Capital One Financial (COF) 24 Jan 232022 Q4 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Fourth Quarter 2022 Capital One Financial Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded.

to Norris, conference Finance. Senior like speaker to now Jeff today, Vice would hand over the your I President of go ahead. Please

One’s Thank everybody conference Victor. much, fourth Capital call. you earnings quarter And XXXX very to welcome

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

to With fourth Officer; me Chief Financial and on Investors One’s we click to evening have and the included of through quarter the XXXX summarizing a website, presentation on Chief Andrew One’s addition Richard you and results. copy In Release. Quarterly Mr. Rich go Officer. Capital the presentation will press financials, our this Capital walk To Chairman the are Fairbank, and access press a One’s Young, Andrew click presentation. release Capital and Mr. Earnings Executive and please release,

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

materially described in those from forward-looking cause differ could to factors results Numerous actual our statements.

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

to With Mr. that, over the I’ll turn call

Young. Andrew?

everyone. Jeff, good Thanks, and afternoon,

$X.X Capital $X.XX slide In tonight’s presentation. billion share. diluted the on common fourth One quarter, start of or X per I’ll earned

collectively quarter per Included For the share which $X.XX earned fourth share adjustments, two fourth and $XXX full of quarter per One $XX.XX. were Capital performance billion the earnings year adjusting share. $X.X items, pretax million. full Net benefited earnings these earnings for $XX.XX results in the by or year, were were

basis, X%, X% period-end growth quarter drove business. linked growth On interest grew This loans on a in average loans net X% and basis. up with a by expansion grew margin coupled linked quarter revenue our domestic loan car driven

grew in linked an in operating and billion net earlier, were expenses an marketing allowance driven by quarter, the build the X.X%. $X X% quarter mentioned expense Noninterest I the in billion. up by $X.X about was were while increase operating $X.X Net the billion, quarter flat. provision Provision driven expense expenses of of largely -- in adjustments of charge-offs expenses

Turning to the slide increase The quarter the company ratio allowance balance X, I up billion in allowance on coverage detail. fourth by in cover will points XX ratio by X.XX%. to cover coverage slide our billion, X. basis total company changes in I’ll year-end the total allowance our changes and to the $XX.X brings allowance $X increasing in greater segment in

In pressure X.XX%. our by our card balance put the upward $XXX to bringing Card ratio coverage our allowance. increased million, Three on Domestic allowance business, things

our in credit was portfolio. The first normalization factor the continued

a than is factors three typical ago. nature given factor of impact factors. modestly worse qualitative These in the quarter. we fourth modestly growth loan a assumption second were on allowance The the allowance muted release of seasonal built balances. outlook was quarter the more the The growth quarter by these And loan a our in the our than growth loan economic offset for finally,

lower basis-point auto driving balance business, continued coverage a X.X%. our Consumer rates. The credit by was increase XX increased our normalization Banking million, segment, recovery In build $XXX by the primarily including in to allowance driven in

qualitative factors. offset our putting These modestly two by modestly a in of economic worse also factor The second factors pressure our is impact were allowance on outlook. upward a the release

for business, And million, in driven portfolio. in to reserve allowance X was in a builds $XX our largely office finally, X.XX%. by the This increase Commercial coverage our resulting basis-point increased

Turning to discuss page X, I’ll liquidity.

You above the liquidity consumer allowed by $XXX FHLB regulatory can increased Total the reserves growth balances see down our deposit higher pay drove XXX% preliminary well to was fourth the XXX%, coverage $XX billion requirement. ratio to average cash quarter billion. borrowings. liquidity during Strong us throughout and quarter prior

net Turning interest I’ll to X, page cover our margin.

towards the X shift higher was balance year-ago NIM was prior linked impact Our fourth the quarter basis basis-point This higher yields quarter loans. deposit higher and increase mix higher by the net quarter. a interest mostly points was wholesale in and funding driven than sheet X.XX% points and basis The quarter, car X XX in by margin than costs. asset offset

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

common net income $XXX in was of the Our the points was XX bringing to of quarter, quarter, ratio billion. at the the about million risk-weighted end repurchases partially capital of The year in stock by XX.X% dividends the up offset growth and We full relative to quarter. Tier equity assets, $X.X fourth common X approximately repurchases. share $X.X repurchased last the for basis billion in quarter

continue to is capital that need estimate XX%. We CETX our around longer term

With call over turn Rich. to the will Rich? I that,

Thank you, Andrew, and everybody. welcome,

growth quarter in fourth in on fourth and XX. Card drove to segment volume results margin Credit revenue coupled shown results XXXX. and revenue card are results our on domestic a with of increase compared business. an the which begin I’ll slide XX in slide function are our of purchase trends, Credit strong largely with quarter Card loans, Year-over-year

was X% X% of billion $XX.X growth fourth delinquency up were below XX% the charge-off to purchase as rate was margin. And in and revenue grew year-over-year, Both sequential the revenue and line strong continued quarter. Card the Ending Ending every from by growth fourth XXXX. levels. or increased as well Domestic continued the the driven normalize loans strong up volume In quarter quarter rate loans for quarter, loan volume pre-pandemic the and in in Purchase the our year-over-year. about XX% balances top year-over-year from metric fourth business.

up a up for XX-plus X.X%, The basis, was year. the linked quarter rate X.XX%, The XXX quarter the was XXX rate fourth domestic Noninterest XXX in basis basis the above expense year-over-year. of an from charge-off was and was marketing. points the points points. XXXX, rate points basis increase card delinquency up quarter On which basis delinquency quarter-end was up XX XX% at rate prior charge-off the includes

marketing $X.X billion in Total was company expense about the quarter.

marketing the business, in choice are resilient Card card Our drive lean marketing our growth. to domestic Domestic company marketing. continue total driver In biggest into we to of

actions close risks. a keeping eye on potential We’re and competitor marketplace

success strong new of top our spenders the across our volume focus card and growth domestic purchase in on continues. heavy in the seeing the accounts, We’re marketplace decade-long our loans and marketing of at business and momentum strong card

see effects Slide industry results quarter, to Auto of for our originations choice XX Consumer have on and business. dynamics the our declined margins. the linked shows back XX% pull that fourth auto Banking fourth pricing in XX% from pressured continued quarter year-over-year to response growth competitive we the to In quarter.

X% Bank the deposits slower quarter. originations, deposits ending growth were up down the quarter loans over basis, quarter X% X% by up to Consumer quarters. from decline On be loan loans Banking quarter. previous ending than the ending Fourth were year-over-year, sequential year-over-year X% Average and a and X%. in year Driven sequential auto were to the quarter. continued Consumer up X% ago linked-quarter in grew the up compared Fourth

continues strategy Our get direct to national banking good digital-first traction.

marketing year-over-year was digital loans of in as digital the deposits was for by auto Banking expense the by margins. up our growth Consumer revenue auto and businesses year-over-year in auto quarter the was retail capabilities compared driven XX% offset investments bank. decline XXXX, XX% to and national in partially Noninterest up our and of fourth banking

charge-off The basis fourth was rate points delinquency rate basis charge-off year-over-year. was basis auto points, up and charge-off XXX up was rate XX rate linked basis, up basis to quarter year-over-year. and fourth normalize XX-plus The On in The XX-plus rate was quarter. for rate X.XX%, X.XX%, XXX continued a delinquency the points. the points up quarter XX the delinquency the

for X% Ending X% linked loan quarter XX were down grew deposits business. the the quarter, Banking average were X%. to loans flat. our Compared Slide Average results quarter deposits from quarter. fourth were and down fourth Commercial linked ending balances shows

the pricing The transfer the Fourth quarter in equivalent therefore internal category offset to the an by linked was an primarily increase by other from was was and driven down revenue that neutral funds Company. XX% was impact quarter. decline

quarter-over-quarter Excluding this about up impact, X% fourth X% quarter and year-over-year. down commercial revenue have would been

quarter expense Noninterest basis basis The X from the X% the to linked points X.XX%. The was points. rate linked linked Commercial to quarter increased quarter. XX was loan rate charge-off points up up and criticized loan rate X.XX%, the Banking from was performing XX the from basis criticized nonperforming annualized

was the volume we pull slower fourth to strong growth In quarters card auto drive previous deposits Consumer ending loans Banking were the our and to our And on was business grew. closing, growth continue continued and deposits originations. quarter. net Loan our roughly normalize in in loans in quarter. revenue, the compared we Consumer X.X% of rates compared Commercial were to back as and across business, flat and quarter. linked purchase pre-pandemic operating rates expense adjustments to below linked Total Charge-off business continue delinquency company levels. up Banking from to in

XXXX. was year efficiency to year adjustments efficiency And net from improvement be flat we of full XXXX annual points adjustments, that operating roughly the net year for annual down XXXX XX Our full to compared full XX.X% basis ratio expect of XXXX. modestly operating ratio a will

we way opportunities up, that annuities. to deliver can continue see growth Pulling revenue asset resilient for sustained

product our assess our marketing We uncertainty. and and economic competitive by continuously capabilities. continue technology, modern monitor to Powered closely proprietary dynamics improving underwriting, we’re and digital

prudently. We’re focusing capital improvement we’re on managing and efficiency

investments economic range to a transform to a deliver long-term we’re a shareholder position of to our broad result resilient and our and in in thrive value As strong growth, of possible compelling scenarios. technology drive

we’ll happy now, Jeff? questions. be And answer your to

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

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

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

Thank moment our you. first One question. for

Mihir of from Bhatia comes from America. Bank question of first Our line

delinquency as rates to wonder seasoning how talked added the And flowing that loss just last talk past. about does over to -- growth see the maybe through the year. could just We’ve you. these about just your loans talk you ask in about months? XX vintage trying Thank think here if and I was we’ve next lot here loss as what you to into to in or a XX of you wanted goes math -- I your and season, loans that I as

you. Thank Yes.

me Let growth of just a math. by start what we reminder mean with

losses, low thumb, we new then the up and especially growth gradually losses can those book a of to over come of losses it rule are accelerate when a grew on of tend peak When new of then couple seasoned a years portfolio. added back general loans with a and to level As growth and adding increase for back XXXX, and book the lot a overall ramp rapidly in rapidly We down. just grew front growth. and time, wake the example, it a effect Great that particularly at looking was we that book visible was large had unusually when a growth in had survived that At math, -- we math seasoned Recession. of XXXX about the back XXXX, talk to because loans

of Given next rate driver normalization our few effect the our general see be math likely years. the growth, I we’ll I again bigger credit trajectory. But think trend the some will it’s of recent think over growth

are allowance CECL. impact thing the other accounting forward forward going of math significantly. pulled is CECL growth that’s about Under One regime, growth different new the

forward most We to as of our a factors support even growth. the pandemic, portion our seen of have allowance offsetting for that our because the growth in accelerated are growth effect favorable But we our as going continues, allowance. haven’t intended builds this of

Thanks. And reserve. maybe on your just then Okay.

Just recession Maybe a trying you term. what of Thank to whether the color built the just understand underlying the talk you’re assumptions help with assuming short just into us you you. could Any for additional some unemployment about there? reserves. can you have

Sure Mihir.

for land we particular In a As something in where higher I estimates we for said quarter. than modestly fourth are unemployment, that’s in this the economic assumptions. of largely will case past, little assuming consumers we are the consensus

is consensus X.X. think around somewhere I

baseline sorry, prices, unemployment that home But to fourth it’s important to around to of around our sorry, forecast our calculation other into but unemployment things -- fourth We’re in all things gets X% the those -- matter the unemployment in fourth of -- note up the in rate, there’s as the a go quarter. be factors of like reserve, in changes X% the well, assumption quarter. around the is inflation, X% quarter wages, lot

One. line with Capital next And our of comes question Ashish from Sharma the

don’t I that’s Victor, think Hey right.

intended Jeff? that for me, Was

ahead. go don’t why Ryan, Hey you

I Rich, So can a Mihir’s maybe slightly Mihir’s manner. of questions ask in different -- one

overshooting And year-end I just parts those or the So, about of or levels. competitors levels normalization even you little maybe pre-pandemic about pace just about overshooting the little versus maybe seeing how actually loss by a in Can talk bit of you’re normalization are talk even deterioration. you about reaching maybe talking the think Thanks. if those? portfolio maybe have a And a follow-up. any bit industry

Ryan. Thanks, Okay.

remain case And always credit seen, XXXX more approaching tend to strong. -- be the the -- some they’ve metrics by course been was more is steadily normalization front was and originations consumer are normalizing this course, new in we’ve higher. At So as book, and of pre-pandemic It segments of levels. first, pronounced than others. that through way,

normalization to to But it pronounced months, example, at uniform they it across of for in levels. the -- rest income thing the normalization talked the of were to investors the More trend we credit recently end pandemic, recently, market. and the before So, and few happening FICO seen shocking, more metrics lower on lower everywhere, spectrums income sort more also that back and would across end. have about the, different. it been businesses where last the up rest more said other actually of was so, spectrum various caught index of was but segments, we’ve to When of the and was the also we across been them very credit the ranges had

the on it pull go -- normalization looks the yes, I pretty is across consistent like that, Ryan. And if board. really, ahead, So

it. finish. go my I’ll no, for when ask No, follow-up you

competitors asked are various different you talking things at So, forecasting about levels. which or cross times XXXX

metrics. Capital on not predictions would very best in One, go into to at I delinquency we’re specific the the are are the rates see single near pretty going we buckets have delinquency are in Delinquency term. is But the at early things rates, think if metrics I that. look predictor making can you key think where I look that of flow we And fact, at thing normalized. flow

not at we as giving metrics, across look dynamics normalizing is at we But guidance. the it’s this metrics, we’re So, look see other we say, feel the specific but credit -- would it. clearly

down. it. Got Rich, comments to maybe on regarding And follow the to flat the up modestly then, efficiency being

headlines reducing modest firm There quarter, efficiency have I think talking you were about last the improvements. been about some headcount.

changed I anything expected guess to terms has improvement? expectations stable place in pace you. of curious, growth acceleration the efficiency? to taking investments efficiency any of just I’m your Thank So, and modestly the given revenue in that’s improving for drive efficient that’s contemplated, is there --

our is it Ryan, as outlook exactly last the was efficiency Yes. same quarter.

modestly to What to the in XXXX efficiency actually, then bit full came you ‘XX for kind to -- recall, and lower. XXXX, be we XXXX -- flat a is If guided that for of flat year XXXX. to little down basically relative for happened

had outlook down, before. of modestly same So, it’s we as our flat the guidance to

not a well, to to -- to kind we way marketplace through But into drive basis transformation we from the journey of the tech invest. how you It’s thing. even journey up that back pull as Capital efficiency, what continue continue our are the the that pulling I there’s of where we’ve way the of whole lean pandemic big the through XXXX is in gradual breakthroughs leveraging transform improvement we we But if to XXX improvement and points our we so, the had operating And create in then to opportunities And way on driven story up work. for continuing opportunities continue efficiency operating of continued XXXX. and the sort investments if tech pull One of to invest opportunities that. to see behind

next Graseck our And Morgan from of Betsy question Stanley. comes the of line

as betas deposit thinking the year. So yields One, about give have to think stage. a likely a if you’re interest but two Maybe are us outlook, questions. earlier the the how that’s different is course about grow case, how -- bit deposit and talked given just you growth trend over I’m you strong. into us net a can a and noticed of here give about understand deposits -- then And as I help this margin little the leaning sense assuming tell to curve, likely really forward margin, we interest Thanks. as which types at asset you’re really of to view you was the sense to point of margin base that. me how us on

Yes. Betsy, here flat before of ‘XX. yields the of get as assuming really asset lagged we’re is than coming quarter quickly curve, cycle, NIM, holding respect about first to was latter in the throughout have rates that following of how a Fed moving forward your thinking are bps couple With I’ll rate start first, last over down and deposit and more this and yields last which XX the rapidly. with bigger in part quarters we the components ‘XX as impact question we as so did into the asset the beta reprice

so, of that And a dynamic sequential going bit on. there’s

In terms our consumer. roughly overall of and lies. mix, thinking are our about in of where product deposits It’s XX% focus beta deposit

increasing just at was XX%, beta if But total low-XXs it’s you think last around And at the XX. terminal cumulative the company, was quarter. so the rate look you around beta cycle, for the deposit last I if look

being see the marketplace above given could this just So, that, in terminal dynamics I a at somewhere beta point. competitive

is NIM. modest the all to net those a of of So, would likely say factors headwind I to be

year is ago. a mix in quarter we last spot. are a And sheet from sheet balance to frankly, back similar -- a balance pre-pandemic and roughly talked NIM we our largely about were We where mix

a unless mix period to we balance the the outsized growth big be be sheet could in higher-margin driver, prove multiple card just I then, likely factor isn’t over a say business. And see So, little to other that quarter would to comes of rates are probably that card revolve in increase the today. offset bit we from headwind could an see they also the modest tailwind described a where is beta bit a of a from potentially that I dynamics

So, in things one will net some kind with But look to an as we are the I are way day all a has note as and NIM we impression a headwinds quarter, you there reminder, count -- those tailwinds. just the effect. just thing that first potentially the of leave to ahead of calculate

sure we’ll headwind a due or have So, QX basis-point we the for two know having is thing the days XX to quarter. one so in in fewer

That’s super Okay. color. helpful

this As I obviously, been you’re marketing, wanted I you’ve just thinking know growth, about a to a very successful generating NIM follow-up, a we headwind, to just of into think year the been for next wallet sense get something top But driver critical outlook about see that as cetera. how as should and customer. it’s Thanks. that with how we et wanted with to investment go of in that the

-- we’re Betsy, in good feel getting yes, traction we continue to marketing. that about I very the

most the the is Of do card that of marketing business. we in course,

growth to across continue business origination. account attractive new for opportunities the see We

giving opportunity. have and over We marketing the see that’s evidence the benefits our continued of to We tech expand we’re transformation our all us that some products of extra in. channels the place originating

So, we about feel good very that.

we look how do three be issues, That’s around been continue of for likely we around that kind sort the feel is and looming for we at things to about edges. having see course, challenge look One, what originations would trim what do places edges think do downturn. we the of of Capital particularly decades or And continue to to we we we this. a or potential this just either that any leaning and of of and be doing performance into in our we’ve the have all mentioned, might context the vulnerable You

lean lead of card So trimming the we bit there’s in. the really, would But the continue a edges. little around impression side on I to is net you

which side, the we -- the on course, have of our direct course, the are heavy just the we there’s -- spender investments, marketing media. all accounts terms investments costs. marketing marketing the particularly that heavy do brand of directly of through to in Now, continued We, originate

of the get good continue our -- growth are of We at the on higher spenders, getting very to the of the spender each most look traction side, you growth as range sort end. at sort we

sign So, that continues us. good for to be a

the And the bank thing is other that. of we’re course, on side, so, leaning marketing the marketing. into And national then

You’ve the seen in banking there. we’re interest Everybody leaning changing deposit of the having deposits leading systems. context some some sort the of banking of the rates, and into in success is side growth

to very traction there. our good marketing venues So get

good traction that eye the to up, So course, the we economic a marketing. of we’re feel pulling about We moving that vigilant the into. environment way very continue getting. we on And like have, we’re

Wolfe line Research. Our next the Carcache question comes from Bill of with

see to wanted up to outlook you degree current does on back then modest flatten And time delinquencies the normalization, expecting suggest is some or are goes by higher metrics. Rich, conservatively expect reasonable bit we levels drift to delinquency around beyond you there, get pace from the in to a it that that out, worsening credit mid-XXXX your of DQs DQs of I for your perhaps normalization? frame? follow that prepared At could commentary expect to and pre-pandemic are

we’re to rates just the delinquency earlier. the see flow you happening And where individual the metrics we look at interesting look there talk we month. can of and is even some to where each Bill, headed. delinquencies few said, are there Normalization, calling what I at -- in and it’s mentioned from as curves others and have after But toward keep lots that continues credit segments is flat. a most point. of continue to entries our of But -- I look is -- have delinquency -- delinquency. when of pretty we’re there, themselves at look other -- are to course, of I individual number normalization we one show a number the any when at, strength is we on what point metrics, sort things It’s they would they not one, They well. the Well, about think investors as looking the you the And continue we other. They’re, pretty And top pre-pandemic this the several of by thing month months, back originations. precise on to flat period. moving to is were that pretty And lagged there much think new sort at course, normalization. but be compare of of of the on in also vintage of we that

So, that is a good sign.

to which to look part payment some like at be mix continue that But remains to making be year percent But before. rates payment relative just of more Capital spender levels. portfolio. elevated. customers they’re is within flat We our assumed payment rates, they shift The to elevated Revolve continue of still customers down payment making course, We pre-pandemic of to below way of there’s and we’ve pre-pandemic been towards normalize minimum where rates going were levels. strong. rate last One’s The payments continue percent pre-pandemic. below the roughly the is is to above full

of say positive these want shift with I heavier indicators. all change things again, there’s own mix that portfolio a spenders. a do the So, in some are But to toward our are been also, bit

be pull with consistent to the pre-pandemic. delinquency they if normal nothing of returning indicators -- But metrics get pullbacks a off may this, think back we these So, is extreme many where on were and It behavior. of more pandemic see what certainly of leading would we the coming fully some in we some the of extreme to see is trajectory. up the and surprising. of And are stimulus metrics that consumer I not

topic. I us Thank at thoughts. on wallet different partnerships Can friction recent as helpful, reducing That’s It a may, checkout for some One’s an could helpful if solutions. reports There update Rich. electronic latest digital you been have give share would with Capital strategy be If just your providers. press other regarding follow-up, very wallet you separate you. consumer with

Could noise, a go getting we’re mute? go, you you background of on Bill. Before lot

Yes.

banking both say phrase side. a as the I commercial technology, on of transformation heavily is. that consumer is is used of a banking the and to in the also, the not first it’s it’s spear often tip significant So, payments, much changes reason all, regulated of And and that I’ve the the in as of is space very prone this

of be be You we a a company lot successful things. in the And holding have bank area a those to of don’t very have tech that company. seen by that’s lot actually to doing certainly -- some traction

were news Capital we continue who our to innovations, has about developed One in own. innovations So, develop various technology the to of about a the today, continue potentially and have players new -- coming payment we support There fact, some out in wallet news out.

ahead don’t of of of team that EWS management that. specific to of have X on we’re comments of co-owners X really one are But EWS. get the And We the we thousands banks use EWS. on any one, that

the with question of line And comes Wells next Fandetti our Fargo. Don from

not seeing wondering a I as on and little And travel can then, auto spend, sustain Rich, in talk about a heavy was and if they credit. spend numbers. or bit for follow-up, whether you’re you your thoughts particular, can on card spenders credit what

auto, and In business maybe a Don. little you, a let’s a Thank about the talk Okay. auto card bit comparison bit little business. to of the

Just to raw that the has trends with trends. very been general auto some many the and going business other auto about. of the are recoveries basically Auto the unusually it. for because recoveries. unique in the of charge-offs example. very inventories low The that we’ve Auto material recoveries, to for things are future had past on talk is all consumer same the as are have about the we also low talking -- The same charge-offs It normalization that past years. few

good auto on of loss industry that generally actually robust puts the build. rate recoveries So, in as used inventory our upward car the prices overall has news pressure been

From of the where little at the in but in very very, low we edges a originations. from to bit the rising seen metrics, the and terms competition. credit we have by around our come low through business, biggest continue that in we about issue rates in trimmed interest auto we our degradation basically, feel passed the fully that the pressure mostly margin credit below has own more point But been a of also, we have end. view, So, very have is not play the the auto good

the really not as pullback to so normalization we a the see can continue we a is really the do pullback feel we business. But the is it about opportunity, margin-driven in see So much our auto certainly auto but credit-driven -- pullback. good

story. trends? Are the on credit you moderation? heavy talk then And about spenders spend, same card Okay. you can seeing And

-- you’ll our numbers notice bit quarter. Yes. quite growth own a moderated We spend this

We seeing are but portfolio, moderate the by at heaviest spenders, the per the growth end, continue in it very see get our accounts. the metrics what’s nice We per of happening really across most account to in we spend that driven the growth are moderation. per moderation see you see customer our the lower we but moderating account, least spend

consumers and big seeing that think response spending. that environment. for? well, we a surge rational -- There So then was ask, phenomenon is should by kind be in a to you’re of very the we I a rooting what

other I highest of think it’s moderating marketplace. than very somewhat, the particularly at the places end

consumers of sign a basically it’s being think rational. I So,

Sanjay Sakhrani with KBW.

Maybe can move share Andrew, us guys repurchases. you’ve that we first slowed on but for think building first. I of share down, capital. repurchases Thank just us help could question as help because you just been you the Maybe about you. you them with pace you forward know

Sanjay. Sure,

low that to ago. the couple from point of we XX the we of capital have couple and and years quarters to some a the last we’re economic course of XX.X, a particular, and about thinking respect around and as the down of in But -- uncertainty. there’s moved terms In over forecasted we pretty and with today, factors, in looking earnings conditions, just those sit here growth levels hit the bars economic wide and error actual particularly the growth at

flexibility clearly, so, But on And good at under with risk like management little feel moment our a decisions be have capital capital. in bit SCBs. it’s to we that we the managing time side of the this around conservative that more

Rich, about you to make so know, as And and if I -- any well. wanted repurchases don’t comments

capital. measure of is like just to and just capital And Lately, I unusually this. repurchases a bit that we uncertain a little through -- dividends. think time a continue we’ve -- Yes. of return lot Well, of central back in a as we part we prudence of really our the generate dialed share on an strategy

anyone there’s says had who too capital -- in downturn. much sort never I’ve they a think that of met I

strong return very investors continues to after One And important part here is So in for believe environment, of that time. we’ve the levels economic an moderated of be we capital the strategy but equation same. of Capital buybacks, the of over this

pace as assume or we not should of So, run good quarter a anything? just fourth the rate assume sort

Yes. the based just we Sanjay, manage what and I on going dynamically to factors that it we’re before. marketplace the see described in

we’ve So, But last a of flexibility, have roughly over actions. quarters certainty been we out, point, that’s bit the what play our we to doing again, month. seen at and the as inform coming handful you’ve this a more million $XX months, will of going have how

Citi. of the line Arren from next with question Cyganovich Our comes

a marketing talk growth the just of could for you little bit level year. about Maybe the

a have a up, of essentially a say, slowdown side? and the still there traction there lot continue and a to I’d to had grow of Is kind growth in obviously the are a You but get showing bit bit rates into opportunity of in most the of step ability your of on the card metrics. XXXX

see. continue sort card especially story about our growth where marketing most attractive business and the we opportunities But, of across continue -- the several see of to the really And leaning card and it. are we is of components and One into opportunities and them. is. talking -- to yes, to marketing is the course, marketing we -- real-time Arren, has just of part that is important an response that Yes. the

attractive more customers wider and to less are the bit with credit lean the more attractive get -- channels, granularity. more to actually, that in from corresponded a some more. us that opportunities it’s models it’s granularity access more and and more just of we allows more give separate better our that the we our access a models, deeper it transformation, expansion So just that opportunities points, and The can byproduct and little in tech from

see very marketing, well. is So, part the an the of that the the and is real-time -- of going marketing we important opportunities pursuit

with more is the to focus experiences drive I about traction end with great win of working of continued exceptional when really XX-year and and more able so more driver, more important to second journey The think opportunistic consistent and also spenders. in reward card lifestyle we’re to And about the course, pursuit that back Venture the it to in is launched but And getting out. heavy and upmarket we’ve course, that is experiences -- great digital of our very from be on. do backwards not And more the in the been XXXX. heavy products are but that’s and and heavy one content, years takes this of of is servicing, market the with -- much the we for spenders to then journey high what declaring top it with that an of something investing that. on And

there. -- but have marketing. there not shows that up Most lot in So, a been of investments bunch a it, of of all that of

in a has early also direct these that building, go significant we brand the the through the only stage That marketing of upfront -- early of when the accounts. line spend marketing and component terms bonuses the also but at right not

love we’ve that been growing sustaining and traction the that years. So, getting. over number we’re We that’s last of the something

path quest that are of national acquisition to service through -- kind again, continue continue really we bank just doesn’t have a lean to comment, are a full the -- built. so, is This And bank, And to we into through where We’ve grow. you done for a and to almost a be realistic to do path invested In or our one. banks branch all smaller, mergers in that everything is by digitally. full to customer other able growth capabilities acquisitions, to create digital can of a the organic is words, size an that. national to really be the -- with to even bank pleased do to I then the our that want national is bit national the we only we’ve quite

growth is -- that’s of marketing much we’ve number also years but accounts story our that our national checking build a on well. so as it’s about heavy. physical savings to quest not this is distribution for some just been That very And light is accounts, and And bank. about

to bunch that the now, good create a So have getting. very big but feel marketing we things about levels we of come pretty the kind together of traction that we’re

Richard Our of JP next question line the comes Shane from with Morgan.

comment and increase accounts. seasonality balances the about from Andrew, the made reflecting the the reserve rate the and in card you’ve of spend spend-driven talking portfolio on

QX, with assume a allowance going actually because will mix but shift? portfolio then into that that normal should As we a up move you’re we runoff mix coverage ratio that shift get pick to

play factors, of number will ratio. that a there’s into Rick, Well, coverage

of a lay key But So, I kind get to pull individual lay of allowance. parts assumptions from and I to all important moment. your affect and than balance one rather I them here. And it’s just why of don’t pieces the talk out up of will point just where seasonal about component will think one out since our forecast all goes the coverage in

models the and flow earlier, as of beyond the at the first to further allowance part become was the go using losses. was estimate talking because, of of rates, error the question first the on is the look that is year. period accurate content. significant over next forecast XX we of Rich they loss loss about assumptions, out expected we I referenced bars call, the inventories months we’re of existing more the this around can the the more to So, generally course in incorporate we economic early the driver a delinquency months the content but those answer And that in the widened asked

then a then, second over reversion assume forecasted rate estimates following year for average the to XX loss we one all net for is exit factor the And against The periods. thing those long-term the the allowances, of a third from months. impacting we the start losses recoveries and

of top qualitative we have then assumptions, we where factors put on so, And in outcomes all believe those modeled limitations. of places

all evaluate of end we so, up together to And the allowance. putting pieces those

like of the the loss books The than we’re in a loans, able those for content related card, revolving closed-end the at loans product for card to loss loss we’re content the we go only quarter the the the for reserve to through account. as with opposed reserving the different open-ended to is because But for mechanics estimated account. closed-end that as are content product of projected on end balances credit

content portion quarter, those are than balances specific of when low then, your the down the to is the to in seasonal life the elevated those of balance to given getting the question account. have balances shorter of we therefore, And So very, balances very fourth have expect pay a we loss far likely very life quickly.

factors suggest. And for equal, into may pressure low would current future single the what fourth loss else reversion a in with periods So the period. bit we losses all that there’s allowance downward of But quarter the content increase the carry a projected can also period. replace quarter the where it’s content from has loss where looking ahead, effect. that then those the of as higher that future here in bunch a coverage beyond elevated assumptions In ratio natural from impact of denominator that you goes worth,

growth. forward of we’ve CECL you losses this pulls cost last like have content. offset balances, over adjusted growth to And seasonally As we of coming where third recoveries is a lower Rich with that low factor the we couple loss quarters, out the period significantly have allowance experienced, the before, have of mentioned then forecasted unusually

So, to all put assumptions, we on upward can can have just overall to things to pressure but rates, our of those our loss content. flow revisions allowance delinquency economic also

other pressures direction. there’s And in so, the

and allowance as sizable subsequent all played pandemic to complex the the when I I but appreciate we over virtually for think of of complexity it a quarters. only during the long-winded out, so, answer, out your we the And had make with we release me assumptions play bearing bunch pandemic CECL of pro-cyclicality saw a built a to all

economic cost which difficult real And leading is having ultimately very thing you to so, the of just felt. [ph] are is on Mako Mako assumptions given indicator at is the we and all delinquencies trying it’s predict because that to where as focus a edge of a why play,

great more No, with bear I’m it. X you. transcript in Got read to times. and it glad probably a the it’s I’ll answer, about

next Credit Orenbuch from Moshe of with line Our question the comes Suisse.

you about, And be talk likely primarily bit is number in kind be spend higher marketing But little should you of total not? hoping a you in in to could mention bit marketing. mean, were in that that you did one, ‘XX Rich, primarily see I upscale was just a or and you doing think talk might whether how what the we what customer. given I to about nonprime about little and card

Yes.

I’m boats is segment? -- in the terms higher at marketing to, the a marketing expensive impression want to glad had would then, across in were you also end marketing. the shift marketing that, just franchise. in some is is we’ve so tends of not to certainly net upscale our sense, ago, saying think you asked the the Differentially And our I I the lift be what Moshe, higher the that also to primarily end. because So end question customer relative at The the years

-- a And end all on of in -- mass stimulus business, end now, all card is Moshe. for it we a including We’ve this shoulders, the of lot is market. the at subprime marketing segment information the the of our lower pretty three higher tweak direct higher at time. we of response, much lot decades doing around well, -- edges the This the of market But, market. its end in the the the strategy there changes the do carrying So, the marketing very marketing, approaching based. been it the is here marketing is

has marketing opportunity. the is which built, that here leaning definitely enhanced into technology we’ve been so, machine that by And

lot get on at years market. top want parts good as to the prime the that we certainly going -- the even the a XX more marketplace, say continue and And we of subprime of I to traction marketing to ago, do have relative the in

So, good there’s quite the feel going and bit a we about on, traction there.

to it. just to you follow-up, kind in the for it would in Got -- either of or a market the marketing? for you take what to see, do less Maybe portfolio as

more do see something edges, we expanding macro it we the time macro saying, the so margin micro level technology edges. expanding heard to to segment use would the a many just see so earliest ever granular we of around me happen things, we’re and edges. -- we’re all have doing credit around of net the these tends is -- is Yes. should at the our the heavily one going that phrase real And deviating trajectory in using but diagnosis. before the you’ve this to we’re the trimming invest metrics. And use there to what segment, this looking on this time where is anything the believe or obviously, house diagnosis that The do I things but house, we the more something happens at or linking in response from always years. we the the way at a in can top to an many, less what in that we’re earlier at days from than we we around continued is than there. seeing And at lot, the is around one the that it feel then, for top trimming more The And of edges in it’s about little expect. see of we’re right we’ve

what it that that. be us -- the we course, credit fairly some amount a around what’s a second trim to able understanding sense. what glad see that have to to continue of be is that when the is And there behavior explanation deviation. of be They’re do going we certainly customer the a in and sort -- may diagnosis sort are me, a some to an degrade to that to to -- lot makes total get it them. we’re led fair things, but we overall edges. size small we things trying driving of then, data this And link to has the of from on dynamic root see of to excuse sort is is one seen try And cause, into and then And something thing, of of of we put of energy

you’d of things let’s more less lines see into likely more more -- things more the that pullback. downturn, around how would that credit say, of The we go big So as trimming it the are play see likely reduction that out, edges, out. is kind be given, would it’s and side would therefore, play card a less you a and the on it’s

John ISI. Pancari with Evercore

of macro much you quarter, any of out know credit regarding $X you On the this to the sited credit to the versus growth, the the and cited Is is drivers loan billion terms macro build I reserve build way of the attributable backdrop, cited versus build you help normalization? -- of how reserve there loan growth normalization. parse in

Yes. out John, another. of part in them those one don’t break some to related are components because actually we

For we is about base our instance, how we another. think about factors think tied qualitative forecast and how into one

into a in metrics, that XXXX, heading out to And really you fourth things when third were as the those into break it. quarter lower able content they’re go that with estimates replacing as the at actually the where even another of And normalization, with we the factors that from were to assumptions. fourth so, at those degree ahead of of the of quarter-over-quarter one you that’s a with worsening. referenced end why when unemployment, continued we and just it tied quarter because looking for where saw we one quarter, all like forward we couple consensus component with I XXXX, at shifting not wanted loss of the parts much But are end on to lay quarter ahead some look the out looking

helpful. I one is there you color if kind you’re appreciate the anything get That’s I was that, of than quarter? anything it. or No, more that about necessitated normalization? any the that normalization like ask on I seeing Okay. And about point, expected, there this normalization that build faster But the the thing the could is just The that gave. size change of already

It’s we of and one in reserve think revert period some there. of normalization the I highlight is why we’re his Rich responses, that part but what from model fact to seeing playing out earlier touched expect. though account mechanics only take terms I the wanted as of in these on into the And that XX-month of No. of

for only content at allowing And the -- so, the the end as we’re the quarter outstandings of content well.

So, could whole we like things of even saw out a see build, just depends on we It exactly host this allowance expect, play we factors. if quarter. as just

in that Capital you think One. night. later if a evening. you Have continuing concludes Q&A will I Relations conference good And joining today, Investor on our Thank have be evening team for for further this and here the you for us your the call any questions. thank interest

Thank you.

and you now call. may today’s Thank gentlemen, concludes this Ladies and you conference for disconnect. participating,