last Evercore question will come Pancari with from John ISI.

if know of On little the wanted in I can non-card just delinquencies businesses. to on credit I auto. see you consumer charge-offs you color bit the front, give on mentioned the a increase and

little Just And reserve release. side, also then more drivers bit the wondering the granularity sizable reserve you on can another give there. if a on

quarters? as As begin do loans expect the here terms sheet, and to you're the reserves here begin to building balance in in forward looking strengthen coming ultimately of or you matching

will talk me let the credit. Andrew John, about do Okay. reserve question.

been So with my the what at quite normalization normal years, In quarter-over-quarter all anything up in in with seen we like have we'll consumer it never saying points, couple seasonal through of We, How strong. bound credit which what the it's mean just and still happen. remains and is on I course, a been strikingly all our does, this, I've to have quarter, see. of trajectory card credit consistent consumer strikingly basis basis, fast, through fourth were strong. they last have the years, trends. to is XX losses, and

a basis that normalization And low course. strong what credit quarter performance pandemic. roughly been auto points, the indicator through very, that's trend. were bit card very pandemic. Fourth performance strikingly points, there. more would the of normal losses just they Our about Auto base, XX some talk signs as and off XX is of basis business, credit seasonal more let's were likely In has I at of, of an X/X point the delinquencies a before the than than and increased of that increase not, early

QX XXXX. And about strong levels by pre-pandemic and measure, obviously, remain have exceptionally losses see negative by in losses positives to recoveries in sustainable. consumer quarter-over-quarter enough supported vehicle our in Auto is above backed remain values to seeing this that's XX% not But business, the increase all demand in values. strong card was record-high largely consumer The credit And constraints. addition any was ongoing auto earlier vehicle by exceptionally In general, normal that supported supply you push seasonality. like low.

prices from would especially to health the losses levels because if resolved. strong, expect constraints are current remains time So increase even we of should auto certainly consumer the auction as normalize over supply

the the we keep me X of that you things maybe rearview there. balance aggressive out than the see models? And marketing more answer so practices and doing What be are I how mirror one to point credit One time things that that our consumer is they in, to Capital the name the industry. natural who when position period all any question, to look amazing lean also underwriting especially about credit models we I of the talking their opportunities much in horizon are can eye the the be one things the more auto they're we're very and built And data I'm and, longer just to thing us. for the of about we businesses? grow -- course, on but advantage like in and a the business, those companies this. in but a watchful think And to rearview grow building the like this There's to at we'll and consumers, capitalize occur natural keep we'll from their have we fintechs many, One other and own it expect But is, is and an an ourselves here? in and of aggressive So to especially dealers of the in when us, capabilities when think and to best that ask supposed what's underwriting, like these it's and has in at the information-based the your are effects just with credit stronger there. history long do a kind on, of own the Andrew? this. sheet. business an exactly happen eye So on build we're capacity models the trying worry, strength opportunities to are mirror can of let has we history with take do of and very normalization looking a just what's for and front while scratch,

the unfortunately, allowance, allowance to answer you respect releases. I yes/no with for have don't easy an around John, Yes.

painting just because me we describing So helpful knowledge do. that in coming that by current much the have pictures the as will unfold. In be way, might I you just various how quarters backdrop think start let as allowance of

is losses So our allowance, future just when about thing and think first we of the recoveries. expectation the of the composition

today's right from levels. assumes so normalization And losses outlook of strong unusually our swift now, relatively

the qualitative And ratios last why elevated to the before. remaining The and we've just and successive is factor qualitative is factors, account then quarter. just each remain second high. the today, at economy, And balance the uncertainties pandemic size factor factors remain is sheet described which around of the these the for this our coverage

all And we mind by net we adds new of effects out. definitely need that from where growth it grow. determined to pulled as is today that future under so quantum of these allowance, keep in so just be forward, of the allowance But will impacts are how CECL we allowance movements

at if significant we next and quarters. to out the builds a few we clip, normalization over so grow And plays see continue could allowance

scenario growth scenarios, other uncertainties and scenario but could credit bit would that modest releases. be, more than the is the allowance little trends there's subside, The see many clearly, factors continue favorable drive further another and likely a is qualitative we

go into into that to quarter, just all give you calculation, of the it we'll window a year. every pieces and the I how the process a over rigorous plays we'll ultimately out go through So see wanted and

it. Got

seeing? commercial helpful. double lastly, Okay. were maybe the a trends digits up I on commercial comment growth just then bit year-over-year. loans you loan just know can And segment you're That's your very

there. of drivers just color the quick on I So a want bit

Normalizing Yes, we're John, our in commercial outpaced growth. much XX% more loan the with and forgiveness, and growth for was our of X% growth it line quarter-over-quarter year-over-year, PPP peers. industry

quarter, our in activity see in market, in where activity entirely generate I a in increased specialty lending this by our reflects we our is would course, While revolver our economic of quite quite increase point just and of And attractive returns. a course, attractive strong we conditions the did XXXX. driven almost out, growth was commercial utilization originations the other thing slight businesses risk-adjusted

it's I outside of their into we that commercial a is customers. lending and the a actually context with nonbank lenders are happening way all our the lenders. good So have eye some for very been, think, market a that in that practices growth industry looking make of of at time cautious banking tremendous This still the of the

at I a So great think it's period the moment.

much, opportunity continue context the marketplace. to cautious of the about John. bigger very But thanks in be We the

have your in Investor and any everybody, for And to One. thanks, answer interest for Capital continuing you us may Relations team Rich. follow-ups tonight's on, have a conference on be good evening, here everybody. Thanks, you joining will call. Thank later

today's your thank that excellent conference. participation. do you And an We conclude for you. Thank does night. Have