Capital One Financial (COF) 21 Jul 222022 Q2 Earnings call transcript

Good day, everyone, and welcome to the Capital One Second Quarter 2022 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 session. [Operator Instructions] Thank you. I would now like to turn the call over to Ms. President Finance. Vice Managing Dietz, of Global Danielle Please ma’am. go ahead,

much, and you call. to Capital Thank everyone, conference One's Melinda, earnings welcome, very XXXX second quarter

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

Chairman press Please Andrew Officer. Officer; Mr. Rich presentation walk financials, second presentation otherwise. and not materially obligation as factors may any actual indicated Financial to we Information go forward-looking contained and statements. click Quarterly presentation. or Mr. or this does results. note XXXX To In date release, Release. revise materials. statements in Richard quarter Capital in then Capital a Capital me materials press a performance and included One's to Executive any the financial the dates With the the or that Capital a addition result are will and regarding of cause this have Andrew Young, One's of could any contain Investors, the you statements. particular forward-looking from One's website, differ of those new release to on described results future events on through and copy today information and Fairbank, Capital please to whether access One's our Chief presentation click Chief our and summarizing One Earnings information, today's undertake this speak update discussion forward-looking of as Numerous only in

release in both One at annual Forward-Looking Risk section section and quarterly Information SEC. filed factors, Capital these on presentation For our more information the see the and the Factors titled in the earnings with and website reports, accessible the please

Andrew. to over call the turn I'll Now

X% quarter driven afternoon, growth segments. share. linked second or basis, In I'll X% was allowance Non-interest quarter, linked $XXX an earned which start diluted mostly of gain the in $X.X million driven driven for grew On Thanks, $X.XX per common expense increase quarter. by tonight's build. across quarter expense Capital and good charge-offs $XXX Danielle, of quarter, the and grew average Provision increased recognized for Revenue held slide by was billion million X after or investment all billion prior the grew of in in the a and X% on quarter lower X%, X% by period-end a in on offset accounting One in partially operating $XXX expenses. by loans everyone. presentation. net the the $X loans our million marketing, sale

X. brings quarter to The to allowance billion the I Turning our million detail. total our greater $XXX XXth. June of as changes up billed slide company's $XX.X allowance in in in balance cover will X% the

points XX our The Our million. stands The which company basis basis growth by slide segment, increased Banking coverage Commercial by in in pressure allowance business, coverage coverage increased basis total our Banking segment, and five varied decreased changes to five. allowance In The In drove allowance. upward to I'll and Banking million. Banking X.XX%. $XXX $XXX points the the balance points by increased increased now XX X.XX%. Consumer Commercial on loan economic all on our X.XX%. in Across ratio outlook a Consumer worsening and businesses, allowance ratio coverage cover at

the the effects and million was provision commitments. of of In lending to to allowance we economic outlook despite million released the unfunded Card our Domestic allowance also I build, growth $XXX of $XX related addition worsening there previously In business, mentioned.

than far, of normalization release. when credit the we slower offset allowance some economic last impact we outlook, normalization allowance. and the metrics. pace of the But have to gradual that signs growth assumed quarter's in set more than normalization leading The card We of been seen has worsening so our this what slower-than-assumed

to continue downside coverage ratio uncertainty. to risks stands related for for The reserves Domestic economic of levels at elevated We X.XX%. qualitative carry Card now

page Turning to I'll liquidity. six. discuss

liquidity was regulatory preliminary requirement. billion see XXX%, declined at the pre-pandemic billion. now during ratio average the can cash $X reserves billion second and XXX% quarter our $XX above quarter liquidity coverage well the Total $XX Cash declined our levels. normalizes about as towards and You in stands liquidity equivalents

rising also interest in runoff the built by our the during the securities driven continued mark the a of billion portfolio $X combination of outsized rates We decline portfolio had the and pandemic. from

quarter $X.X X% Turning quarter interest from income to from sequential was our XX% the up Net page seven, year quarter. I'll net the interest billion, in ago up margin. cover the and

and higher than yields count, impacts forwards, offset second largely day here linked interest driven quarter by betas. growth. quarter deposit securities was to a five higher the Our and NIM recognize wholesale rates NIM increase funding of quarter prior our year higher quarter. in than assets to margin ago, revenue. by and in points Higher costs, a costs. basis from yields and mix, sheet basis The the impacts will X.XX%, ago be the of loan loan in excess largely Outside additional sheet year on balance the and deposit is the driven by function funding deploy cash an of quarter was beyond points the as Relative of our in a wholesale competition on were into XX increase changes we net NIM quarterly day shift the interest balance

eight, by end to Turning I slide our capital discussing position. will

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

dynamics. Rich. and the billion. that, estimate to will will driven repurchases call to conditions repurchases actual including our turn around number a I about growth, any the market continue be pace With by is earnings, capital We of Rich? the forecasted need capital our economic long-term future factors, slowed of that of and pace to our over $X CETX The XX%. quarter, In

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

quarter the Our Domestic XX% or quarter purchase year-over-year. patterns. driven the compared roughly rate as X well growth Strong charge-off charge-off linked rate the up loans, quarter was XX-plus in was in up in continued was X.XX%, The basis, loan revenue quarter normal line as a we Card was well the year-over-year. continued by seasonal Card growth basis The of delinquency in which delinquency point rate charge-off the increase was of points, pre-pandemic and delinquency the up a quarter. points business seasonal Ending volume year-over-year, by $X expense the but expense second gradually quarter, prior and quarter. end posted normalize, of strong revenue quarter at and quarter, linked in Non-interest the second marketing to for year-over-year improvement the from rate the sequential loans grew levels. Ending when metrics. rate marketing. below year-over-year Domestic XX was -- the points an in XX% year. X.XX%, Purchase rate up strong basis driven XX% above up basis second see quarter we about was $XX.X On for improvement. margin. company with typically the XX Total to top modest basis the remain another volume results XX% XX% from quarter billion XXXX. line The was increased XXXX, Both from about and X balances up every billion X% credit

second Consumer are marketing marketing driver Card Banking and deposit drive of national marketing Domestic not company the in we travel focus into heavy well spending and customer by of on airport account gain resilient In increased drive the as digital-first and enhancements marketing build can lounges. our total heavy includes in our but opportunities trends. competitor the Card in our spenders. And accounts bonuses keeping success only seeing like across see risk. driven a loans continue franchise And driver to marketplace early The business, scenario, spender traction a as franchise choices accounts underwrite where We're growth always, we're and and spend marketing. portal is growth quarter strong franchise to returns. potential businesses. we and marketing our our our we growth book into attractive close strategy. increased loans Domestic growth continue primary Domestic biggest, and worsening continue on we marketing We're to as lean of strong and to actions banking Card build even business. And Our volume, In marketing eye non-card across quarter, first the as Card in business, decade-long lean new to our that to generate and purchase our a we investments to in in Domestic

in result spenders Pulling costs investments businesses. experiences. marketing some behaviors than promotions a new accounts market. our and and different of we growth posted our with top has building As upfront and at of building, heavy has up, significantly brand of high-end franchise card marketing, franchise mix long-term higher heavy economic spender share the We're other the It with strong customers. engagement spender and a a existing heavy in spend our strong of and gaining and

have grown are in high a of economics has results. spenders been the in trend that's is time. years, velocity spender Domestic and a net increasing has long-term have recent being all Card rates, which exceeded as its spender purchase purchase strong payment in of are are major driver spend losses long-term card impact and revenue heavy and And changed increases revenue. Heavy behaviors performance. large factor low, driver of rates, our spender strong fee loss Card growth. payment a driven and compelling. Domestic and payment -- lowers Card rates revenues And annuities strong domestic increasing credit revenue our Card customer several has metrics our on very over loan heavy and are total Heavy strong attrition spender in overall sustained percentage Naturally This these franchise credit absolute relationships. financial go of low, growth Domestic long-term significantly Domestic equal. impact other terms a interchange volume However, particularly over things very volume with and interchange Heavy a generally high gradually hand-in-hand as that has key been growth quietly loan

Our are volatile results attractive, and franchise resilient. financial that less heavy generates spender very

and sustained the result, our build significantly heavy XX-year to Consumer credit our long-term we quarter this business shows requires spender auto and on growing. capital. way of franchise Pulling our XX levels In and quest business. are has made enduring of they're Consumer marketing, As increased quarter, heavy Banking auto compelling, in capital impacted but with the several to in Slide dynamics. our the on less Banking second choices results spender pricing franchise delivers revenue, We it returns strong business growth a brought resilience trends. benefits capital up, response competitive pulled back in second for

As pull but auto costs, year-over-year funding linked rising have back raised from lenders We which as XX% and relatively auto margins. marginal pricing rates XX% you'd pricing declined have industry and quarter. originations, chose expect, interest gained pressured These to market the kept some competitors many share have others on flat. drove higher

the to in On loans linked basis, pulled loans back X%. decelerated originations, quarter. ending in year-over-year business second were Banking As growth on we a Consumer ending X% quarter up the the of

commercial Second year in small Banking retail XX% Bank second a of deposits I Consumer expense of were declined in eliminate the was completely decline bank. aggressive by auto investments rapid and decision just resulting marginal in XXXX, the year-over-year from that, quarter. Banking Consumer marketing deposits increased the portfolio discussed. funding up competitor by auto for in essentially the overdraft and driven part year-over-year, margins. aided up from our by quarter increases Consumer compared digital increase the prior was transfer deposits banking in of growth the was costs, driven bank and and by the auto our offset effects compared ending sequential our the fees to the rate Noninterest the interest loans from businesses. capabilities quarter X% X% to of as in primarily digital revenue flat compression national our of was quarter Auto continuing the margin pricing our to

losses from X up charge-off points. second XX was up quarterly was loans quarter basis quarter. growth XXX basis X.XX%, XX-plus added credit million. for losses The down for in We quarter points, the delinquency fact, million a the ago. a provision quarter year-over-year. pre-pandemic to negative rate business which The rate our benefit The to delinquency the year second a continue XX XX in Banking quarter of unsustainably in the business, the an $XXX year delinquency rate of from swung Second of up was quarter net well below charge-off gradually the quarter allowance auto basis strong expense rate points XXXX our shows charge-off was allowance we the the in points and a release results net in and in Slide charge-off basis for credit the to low, remain Commercial normalize, for rate basis, but On compared quarter. in second to auto rate delivered X.XX%, rate ago $XXX and levels. linked revenue XX-plus

Second increased a ago, some Ending moments Growth in seasonal in runoff withdrew In and well few specialties of drove part search deposits up quarter by sequential industry quarter as rate-driven were higher I customers X% balances from quarter, second Average year-over-year, were the to mentioned down X%. our XX% loan first balances returns. retail deposits growth. of deposit our the from transfer of small the also the ending driven selected bank a outflows. loans portfolio by in were down impacted XX% that as quarter. deposits as

The linked driven loan X.X%, remained allowance was posted from to strong levels criticized year quarter from the from charge-off was losses. XX% slower pace. revenue, And across below growth non-performing rates our rates loans Consumer X.X%. delinquency normalize. credit growth Second continued, points. performing rate in loan Banking drive quarter. card quarter was in the build was remain losses quarter. results year-over-year. capital our Banking to good Commercial with second million return X% $XXX quarter. the we modestly credit Banking as The first a and rate largely and rate strong business quarter, the Commercial quarter increased annualized a XX by In continued volume the for linked criticized growth loans revenue. up credit the down up from the basis credit in and revenue for and was second and expense Non-interest the continued well loan at in we prior Provision closing, to charge-off even and in pre-pandemic businesses, continues Banking our purchase Credit shareholders. to And albeit Commercial gradually XX%

core And we've cycles position resilience value same every strong evolve through several cycles. these And we as we've For hardwired the three and into than growth we've good in an tenets Sticking and more today. decades, And to building have core We've focused to demonstrated seize a as franchise. on choice enduring and make resilience been opportunities these markets tenets, steadfastly played we out. times delivered in significant underwriting living long-term. by bad. over we're

can normalization out. opportunities into sustained resilient the after we're in credit lean long cyclical trends We're marketing see that revenue to the asset continue pressures annuities growth confident deliver and making. play We and to choices

driven monitor the continue sub-segments. increasing and our we As structures hone resilient credit continuing closely strong. product prior staying assess focused And uncertainty, and that through dynamics have on remain economic competitive to proprietary and to our the We're results cycles. businesses most underwriting we're and resilience

that management technology digital All transformation. managing growth choices continue and in in of tightly even are our as our and engine technology of future costs We're invest transforming risk to these are credit efficiency. enhanced the growth we capabilities by

up, possible impact long-term by opportunities powered we're position value play shareholder digital drive long-term tenets long-standing questions. cycles and And digital be delivering strong and the and strong operating gains. we strong While us leverage often to that resilience the broad focused prudently they we'll deliver now Danielle? banking and opportunities happy to we scenarios productivity in the sweeping Pulling timing, remain a to to putting continues. as imperatives growth capitalize way managing out. continue of position in in a emerge transformation today ourselves weather marketplace your to over choices put on are generated the compelling to as And that our capital risks of believe the and position and are core a on a answer to economic range

Rich. Thanks,

We will Q&A now the start session.

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

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

of Instructions] Sachs. And to [Operator you. we'll Goldman go first Nash Ryan Thank

Hey good everyone. evening

Good evening Ryan.

in on off broadly, start impacts about decision pulling the could bonuses? up to on the pockets are of maybe back are in which the context the economy given we just And And you the the seen just maybe sequentially. customer And going again maybe just leaning peak of we talk where marketing, still just you inflation? you guys maybe base? Rich, with across in? what's in Have any was early more are

we we I much bonuses spend to tied bonuses, our lean Venture into how we rewards example. on early Ryan, mean, across -- really business. that's early X, I pretty mean hard have for the

a bit. separate So, let me little

So, launches are quarter Venture kind of a of some thing. the of and we X, have sort long companies launch

to We that. lean continue into

You've seen our national that. advertising continue on

products the lot continue probably, But marketing There's response on at the not much I rates bonuses of lost at card bonuses it's quite average, edges so in out and this estimated models for We on resilience in as rate the loss as economy, our and and don't and the been and a With because of every -- that and well. few are we to the a after, auto, always think, talk then also top-of-the-house there of lean with decision stable feel the bit us. spend a there's -- talked for a some just has about factors -- to and their rewards more lost noise day, that putting economy. trimming says things. we we as the in early we've the us that ago. to so going around And the of generally, -- on spend I rates a we're we So, kind a we these decisions make continuing very this respect that's are by going spend lot on at card -- part uncertainty. that probably uncertainty staying been the some early moment other there's edges. there has and about a But segments about minute, there some trimming margin good based decisions way, on been minutes of There core into. target around in more and not

a your economy watchful So, impression At One, I while very and be worsening a decisions have on net think it to obsess we every scenario. day, our Capital underwrite eye that about should underwriting systematically. the we underwrite

we been And took decided at our in time quite years, frankly, In about move good our to Capital -- a originations. also good quickly. but One. and tech whole move in to infrastructure and much most transformation And more when it able adaptive some bit create really of a to past one allows the been to responsive of -- We've we machine. that sometimes about turn, companies adapt has and much so feel more thing us our is it

about And feel also in But leaning good we're time of a them. helpful into net-net, so uncertainty. opportunities, that's and the we

question Next please.

Thank you.

Sandler. Barker hear we'll Piper from Kevin Next, of

your where of good impacted. then through given seems seeing that you. much. potentially you just the a to throughout now how really very yields things and this we delinquency saw some really used some and sector you the softening and like car what unresponsive just going And just Could Capital combination further in Can us react in Thank year in it's performance? you give prices just the One rates, outlook discuss are of rising are Thank on XXXX? it recessionary been where XXXX on environment you're an expectations auto

to need Rich, I unmute think yourself. you

and business -- still investors feeling opportunity Sorry, -- we share how of business. sorry. But, one course, at The we're that still what thank mean, is always Kevin, the significant see the we're with at the we you. moment auto I in margin. auto is

long moment the we've how saying you So is too high the in a the a feels. the low that to in time of industry and at players of, And unsustainably of competitive with long caused biggest that worry can many thing in of period of dull that for the wanted environment low charge-offs weakening car some auto period the ways, used we senses and too prices underwriting. been charge-offs, we a share

competition calculate credit their of actually then different few unions very you well not funding who -- primary a -- more striking have cost underlying behind in is their We a that. what in their are And have terms And has certainly, consistently is seen on market and and that. The in credit not that's model they've the in what's has economy. by all -- increase companies think, particular, have share. kind business some We up story funds is lookout you significant of of auto we center, haven't the and really responsibly with hijacked, story money happened had very is really for moved a see. cost what players, really whose for not. the pricing, if to inflation in different increase moved is. and that the increases the and way at have, the the large players unions the There certainly of pricing are will, that, in significant pricing The in a to and cost funds. And most I in been very movement

the business. to dedicated are very auto So we be -- we to continue

the story what exist us, to business, us not have not huge least the pullback, edges. the for -- I that We trim tighter would margin around at has margins with that in That's, at doing led We're is, is now auto. with in say but that biggest think, temporarily a dealers. we this relationships the like we're the

used is thing pricing. other The car

a obviously And that, about that everything little the near-term. constraints see bit above their levels. when we production high think dealers biggest the just vehicle will production will well factors supply even And values in take normalizes, vehicle talk time strikingly high remain remain remain suggests Let's to supporting and I Kevin. And values. it rebuild inventories. constrained pre-pandemic Vehicle for

So respect a probably the relative values, underwriting made. I underwriting that not But the used pull concern outlook car voiced of of with a absolute near-term view, assumptions collateral good is pretty to I've the versus often is if that up an really point values. collateral but matters of is lender what that the level value values from

levels we declines been an car on so quite values versus the are eye our anything to for record we we've -- collateral hopefully getting not relatively seen prices the And industry significant at have at used time are some that a underwriting, but in that has assume now in in watchful used past.

that for a to to credit one share edges, driven will continues I be with period for Capital we by way, around you. which time. everyone But tight by may, a think opportunity except So until ameliorate continue then, auto of relatively the the wanted particularly be in but the unions to pricing, we certainly short pretty and significant One, the

Bill of Next, we'll hear Wolfe from Research. Carcache

bit How hikes dynamic feeds and is you about markets risk consumer you to in are this the more? Fed after labor in the strength seeing do be peak and to evening, Good have reserving costs, information-based lead into tends could unemployment that to you. since thinking Capital little One the maybe rich increase known and the impact talk Rich, well models? Fed to for has of to Thank of funds, lagged, And we're analytics. the how continue itself can and been Fed long inflationary a about underwriting tends its

Okay.

-- thanks. So well,

inflation. talk Let's kind pull of just up about and

think, in expects Fed sustained We now, the decades, haven't US and reached, in and X.X% increasing are year been in X% a it inflation June. started increases. in it's for course, And raising seen producer further And the I response, market running even above over many rates faster. but the of has prices

potential So what some to I the it's our inflation, sustained and want to negative. of maybe impacts list business do mostly of is

in variable to especially we pricing Consumers terms the feel of the already slow dynamically in and – been unemployment. the for you the One. credit business. that seen the modeling decades, also demand auto would way, in business seems of business, the can competitors, to in isn't. on interest credit seen the the to of is price one view, And that biggest lower losses. suffers by pressure also the your outpacing by driver wage that adjust think. would And rate as increases, rate me were underwriting Also a generally of the been seeing thing, more we're offered we in lenders impact result as the already the just in but margins, we've thing of it. that me way because right the I've So credit we even if all From in about inflation point consumer if efforts direct headline of don't impact our struck Then have comparison, let business, to could of our it's pricing And lending We've certainly over low how inflation, see a you biggest response. card this got selectively certainly auto. of now will be that. in product, of than much in economy on is. rates. card rate just unemployment pricing just responsively have a funds By just in be at put higher well, starting cost real things is, Capital what doing striking seems say finger macroeconomic to we've a other – And rate growth. pricing feel adaptive let put our responsiveness Well, credit a products interest feel losses our sometimes if I higher moved mean

very effects will of Existing which effects sustainable point, to high sustained period direction. identified. real the be the so, total, there's it subject a And the decrease well. now. more I High just want debt in of this credit, irony favorable to inflation in could you strong terms start in a just few the position of do affects may inflation, inflation. to your as inflation we position, negative values, some I of auto levels strength though, and environment. in also of in highlight But think the on a support vehicle we're in a But tilt while in contribute definitely --

So, and the tough And else I to to that I effects very a but things, cycles. predict it's we I've we model works. say these how to economic just better economic this thing one happen the We that in various Capital don't it's than last felt to incorporate decision-making want general collectively we to what responsive. cycles. always it think prepared position for predict fact, be And is, look hard One of start in do sort are to stuff thing these to theory is try anyone then do. into hawk, all we a of with like a a is

cycles, cycles. day to our a very make through which you've I these is, away this strategy, underwrite most key can important it us successfully in, years of thing cycles, that predict a that's One. credit the from seen of is as to to weigh hard been cornerstone correlated, of the but The founding not same take predicting But in actually it's since what level and Capital thing resilience Sometimes to thing -- doing that. the be very

for Rich. I taking in. my let helpful super others you jump Thank Yes, thanks. will question.

Great.

Next question, please?

with question Rick Shane Our comes next JPMorgan. from

something in Rich, piece in Thanks line that competitive it I'm from at kind I of when your Hey, the question. a looking is at Credit you're or other business feels the the the for everything terms focus that would Credit business, the growth cause because likely of businesses hearing numbers, lending outlook and reserve like taking particularly Card you my Card that that there movements that consumer the in business, seeing divergence? pressures, we and commercial the on perspective. cost business diverging outperforming of of Is are sort and lending together if the

I So the I that certainly as with you I -- our most it, wouldn't but is if run we around say that don't think the explicitly know stark feel bullish a business. about we view Rick, say card

why talk about Let's for second. a

book in both By but we that Also front just point dialing the model a First way, of particularly technology bit we've point -- the card, card, seen quite really math think are power in continued One two in auto if of back business about you and the and is has, -- Card -- data businesses. it the and resilience anything, whenever if level revolvers by leveraging there with a the mass push, out average and books. we said, universally, for in business, sees put And that see there's seasoned actually I and to back choices want think Auto it but has heavy some than always that. gradually, auto is an it's that that so of view. and think way, of more and the of high has faster and but resilience going is normalization, things gradual one the through Capital of other which years, But of across as of like as the is with made in has I balance all normalizing But several our all, position I've been an the Capital life auto, from of whole than to the is from normalizing the like Credit One spender in just book with front point on the normalization, even a respect I the terms shown analytics example. longer and much transformation last the gradual. customization normalization the business, back business in the business, book, that downturns to -- than and now feel what and high with and I resilience the stronger past. I as think, demonstrated

there's replacement portfolio the so card. front is in in the speed as normalization, than book much And in faster auto

in in the faster normalization those normalization say, of amount you're get same the to two for just in, even going mathematically So auto. businesses, book, front

So replacement case, math expectation. because the that surprising of turning it our us of be weren't is would just over to rapidly more It the if more of a portfolio.

story So, story not one of a We're universal -- feel we leaning most here. our about there's is says we our bullish uncertainty certainly hardest not great one growth. know into. is there, that notice out -- a card And but we're is that lot about we're the I the you'll business

into we're leaning it So, everywhere.

that into significantly seen commercial in how You and can as that hard you the of thank And certain a is at locally, that years example various Everything phenomenon. I what we've Rick, pulling an choices card you've parts while the mean, of made pretty in very Capital the businesses. is leaning very see auto, back about much. fact is the we're One over window works. talked in margin of

Thank you.

follow-up we'll to a please, have question, you next Melinda. did question? Rick, Okay, go the

Thank you.

Next, KBW. from from hear Sanjay Sakhrani we'll

about Thanks. A you deposit rate Maybe the just talk the progressing just how how you rates betas Could talk of last NIM? Andrew. you're question through suggests than quarter. plays outlook see here? how sort Obviously, for progress seeing NIM the from more and that about

I detail broader a into Why question then NIM start Sanjay. feather of and little asked. the and Sure, just it bit don't with you give there beta

which are the in betas, And like brokered, that are deposits a you XX% something higher the XX% have but deposits, gorilla -- our so really look is of the of combination retail. commercial at when and XXX-pound roughly

of this I bit as a challenge there. on mostly is in focus And guide I'll looking think So, cycle. a a history back

move so in seen see So over and we versus months. in moved this to the bps first expecting might three XXX the years first half We're XXX another that rising we've or XX get took last six a XXX to just We And already of total it XXX cycle, year. the in in next. the year.

will And of deposits. and larger their competitors overall set moves, behave how competitors tightening so I the more being aggressive the share that bit and context to quantitative all play of coupled level and say growth, of to faster with into a some possibility loan fund the

last it's I a beta to moment something at the we I described But given but think And last looking to cumulative around around slightly if would rising ahead, the ago, could hard XX%. I really were be pinpoint going the that look exactly last what's above cycle. or our transpire falling so cycle, cycle, factors at the XX. And we rising were like

you've And the seen slowly to in so what pretty with beta in hikes. of historically, moves line the first set beginning

And of are second so half this were quarter, single-digits, up. pressure beta planned we likely you the but saw year going to that the high for that hikes rate the

obviously, and card. going And costs, card what in classes the Those the depending one more in into spreads the asset interest and But just broader those I quarterly when outside, be like this yielding things asset that to also the isn't yield marketplace. credit tailwinds the the but of count that then rising we asset relative more tailwinds. investment card other we way, I funding the are to to described, is take deposit portfolio factors costs we to of moving dominant our be so, just ending NIM effects, than faster And not are from where towards day grew NIM mix extent from that the growing wholesale on betas quarter, rates. saw in increases to cash stand that do the force assets only deposit so to it the loans by average, be that and and that going headwinds today. The there higher going are factor higher and our are the from the

all we're the coming nets pushing that to where see out I going one be to another going in against they're So think quarters. and

Okay.

Just Obviously, if massive opportunities Capital space fintech dislocation a a the presents curious Thanks. I'm valuation there's from Rich. standpoint. One. that question for a think in follow-up for been for you M&A

One, most other to banks, we're franchise a that years Capital for on and not we've a banking go of Sanjay. banks buy way. quest national number build Thanks, said our unlike that

a we bring companies -- would of that right spot. and it basically either would that our capability a do tech where tech-based -- So tech that in or business sweet themselves acquisitions, really capability of be really fintechs bring

marketplace, have certainly, in that in acquire a way the tech have We and a pricing fintechs, we acquisitions very talent keen I to -- breathtaking our that same crashed is because Capital that modern in you interest buyer And from that and have as think from haven't very we an we opportunity ideal kind feels we One, assimilate is great the fintechs because a we market to the your our much for observers of for tech learning we the -- carefully. marketplace. that like much the provide of plus of that to well point, One believe remains and of to strategy and comes been the very reason, fintechs, watch a continue built that company stack pricing tech company But So had. seen suited acquisition. has Capital that in have

it. the of behind So sort principle that's

we Capital institutions. look of banking that's acquisition I think, primary One the most interest in is to So that and continue which kind marketplace, different from, the has,

Next question, please.

Thank you.

Wells Fandetti from Fargo. of Next, we'll hear Don

the was low I is can more surprise on where Rich, on talk you see strong maybe the in you really or weather a affluent could end Hi. And wondering credit little about risk bit? it the spender? consumer, the heavy guess spectrum. lower it particular, consumers I unemployment if the inflation, downside softens end, Is

thank for So you Don, that.

sustained remains consumer. struck balance consumer healthy. We the the of quite US of Let's sheets the point improvements coming in Certainly, is pandemic. where certainly see about the start by by consumer talking starting I'm consumer out because the just

the Despite standards. Let's recovery dipped remain months, across we delinquency We bank our few credit significant Labor roll near metrics spectrum. record and wage any own past in the like income of strong household years over remain two rates standard net growth. higher for see. account solid by continuing over our demand rates. higher in remain job cumulative pre-pandemic last below market average. savings on -- strikingly with and Debt see levels openings times of numbers our remains credit consumers portfolio, historical exceptionally strong normalization, any see has still strength and And worth burdens mutli decade servicing lows. the savings The a rate balances but positive

could that to ahead effect that interest servicing and and is consumers loans. price in continue are up inflation although increases we by headwinds for existing rate higher the erode And could run price growth. see. push especially your most inflation the the fact savings mortgages that rates is point, auto burdens, rates. pandemic, the So context the excess household if But Higher muted through interest consumers wage of is debt to big this accumulated debt fixed

that. into So point I'm potential would strong much global the as -- of Great more the this, Recession or by, course, I starting going contrast inflation for though, financial of the we look -- headwinds weaker where trouble. consumers the to crisis, a which struck consumer And the into and economic was in position the

-- the the board of into of across -- is across from consumer pretty the strength the market Now top much the the sub-prime.

is striking a is. sub-prime though, pronounced these so I these that bit But And it market. the in in Also – it universal case the the is pandemic. earlier also than higher think in more But is more how most it populations, sort is of more and thing normalization the quickly

shouldn't trends be surprising. these think I So,

But So, certainly to thing. I not now them in are breadth. income a times, the score FICO state lot same people the same and think – tend of

little their income, faster about income by growth for has won't lower way a But definitionally struck of interestingly, fact of we they're I think income which if lower the Our of is and be strength. certain different normalization starts consumers I'm pulling the where with growth see to a then certainly, been than little on category, switch inflation, that's necessarily I expect should with subprime business FICO think you the consumers a faster a strong one to wage -- consumer cut but probably people And income, that could also continue, the in – the a below lower subprime. FICO that up the consumers, normalization that a keeping wage end. is position scores up, the kind is level. kind in but we But place,

we we fact, where effect. already course, in biggest underwriting kind built whole model business also of Capital the in very that see in and the think, resilience. have our But modestly that's I buffers of One, of can of

lean good marketing of the feel spectrum feel and part to good our we about So, really opportunity. credit into marketplace. that We the across

it. Thank you. Got

Great.

please. question, Next

Our next Suisse. question comes from Moshe Orenbuch with Credit

across Great, consumer thanks. kind the bonuses very kind of also the where how have guess, I for increases and seeing about that Rich, spectrum. you accounts in same you prices saw upfront had mentioned at for spending you're been that competitive high. Can effort? new of good particularly But environment, time, you rewards of the higher-end talk the just a you're lot

Yes.

pre-pandemic intense in is, but intense unchanged quarters. recent more pre-pandemic in I'd bit -- more competition say, space rewards levels, largely a the than than So,

rewards it's rates, the but in probably baseline they were in calm space, basically we the year. relatively of then introduced, were new see but been if relatively in bonuses aggressive offers been early bonuses products more particularly last being in earn XXXX cashback higher come spend and market. of the continue these certain out spend and in early have now offers quarter, than Cash, stable slightly look to And So since as overall at levels first pre-pandemic, elevated points mid we are more at aggressive than the were middle since.

products. we great Now our about feel flagship

the I We're be have One one going, And the space, that. customer pleased pull of lean if or requires the is a also intense things to tipped that it by have years -- lot part And products. them a is beyond into thing. whole -- products, the believe them. we're matter consumers' have out the to engagement to of than marketplace, winning we're struck been that, good a have sustainable launch very the what the think success And But have digital in spender are can't at win done, the continue think experiential heavy and and unreasonable the top been not to that the I very I deeply being that. been good Venture said over you way we I Capital players our up, experienced are as saying we've market product but going the things a choosing one that's few It specifically for with with It Moshe, more brand, and we And that generating. where lot irrational. I card. hasn't package. the with of that so of of by an that takes now this very continue way X of response the in and We winning is being pleased why of is while experience, experience,

opportunity it's space. in So competitive, I like but our to that very continue really

from growth and maybe And for that higher four of both yield to going Is -- the consumers? follow-up. this talked to rate the profitability is to as some a what flat little your in more card a pretty business get revenue take Is been quarters level it enhanced? really The you yield up last what But you -- about. going the with has loans see quarter, on just is -- a to be number? to the it get it are the revolving of increases that -- it high-end guess, bit going your that I to

from we're basis of talked a over ago, we're And fees mix both the that's the you originations in Rich changes how that I year-over-year. rate and your few points. here think been tailwind drive But card by customers ticked have a history, delinquencies in is assets side. having our the seeing to Moshe, growth is But last cost a today modest from in that has a branded comes term a last probably of in seeing bit a really the low of we we that very as it's flat. the which that up can a context funding quarters, with the been ultimately margin up Hey if we're looking sit so clearly, and And put on existing levels I levels uptick leave book, But driven these yield closer think of think seeing I it's a impact an Andrew. that at to a and something will that's year also very higher the shift up, And longer the success about. gradually point of sustained. looking much year XXX yield yield to it

Thanks very much.

Next question please.

of question from Cyganovich Arren next comes Citi. Our

mute. Sorry that I I taking on Thanks was follow-up just for the question. point. wanted to last on

one You're talking the really that of don't because guess, beneficial much and And evolve is less you're super is not month. that or some about I I each the velocity so tend challenging these they or prime down to benefits pay aspects of less as high, nearly guess that's, revolving they spenders. of spend

think you have customer just base As that over pressure your a on downward yield? time, Card Domestic kind would that about growing natural of

if just outstandings pure transacting. But versus they're bringing depends they're it of time. transacting, they're the revolving Arren, on Well, a to bit interchange quite bit and which over low degree relatively a

the well could be you fact a not mention of net described. and creates create so, that in less doing to it that to just So, very capital prove pressure positive that And not need. downward a the

journey being to up reasons which capital-efficient we've so And that of one franchise. why at it this least ends is pretty build over time business, decade-long been on the a

a And do with it. to had deposit I'm the decline side, kind then assuming just modest taxes. got that you seasonal, Okay, of on had

really, growth terms do an kind I not hikes quarter-to-date to the seeing on rate in benefit, increase been of increase? be little You you expect haven't guess, your pricing or the Are to deposits a bit a slower see of leader you that we as in online side.

But then we comment about bit little far Well, about and strategy a there. what the take and on industry specifically a think let's our I'm not see to back so this quarter. going step context talk

would of you here, sheet. in both quarter, that look where environment. faster of itself, in whether cycle, this Fed go it growth deposit the that. phenomenon you the little and larger least are the mentioned previous least And rising certainly shrinking its But balances second history, up, repeats and industry, deposit Fed tax first rate fund rate to drops at in at indicate we ones, As I is the happened thing Sanjay's retail, the brought industry than particular question, bit as balance rates, felt from outflow a the in at and that

in but So good is could industry-wide who flattish think see down knows? near-term. to where as I guess scenario are the yours, we this a deposits I

of And trying different to there choose our liquidity across balance so optimize what to funding number we tenor is really do of and and and pricing. sheet dynamics a

a And a so here where straightforward simple industry user we're in needs industry we of that have our that in feel will position context like backdrop function experience. and with of a great compete products competitive But deposit dynamics. to from competitive the great deposits go in ultimately be our that

everything proportion relationships a we are franchise comments digital-first strategy just deposits by tech high and there. to to Arren, then national digitally is which, it just and full-service a, continued that can almost of that part And are company corner highest -- I through, provide branches that by really that our excuse as a States, marketing capabilities can thing we've branches One but a I on One and which set a just is, underscore side us not now, but every -- a can but not that in having on side much that. in and a franchise We've everybody as corner. we've corners, levels, have got are high-quality the get about of on and, -- build banking greater had building extent, over is, invest provide continue years the the a of building digitally. it's that the service it a -- about Capital franchise are to banking in dynamically made have consumer some where time pricing the very digital one part we build across that, me, pleased great local are And branches to is acquiring is building side, But also brand Capital is, one doesn't had of our a of relationships. bank, we're primary a in a that much a of about -- paid, relationship in just grow the to that notices, let invest bank originated. has to And that bank but in savings me our rate the this people expenditures customer nor full-service digital well. sense, you that on my very marketing banking strategy some on on brand enables products, every to of our And one a United deposits with loyal the is long-term build add experience strategy at all for very appropriate banking want blended nationally success branch very of building really national larger and

please. question, Next

Stanley. Betsy Graseck to on of Moving Morgan

evening. Good Hi.

Betsy. evening, Good

comments having quality, basically the -- just transaction just function double-click that's you're and the the what there? or high intensity, on a Is that higher that shorter Andrew, it's high about, around duration book? on there of to being capital something transactors credit wanted lower them is making more

loss really It's the No. content that just Betsy. of book,

Yes.

you when deck XX% CETX capital going think you were mentioned through is then the your the target. And Okay. I on slide,

spend the while to is now, unlikely demand us? in period mean doing and your this that that there is you'll high loan it's borrow that should buybacks given for growth take near so, we upon be And such right comments future

just prepared we things to with Betsy, put in a to level those but a number factors those earnings the my just in I around and our just and consider, growth, what of to little remarks the particular to context a need forecasted of capital estimates. bit, Well, of there's error shared repeat eye bars

to And CETX, was XX year highlight I ago, X down if quarter. mostly to what XX.X% this is back trying look a we were so at you that's

much getting start there those error And the to number given just economic to we're are a matter uncertainties of environment and opportunities, time more. the at when growth XX% level. bars And so closer that a

mind And is quarter. so of both for in the we is second conservatively case, slowed the and as capital us. down top a bit But efficiently always managing

we're of going evolving ahead, to context And so factors. looking just pace in dynamically adjust our those the

Okay. Thank you.

question, Next please.

comes from Oppenheimer. question Dominick Gabriele next of Our

the I gas, for targeting think your probably great. was would much by could provide Any retail whatever last of you us an if so would within of percent us that my or as as spenders, that's higher spend Card, Thanks. XX you're over changed. Domestic breakdown total effect could Card on would could be provide be so taking Thanks you as mix question. it's provide your I excellent. wondering Domestic or T&E just a you years the with that had of grocery color a -- spending remind category and

need you please. to Rich, unmute,

Sorry.

Yes. Sorry.

mix of -- find in but Sorry. I it's have but is this fact, I versus things thing fact I growth some rates, front front but exact since me I of in the but not XX%. in -- that categories finishing these -- of guess, you're pretty of fascinating, think mix, own our isn't in this don't bunch growth XXXX me asking, I gas things, a have

is whole the growth of our significant business. Capital overall. by growth this includes way, One There's been – by Now this

just gas to year-over-year more. although So grown gross, category at travel has second I some is look comparisons. but gas, -- XX%, as if relative a only Travel,

up one and XX% XX% -- other other is most said, than is of up those up that swamping are it's been it quickly. laggard year-over-year, I categories the So and really like is year-over-year. been catching gas the – during energy, the The travel travel downturn, way has But was the there. than

and in see consumer or as things reacts a as categories one striking also, it'll to eye -- how the much vary things costs. what's on that So just these marketplace. migrates to a categories. consumer how little And tighter is COVID discretionary between keep -- the close be energy get across much to whether nondiscretionary interesting the to We'll the

And then Great. as just follow-up. maybe a

team, you but deposits within around to the card franchise slowing growth, perhaps make reasonable out just between business the seeing you you're this you're would a this management and of really on and Thanks building of it the because so Given step further look really, regardless growing trade? take just – conversation cost, deposit that growth the to amount assume customers card that funding, given funding gaining more first, some that to and your deposits of as much. funding focus is trade-off franchise, and would non-deposit one

Yes.

on now, So us slowly that first, Right in growing pulling deposits. rapidly. growing not up, it's more are lost all assets our are banks

is part the happens cycle. I that a that I at So, we natural think – this mean -- this of thing

being why having earlier marketplace. a tables pleased have this accounts, deposit to a I very build primary that as rates, being to but of so, savings savings have have grow off a generate into we have to relationships, is been made And leaning about franchise attractive in kind my already company banking position will business the not rate a that and brand of our to go all to comments bank

to – more would even opportunity. down card Dominick, are we turn to the -- pay have for growth that that that margins with the but the to to if the So we such wouldn't imagine not think respect make trade I economics, continue it's deposits, we hard

at grow we in the that have of the deposits national for position to a when brand cycle. digital opportunity a need banking bank order of national there, a continue robust business are the franchise. good I'm off to that can economics as sorry. trade being finish as see the time just But with So also to going out available growth like at that part long because that as this the get gather be to deposits and it's they're as kind in to we in far a we to we're particularly we fund come deposits going our with card of point. a growing position a that to harder card But it's

questions, this to you Investor evening. everyone, Great. for thank Well, today, here Relations a The and will any, you thank you, us conference and in for your your call Capital evening on answer if One. have great have be team interest joining this

Thanks, everybody. Good night.

today's your thank that you do participation. conference. conclude We for does And

now You disconnect. may