Capital One Financial (COF) 27 Apr 232023 Q1 Earnings call transcript

Good day, and thank you for standing by. Welcome to First Quarter 2023 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

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

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

press presentation results. to the release summarizing first addition we've a and In included XXXX our quarter financials,

Fairbank, Richard One's Capital Chairman me Rich this Mr. With Mr. through Capital are Executive Chief Young, and you and Chief One's Officer; presentation. walk evening and Officer. this Andrew Andrew will Financial

To to Quarterly Release. presentation the Capital Earnings please One's access website, Investors copy go on release, click of click and the the on press and

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

Risk accessible cause that SEC. statements. section factors, section reports and filed from differ results Capital actual described in Factors the in Information in on quarterly those Forward-Looking titled with our the and are presentation forward-looking could to the please release One factors And Numerous and information our more the annual for materially these at see website earnings the

I'll call With turn to Andrew. the that, over

good and everyone. afternoon, Jeff, Thanks,

adjustments. Pre-provision of relative and loans and fourth earned held were $XXX investment to X% average flat the In tonight's $X of loans diluted One billion Slide for Period-end quarter to quarter million common Capital on were flat. per start I'll of fourth net X% quarter, presentation. X or declined the up earnings $X.XX share. the first

in The an deposits strong retail X% in commercial quarter, slightly deposits deposit X% Total our was and was basis. decline inflows, grew on by increasing ending a average which increase deposits. on throughout the by driven offset

drove Our at deposits. XX% deposit insured FDIC deposits end growth total strong of retail our up the to X% quarter of percentage

We provided appendix. in deposit the additional trends have details on XX Slide on

decreased lower while Revenue income expense driven decreased linked quarter. marketing from non-interest higher largely primarily in driven decline fourth X%, income, flat. by was net by in quarter in X% interest the seasonally quarter, the the a Non-interest

flat Provision Operating billion allowance offs charge adjusting of up $X.X roughly net X% build an net on by $X.X quarter basis driven were expenses and $X.X the expense a of items. about fourth GAAP and was of billion, billion.

up Slide to in increase prior company balance up will in allowance variables to X, remain our billion XX X.XX%, in to quarter. is total as Turning In for I allowance, brings The assumptions our $X.X now of greater total the quarter. company similar allowance points changes those last detail. ratio the billion from coverage The our March XX. basis allowance cover key economic of $XX.X our

We levels from measures. today's to most continue worsening economic on assume

ratio by points coverage on allowance ratio our to our the by the card the domestic segment $XXX coverage business, increasing basis by and X.XX%. changes increased in X. cover of Slide I'll million, allowance XX drivers In balance

factors. the primarily Our build by driven quarter in three was

we balances factor of the from replaced the first in The which allowance. growth quarter held seasonal is minimal the impact which quarter, fourth underlying for

to begins period of factors. the loss first removing additional of before supportable and qualitative the our our of quarter reasonable is the revert to from impact the XXXX historical higher lower that uses forecasted consideration loss quarter Recall average content content factor loss allowance relatively and XX-month for of it second XXXX. methodology with The with replacing first forecast it a

portfolio build in was third And in the the allowance BJ's our the impact quarter. acquiring finally, factor the of

and Banking Consumer loans. by the at The $XX basis allowance segment, ratio coverage decline points the driven stands increased declined X in balance our mostly In now million, by X.XX%. by

ratio finally, now $XXX points And X.XX%. coverage allowance increased office basis stands XX basis about XX.X%. by our in related coverage the allowance by to portfolio. billion and by increase commercial at $XXX portfolio the and at $X.X points reserve our now Commercial business, increased The The a million. was stands The Banking driven increased build commercial office XXX million on

presentation. additional We portfolio have XX of on details provided Slide on this the

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

ago. the our driven was $XX up in to of by see can during ratio last levels by average XXX% billion liquidity from coverage XXX%, $XXX Total year preliminary quarter the increased quarter cash. You reserves increased first liquidity primarily and a XXX% quarter billion,

billion Our at $XX from in prior $XX driven cash the by quarter strong cash growth earlier. the consumer position increase This position I deposit was up quarter. the primarily referenced billion, our ended

to average term elevated near expect We balances the cash pre-pandemic be in relative to levels.

portfolio securities $XX to billion of quarter. higher addition to the In end value the at grew of market the billion our the $X AFS cash,

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

basis and quarter X.X%, quarter-over-quarter last net than points in was NIM factors. decline was margin ago first by quarter than Our XX higher the basis two XX basis driven points lower points year interest XX quarter. The

of days Outside impact the of pressured basis by I that First, XX higher basis result elevated in a XX funding decline offset mix NIM roughly yields balances, the higher asset of points. of points second, having was two quarter. the fewer approximately costs. described, cash the previously these two And effects,

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

were the risk CECL of and quarter preferred X we a and share and Tier XX.X%, in completed point flat weighted the $XXX the from repurchase Our equity impact at basis assets transition. common to XX quarter Net the million quarter. of phase-in common dividends, ratio ended by prior quarter the in offset the capital lower income the

capital, ended to at the $X.X and CETX our the estimate around AFS At regulatory our quarter were were If our our we unrealized the capital first would portfolio the these continue longer-term losses in is need unrealized have losses impact that we CETX AOCI to quarter, XX.X%, in end investment XX%. of billion. ratio from include of the

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

everyone. good evening, and Thanks, Andrew,

on results begin with Year-over-year to Credit are in loans trends, drove XX and function are results year XX. quarter in purchase Slide Credit and shown card Card Card the volume compared segment revenue growth prior a largely first in of which on business. quarter. an Slide results increase our domestic I'll our

card first the from XXXX. up for year-over-year quarter domestic Ending-loan In the Purchase quarter, $XX every balances margin and XX% volume first And and first continued year-over-year, quarter the billion XX% our in was increased strong XX metric top-line was growth in or revenue the in business. loans. the points by quarter from declined strong basis at up Revenue driven XX.X%. XX% remained growth prior-year year-over-year. purchase about of volume

in margin segments growth first In card two the quarter, Revenue margin to continues by the of that benefit was business. offset benefit factors. high our more from than

interchange growing a increase, is dollars, and purchase second, than and revenue as margin. finance That headwind net revenue. currently at tailwind are rate a we're fee to reversing revenue more charge-offs And volume charge faster loans First, dynamic but a to revenue.

will rate essentially XXX to to on XX-plus to quarter for think year our Both what the levels level. prior and the delinquency rate delinquency back year-over-year rate XXX The delinquencies, basis of X.XX%. card points its hasn't up we X.XX% March domestic quarter-end rate charge-off The normalize. charge-off the middle based around now increased and we was is at rate but XXXX rate see from charge-off to monthly get caught basis the points this continued The the yet, in charge-off year. XXXX at up the

year-over-year first decline the company of partially XX% from quarter $XXX higher in up Non-interest expense the marketing. expense in first quarter. was Total expense, operating driven a by by marketing modest was XXXX, million offset

driver in the choices marketing Our company marketing. total domestic card biggest are of

for marketing from the low and the quarter the year-ago from down quarter seasonal X% typically quarter was fourth XXXX XX% about as domestic card quarter is the down marketing. First of point first about

see in attractive domestic our opportunities We continue to card growth business.

are enhanced drive our opportunities transformation. leaning growth. resilient marketing Our technology into to And we're by

eye always, and risks. actions marketplace on potential As close a keeping competitor we're

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

In first the decline X% declined in linked $X.X XX% our ending-loans billion auto from and business. a the by ending-loans quarter X%. Consumer down originations, or quarter, Driven year-over-year. XX basis, X% first quarter. auto linked-quarter results year-over-year for originations Slide Consumer decreased Banking shows On the Banking were

quarter another posted of We retail strong growth. deposit

direct X% continues up technology X% good First the up X% our and quarter. digital-first from consumer quarter our year-over-year or traction. were to $XX by leading Powered were up compared the and sequential the Average billion national to get strategy sequential up and ending-deposits quarter. modern capabilities, year-over-year banking in deposits XX% digital almost bank

X.X%, The quarter XX points quarter deposit by driven to year-over-year points XX% for Compared was charge-off seasonal auto up down X% the basis XX rate with first basis The Non-interest was revenue rate XX the The XXXX. compared XXX up X.XX%, the quarter, quarter up Banking basis patterns. charge-off delinquency was rate Consumer growth. XX-plus trends expense of linked year-over-year. were the up was was was to down basis delinquency points consistent the points. XX-plus rate and year-over-year. linked expected

as as in X%. tax quarter. first continued usual were of normal were trend made payroll, manage decline for as higher Average well quarter, first less consistent quarter linked with the to in outflows shows seen general Two quarter result customer the cash Compared down downs X% factors And We results X% we've clients loans tighten First selected, The throughout quarters, for down and commercial Banking other balances. from also down quarter attractive year and decline. X%. the we the several declined used their Ending-deposits Slide we balances the business the the credit Commercial as the average to saw deposit were for our to deposits XX disbursements. payments earlier linked ending-loan down pay is business. quarter. choices drove

in quarter XX% linked that from revenue First a the Recall transfer pricing. quarter. quarter prior was funds the was move company revenue up low, unusually neutral driven by internal in

by businesses. income impact, from in Non-interest quarter have commercial and would linked this X% expense was down down driven our quarter. the revenue first prior from a been decline agency Excluding markets capital quarter XX%, non-interest

X.XX%, Commercial in rate to rate estate business. non-performing linked and The rate The real linked X primarily our quarter balances was quarter the Banking from Criticized the points loan was performing from basis basis commercial up annualized the to criticized basis points increased loan points. increased XX criticized charge-off X.XX%. X loan

loans we once and revenue, card again, delivered quarter. closing, in purchase strong growth domestic volume in the first In

and annuities, to uncertainty. marketing. we're domestic see closely And dynamics always, revenue we card to and economic as competitive continue can that monitoring We continue sustained deliver opportunities and growth for assessing lean resilient into the

in modestly loans Banking deposits declined consumer In and business, our Consumer grew the quarter.

to marketing grow to consumer consumer continued national Our traction deposit and grow we're franchise. our into banking digital-first gain strategy and leaning

bank, commercial our were cautious and In deposits linked commercial in compared quarter, marketplace. to our banking reflecting stance down ending loans the

our Our pre-pandemic bank through continues specialization. or across continued the to in commercial were industry normalize winning focus businesses, to trends credit quarter deep approaching and on quarter-end. we reached at levels And

the deposits, additional banking we losses, liquidity. and net quarter, of full In ratio, flat capital through to to strength strength the retail our be modestly credit maintained balance year grew and recent continue as annual demonstrated of expect sheet And sheet increased of turmoil or We efficiency adjustments, allowance XXXX industry. the XXXX. strong increased levels built its will compared operating that in the for down roughly balance we to period first

investing each advantaged accelerating put with One stack a at the and tech to vanguard themselves the And up number bottom are infrastructure is of Capital banking the of its truly up technology in banking an destination. and goes very quarter, way banking, position build from future to Pulling who a players of modern is to passing digital. as win toward the small technology everything of inevitable in leverage transform digital. is

opportunities an generating of across our businesses. are capabilities technology modern Our set expanding

driving improvements as and scale. modeling leverage at underwriting, learning in increasingly are We we marketing, machine

term. banking, creation are customer transforming the efficiency improvement value the over in We enduring long our tech growth, and experience and engine drives

value deliver to to in and to investments possible technology long-term us shareholder resilient Our and range economic put broad a of strong thrive our drive in a compelling position transform scenarios. growth

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

Thank Rich. you,

a and analysts We now investors start wish single question other may plus the session. single will Remember, question, follow-up. to ask to a a a Q&A as limit who yourself please courtesy to

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

please Amy, the Q&A. start

Kevin from Barker And Instructions] question is [Operator our Sandler. first Piper with

is open. line Your

questions. Good and afternoon, my taking thanks for

want to portfolio. the follow-up within reserve the Just on build card

normalization remarks slide said You trends you than said same in of anything credit continue But worsening in your the grow. this prepared more presentation at else time to a is the cards. domestic credit and

the and this likely you. So, as and rapid what charge-offs normalization gives you to in further opposed truly confidence of increase a to Thank deterioration build is signs that's the delinquency fairly occur? that reserve

just at some normalization there. for will Look, -- as question thanks get this. because as Kevin, retire to where your we think back Yes, were pre-pandemic, get I things talk let normal. point, to me need the pretty word that they about things

little and we're just and how bit talk about our we're what's a just seeing outlook. inherent let's So, in what

XX XXXX point, And many have at X.XX%, were is this metrics to levels, -- they're in particularly probably single at is the me. others pre-pandemic excuse which first we delinquencies. So, our not headed look as at yet, have pointed essentially to their metric of levels, quarter have best credit returned the to there. but delinquencies back And

caught global I've crisis we're in in the haven't the charge-offs seen get to XXXX what industry just the in tend our levels probably saw think middle over the directions. we our of delinquencies, seeing in And it they'll the again and based that financial and but We credit we yet, it years again on of the of metrics quarter probably we year, pandemic, our excuse a both two saw or what the here. move, me. around see many ahead up to years, -- Now,

more relative So, that an there think a terms first effect just forecasting forward, is for our about exists of going and One it's all, a Capital losses how our -- everyone. effect we one effect of that's is in to outlook of

rates, I Capital loss more is One related which think to pronounced for to our relative recovery. it's

just explain for me let minute. and pause a So, that one

lived we Past very course, just years and low charge-offs raw of the three are, for of recoveries, material through charge-offs. future

us So, as higher medium than will on tend headwind tend opposed we meaningfully short the we of own a unusually because others, tend to our average, -- work selling have than term. recoveries recovery we them This for our recoveries, most be low is because to the to industry work to them. larger most and rates to our in

come debt the case and once, in not the be as recoveries sale. all So, in would overtime at a

talking is that are work been about of that's that One just Capital a the a effect sort in our So working charge-offs math how we've overtime. for inherent while, of will and and

material labor low the end worsening the rising markets the and we is from economy, X% rate effect are other The assuming of above XXXX. by very to with of levels unemployment today's

extraordinary assuming of earlier sort are further effects pandemic. inflation We also from flip adverse the some the period of and of worsening the the in their consumer profiles during side outperformance from

So we that's about how create just a outlooks. comment

We about good very the feel business. to continue

We growth are leaning our opportunities. into

worsening like We there. are underwrite solid. Our we we And -- scenarios. opportunities originations have in consistently the coming see out for underwritten always we

time. anticipate quite of quarter, continuing Every long on as as have which So, just the sort -- for effect might economy little credit a little continued we're very are be the expected also a or We're bit into some customers we see been the we that the more we resilient for where normalizes, opportunities we of are around trim edges path struck of right leaning performance where an those. where we've by time, vulnerable. on and expansion period we a bit

things really with -- and and the is we in feel rates losses continue what built anticipate loss we and this that consistent we're doing to about expected So, have higher business opportunities. is volatility to we good

that? your of are then, -- traction the Do marketing in from you as on lot that flow seeing near continue new relatively the the in you the to did newer first business. spend, the past still your I And a term, then you also comments guess type quarter in Okay. in the see you And rates made normal of growth XXXX?

Yes.

just your are. let a our about me I about they bunch the and little flow -- on question rates, where just just So, don't metrics credit moment talk and why seize bit a of

talked about We've about talked we've So, delinquencies. losses.

individual the rates were at basically entry delinquency just early than couple And look flow things higher cases, Our if back have and normalized. in way of back. a buckets, rates levels, some but tick they a XXXX very are in we at flow they're

just extraordinary are thing, rates the data, you increase, they the if the manifestation paying striking that Capital -- spenders. were performance And have because toward electrifying of shift also the -- -- of was really payment flow levels. the is industry's traction a high pretty driven effect market or the a they mix heavy position, flip top look electrifying the increased card Our were the the we of good of dramatically, payment two the side the striking were it such trust a saw just things. at One's rates off consumer in continuing a manifestation just rates the of credit getting One you whole the at And most. in increased was different by the where and

because payment So, we close but back not sort segment not declined if separate where levels. two very they even were segment, to were high we declining every pre-pandemic. from where by that of have to out look see these originally. in rates But the yet of They're effects, segment, rates payment they and are them

to that's there. an eye So on something keep

last effect think, pre-pandemic a Our below levels. I there. is and year transacting flat again, revolve roughly But rate balances remains growth there's to in

So, to adjust we'll have of for sort that.

new a is then, And one originations. very important

talk that. Let's about

are the performance some most have delinquencies months our one newest be expectations. segment of on course time consistent as versus few But where that at with years delinquencies monthly earliest ago. So, a start early our vintages we that would week originations because earliest or current at The our can several months ago, we to them. compare originations on so origination of we with pre-pandemic very delinquencies consistent look early see on the have carefully is they a -- vintages recent we reading

risk for month-over-month vintages, vintage-over-vintage, then, recent And seeing pretty stable we're levels.

good edges the active feel around several about bit trim over have little continued ago -- that also fact So, One some performing of top on years I've a where thing commented to, the market sort that. we originations they is changes, of on result anticipatory our we our very is the were that in anticipation so management. time of that of are

underlying probably offsets worsening in the some it so that's And marketplace. happened

to we continue are set making. we pull metrics, choices feel up of if So, we're we the about on very -- good that

this position to us marketing. I As continue puts into our underwriting in before, lean worsening originations, anticipate to in matter -- just a is of anyway. the We, said a as

And here leaning edges a into so, bit we we're even the trim or continue little marketing as there. the around to

And this feel now. some for has few very quite how the just really message here our so, quarters ways, very, a of in is with similar been

Next question, please.

please. moment, One

comes question Graseck Next Betsy Morgan with from Stanley.

Your open. line is

Good Hi. evening.

Hey, Betsy.

Hey, Betsy.

I go just lot we've the you I know that than in that that you the say on sure want about book got right make it current Is macro off. rolling worse quality that's sure the spoke on So, to I quarter the no. to it, rolling situation should the ratio, the just fair every stays is reserve want fair? that's assume to ratio just or up already reserve where Is so understand make now, book understand, a because yes I

on months. the losses answer is books that mechanics will I don't of the the the quarter the for will assumed based you that the your or to allowance experience the losses no, ago. myself a what reserved But for we limit answer the are the a given I next that on provided short framing no. I we Betsy, The of spare at were want quarter, end question. And the tutorial current really XX over to we balances yes from assume have or

so, a have you're your for replacing nature with I'm -- you build, similar correctly. if the loan if characteristics, question getting I'm And just interpreting loan wouldn't otherwise if of

you to you're on that slightly topic, efficiency just follow-up be fee year-on-year sounds with to just then, you it square wondering the this card marketing see which I basis. what has different a question do a leaning of down mentioned the you And a operating into side mentioned where on Okay. in on know you flat year planning how marketing the opportunities that are looking is I'm the side. lot with expense like to on ratio. and for

square to wanted just two So, those up. things

and clarify guidance efficiency our is to turn over operating Betsy, efficiency relates point. Rich. When Well, it not it then let a me I'll just for expenses, total to

marketing exclude I'll from to And so, But it turn that respond to the it whatever would choices broader make in calculation. question. to Rich we

going to I say same Well, thing. the was

efficiency down The energy modestly the to is our put to we also specific That's of a of be of to part to operating our talked guidance about. marketing ratio side flat efficiency business, relative guidance. of that ratio course. So, lot respect XXXX. with into And as to we've continue not includes the total

really that for And Our you Betsy, see And on marketing One have the when we very them. opportunity see. choices call dependent people are opportunities, known on Capital we the in most this a on long of and lean we time.

marketing And about but on there. can point question, talk that's another so, we efficiency maybe

Next please. question,

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

Your line is open.

had card middle XXXX Good of reach year. the the mentioned you Thanks. evening. Great. kind that levels charge-offs to you by expected Rich, the of

bit would little are guess, other expect a as go the time. is unemployment Or what assuming in a guess higher I then over trajectory? -- XXXX to your we about reached, talked if also we even words, losses is You stopping higher? point? unemployment about see think I those levels up should expected

just up because camel, with have Capital metrics I a history want gone various companies, of gone card that try make One, often and in historical business only look the a comment the the thing of limited humps been a of two number as into that. to times I data Moshe, it's So, All rate, and on unemployment including small call down. respect to on model to trying economic to

the the at all losses. striking -- We along losses. to and credit our has in thing point. been rates the with the and to try drivers to credit do correlations our limited to A parallel hump look journey all camel sort respect So, of of movement unemployment of best

often out as many turns we of matters of either our rate of level in like monthly most, it or unemployment talk focus on to view, actually, the is standard measure the people while change job models the way to So, from unemployment, -- about in rate. a things creation what of point is change modeling the the

So, the loss, unemployment an to from of pretty to pretty But though X%-s that's of the -- card lean increase number into material industry we to a would a the losses little that close the in unemployment X%-s I bigger card the two well, in window into in that our therefore, happens historically strikingly that rate of -- more the camel be is rate models. worsening. But we those and humps changes, the own average be when they've past. cautious effect harder element about I even been rate happened over just think unemployment think a to a almost

just the make other couple to of intuitive want about do just I economy. points a points,

start comment fact, be. the credit know affect well because of average can margin those outlook about a want that's a We course out play talk on down, consumer And that. but know, just course there. consumer none couple where of of of savings after on But we sort losses at still to know two to So, with of I'm effects just place. winding those, will just credit till of going losses not very the strong But on one is it's we'll of the the average. but excess us our that never in a

historical account or the and of but of And and consumer course, of sort is we we credit XX increases to effect separate from impact real this the expecting of inflation, to can't are outlook really our in since in really card of none -- but One, we sustained we compressing understand effect effects model assumptions this as significant unemployment years, to seen -- inflation. for for more directly, we predict kind effect. make data inflation haven't levels have an business informed us of we inflation And effect. incomes, by a than

levels if happens effect as decline sectional of for can about evaluation that from with there. to different this, is a function extrapolate we think can a sort how an So, and like example, inflation there people we history how and real those cross and this a credit income way look of our something incomes of then at is do proxy our have effects in can

So, it's an it that of of levels using sort going proxies, intuitive for but are to matches challenging inflation high be off to people. assumption

years versa. And finally, periods about, of years my worse vice we've performance other the is, Over credit good intuitively was three credit in of marketplace. as all the to are I of periods journey think the abnormally that past effect this, by unprecedented. saw and the sort tended And see of credit followed we over the

up effect three consumers side have other what might a that charged over off of the that could So, for happens years. call on who catching we maybe past otherwise there's the

credit. and of a where financial then of And the of reverse crisis this was sort happened kind followed benign by strikingly in charge-offs global accelerated the effect period of were it

in think just We to I that it's even able be of won't believe. but we bring part measure I can't hindsight it. in it, effect is We into the This intuition the intuitively business. measure

pull up pretty metrics we and we on you when you what we see. that all share credit see is kind that So, much things, of the with we way see

views opportunity would with business also shared can this card, intuitive levels time. to believe be. we you and from we So charge-off will now effects over both in we're all like those, when how we some we over where that I happen how does to time lead are look underwrite look And go when this continues card higher our saying, of here? the in at in card, strong -- the at

into we of the sort that's me those of credit the But window just over course that and about factors of the build. thoughts but head some talking, that's of think how out about relative -- the kind are allowance then to then whole and process and relative our a anyway, leads time. So little process play to that -- Andrew credit, may how whole

Maybe just Thanks, Rich. bit. Great. switching a little gears

or and the you which ratio were mentioned excluded next the AOCI base? capital You are if as When you return the one included. those capital capital year, of then using your over ratio think the about

We our at Mosha. considering capital It's number Andrew. of look actions. we're a as things Yes,

couple and increased over half opportunities, a ranges And so, environment, growth now, uncertainty of level I've everything been last the of happened saying uncertainty. that an economic increased we've a that's seen wide for and has level quarters in of month around the

so, have to coming operate the that But target, include on may be changes -- believe that down very to both the that of could our of more course, we capital. only not continue yet. XX% know regulatory pike, in long-term treatment but AOCI the we which prudent front, to And clarity it's we well until economic potential don't both above

so, do of the to in now, our right. substantial we're to deployment capacity in the of in we it changes, ability for say, changes, above plans we when have evaluate time capital to is economic regulatory regularly our so light continuing like the suffice And long-term quickly we we'll and and feel But certainly that light target. operate we have generation pivot

please. question, Next

Our Richard J.P. Morgan. Shane question comes next from with

Your open. line is

I'd impact and other impact, it's the the the we we appears forward, pricing is. through impact be Thanks like that think for is it When that drag it a NIM see in deposits little going is we that look continued a lower of the on little that my elevated going the down corporate the the line assume change Hey, -- But well? we primarily Andrew, the the there's is in because deposits. question. line modestly. it at lower to about at corporate the a reinvestment bit think from went looks like should terms rate other talk deposits that the taking to runs where I When surge bit pricing things transfer and transfer as about that a of

or you to But first. the tenants other, clarify more to happy at of corporate/other in trends deposits. I'm between there's just me FTP in assuming for clearinghouse let arm's this, but Rick, a just offline net does looking the process And length income about which an FTPs. and detail basic the transaction Well, -- serve talk as I'm interest you're

they're so, or Commercial in Banking of revenue Consumer either segment prevailing shows rate, up segment. getting which a the the Banking And the

or so, that isn't just there of a other. other factors number subsidy drag on There's clearing a there. going And in happen

the actually, and NII accurate transfer on But a the the It And very Understood. about way were basis like deposit we've they it out calculate figured rate through over looks transferred consumer was years points. over bank. the the it's down, deposits to X down like long time. looks been a

bank. -- So consumer at the

curious there bank it well. as I'm other terms the and a looks drag So, less was like little the perspective NII benefit at was corporate an bit a and actually attractive in of from

think a don't I doing take Jeff. comment and offline? calculation we fully It's I Rick. Hey, on don't don't that you can that we understand. that you're Why

terrific. Okay, Thank guys. you,

Next question, please.

Our next Citi. question Cyganovich with comes Arren from

Your open. line is

into Looks little volumes? purchase bit about April. portfolio? little the a differences seeing customers? are bit demographics you're card during your a your seeing others within they're quarter. Will Thanks. within kind in seeing What between that any credit March inched a and heard purchase of talk you up And that like are income different that from in volume there slowdown We've they you

thank So, you. Arren, yes,

Let's just volume. purchase about talk

XX% this it's very XXXX. the growth benefits then striking solid, out of volume some So, in from in year-over-year. And origination the growth, I our separate think like But of and per efforts. spend has QX, was while decreased part of it's account to first recent and of accounts our up the card active -- purchase

year spend ago remember I on declining surged at. coming that a of little levels the that months, and of see pandemic, the ago, is if last really ago. down over I So, really the it account a And surged maybe I was just looking then has it a pre -- sort in the was of think from on where year of couple ago. a mean, a actually or few basically if year it at net into a bit the to was was per last We -- a sort doldrums typically it the it it look -- result flat account, it's of year being now active it sort graph spend active is -- I flat months can under per for of to been watch we it pretty we

pandemic start it's on way now effects on the we much played -- in But their up. more so lower broad that pretty down income bands this then segments often initially segments first, mean, is how and based way our Now slowing improving income see happened credit card out both then a normalizing lower that's credit the in side the I funny it's score thing of on lower really side and across spend, the happened. income, on business. but the side, whole make and

So, of are even continuing and having we levels very power growth out. nice to as spend purchase of that's sort in course volume accounts the

the spent me level have it they strong spend seems consumers to of off for a are that had. to Now pretty we -- for, pretty spirit this in for what be to rational of rooting thing sort

what of think But I across spend, the And well no, year basically spending, all category have things the more things see change, at rates discretionary last pretty slowed returned level. categories, So, because more the pre-pandemic same significantly. the slowed much the like the we have stay mix to growth then, non-discretionary of -- the them pretty they things and over with. significantly look -- that we the pleased both we're have

deck. disclosures little several you kind business larger Maybe Hibernia talk relatively And Chevy deals portfolio a real that North slide could business. just you Thanks. lending appreciate mix these regions? acquired loan from looks and you in Is portfolios total -- Are It those commercial small, bit as of up, around Fork overall have commercial well? smaller real estate overall Chase. this and the predominantly following banks, know also and comparative I Or do national commercial commercial put to together. I estate a about in office you your the your just

talking Yes, by about isn't me various because provided, know start organizations. that let we -- differences in kind disclosure of I across what the in there's is

As is excluding footnote, our this you REIT just and you has total your less But as space, a different and the our office little of saw and and than billion is Medical office Arren, in so know, and characteristics it too REIF. medical probably about it's X% office loans. that very represents REIF. commercial $X does REIT

commercial terms XX% it's BC concentrated DC our Class in It in and Francisco. portfolio San is A. and two-thirds obviously XX% office roughly the on of New So, roughly York, books,

was I exposure year time, has few up until it's we but any in, quarters, little a but And segment by this new the reduced north over our had to also ago, over that of been so, business past haven't a originations it it accumulated active the XX%. were years few a we past think for

now But uncertainty that and in increase that's the a see light decided coverage the of see terms rates elevated and the in interest that described office quarter on back. the in other in being are just and debt quite we of what to continued despite that I significantly we bit utilization given ratio and uncertainty fact factors, burdens the just you the disclosure utilization payment this right service increasing below pre-pandemic XXX% we with just vacancies getting principal levels and

Next question, please.

Ryan next comes Sachs. Our from with Goldman question Nash

open. is line Your

everyone. evening, good Hey,

Hey, Ryan.

Ryan. Hey,

Maybe another credit, maybe has just but on one, follow-up on to I there Rich. questions lot know been a of

the it lower I'm normal maybe So, elevated that levels surprised and worse continued about revolve payment comment rates where rates. talk was deteriorated? And just also, where or the you're despite by reaching credit performance

think you credit from worse? to do not versus how the risk here growth get continuing about only balancing of normalize So, but

to emphasis the gut half think back. My of we all And spending fact them into is think yes, just pre-pandemic think the side. impression put it's to are. on net been at at them just I the and of sort marketing, to spenders we we our the just metrics, our I look them So, segments, the shift very aren't levels to spend of a them of only effects feel not half lean underlying more the a there's the of but better manage the view kind raise credit the net subtle some products, market, Ryan, I the within the when impression way cetera. of that and lines towards the best a despite of in little like of we et continuing accounts, some top that as back people

years -- the are the at pretty much -- these a around of walk of with I that of but behind I that ago. might behind, So explain think things are in why they metrics terms think where few a I perception the few levels were but

choices comfortable said, is. already that we're we to the now with why talk worsening. let's feel that and assumed just underwrite So, to respect I've making very about we

of just was in back back go company, history of never that let's of consumer underwrote assumed whole was So, to the when losses. the performance at We seen levels we We higher the behavior the to much unsustainable. so levels good. credit was

that's not at Capital of sort really So things One. anything changing as normalize,

on but the the horizon. the noise -- we place time, So, you over all at the see same

So, performance like that machine from monitoring identify we tools back. might prior and have And be performance that seen obsessively we pockets look gapping modern learning some pockets the expected of dialed that. little only way, for our we or by in based then -- not that anything out to use all we and or

to We about back economy around even edges and and anticipatorily most would also dial think hunt the be intuitively of there. going, where we the around where is the vulnerabilities kind

to that's of We've earlier, -- the that ways customers company, transformation said of I of struck succeed new kind in seemed happened. open up. have for as But opportunities I'm are that dial the of new by with of number driven tech opportunities channels, to originating every the terms kind had back new by

are impression, the really the and value to our into And away -- -- so walk those feel part the and that we it marketing same in business, sitting create be you and same card very cycle here to so my net with we card level opportunities of in and saying to the want -- to of optimism where strong. respect opportunity in growth to the with about leads with we and I our leaned this

a auto say to to partly I striking been there. the just business, very light very it's part pullback say a of the the period -- striking leaning been just of a -- there's as the area. at business, that one one is time, to always is we've fact card has pullback been the minority the about the that has business of just one top talk our But all same the pullback. house a in much This green even business sibling that out that here. point out auto that we don't happens, over that mode And Now, in in segment, of which at

credit But from point majority not the with related the trying of effects about of But still been credit the higher of been of view. of at card pullback and in any the get part interest happen the as has things pricing, talked the some rates. to marketplace looking the effect at business into looking have we of in driven, an sense that think might important ahead we've a their -- passing margin through

related in quite and of more majority to related. much is dialed more not auto. really it opportunity so normalize the credit bit And things in or of have that certainly open pricing given more If and on we so little side, we the a a But bit be back that might up most back change dial auto. margin able

the about what combination I as model the around of in the and I'm thinking do is customers ways how can customers works. earlier But about it might credit appear. can as shared the not about answer, And with intuitive walking the pleased -- as worsen well perform marketplace

taking on, that's transformation. cycle then then going the that by before for way the what's move our action, and faster respect look effects. technology used a tech to to is diagnosis to it of identification, the having As root we at then, the granularly so with of and obsess and it informs to about our quickly than the which margin the choices And causes be incredibly that, monitoring

the we're to despite opportunity a environment. we why window feel contribute those go of keep opportunities all our growth, a after each them. changing of on other coming see has curves lean sort be about to able All And contributed confident -- company to of to vintage confidence back coming a that in probably environment because leads move opportunities, and in with changing every the the these we has we ability of limited when to that why to finally and top into

Got it. queue. the the from back step I'll color. Appreciate

Thanks, Ryan.

Next question, please.

Our next comes from question Carcache Bill Research. with Wolfe

is open. line Your

Andrew. evening, Thank you. Rich Good and

your as for do follow-up you you indeed just a macro right. to have Andrew As that quarters comes it reflects to reasonable here commentary, given future quarter would outlook higher that conditions that off. allowance on worsen quarter, I and make from old If expect than on a the in Is rolls each mechanics rate each sure that expect new drift worse your dynamic? reserve

updating rate, being would, if and estimation quarter just individual It from have That now Betsy's itself, lost our of what of change if Bill. view the I add same, be the consistent that portfolio what our question to responding time. Rich in to of similar at likely assumptions to a economic to and content our that will the we're growth allowance. changes, wouldn't But of you interpreted described. just vintages I a was

partners may extent we business. which is Thank reduction the back to you deeply come expect under in it who then, pressure? ask But can where involved against less partnership this in about wanted We you following renegotiate play CFPB you'd in to their through than separately, economic Understood. proposed That's the give And Rich, cases you. late particularly super helpful. for efforts issuing it's to perspective merchants others to out terms industry, more try significant know the proposal. for to any some fees, across their expect the on possibly by merchants to you sales push think how I fee the late as are

fees -- significant just the in as have and Bill, effect, I don't as impact I people your much late therefore have go Because to really that. merchant comment than partnership a opening comes I a partnership So, changes what what the merchant come and something has I a of let -- then don't about legislation it's to probably the happens this prediction it do -- about you were collective wouldn't relative do -- agreements significant for and well Capital exactly I one. to in just with into business really prediction the the have issuer a -- on others. partnerships say, when don't One. obviously that more on want this sort

out, second. miles everything on works to go but So, lot for to of maybe just this a now, a there's comment before

lots to running into role and they process fees -- this and direct credit that all, it's how and to see very can of And to with out. cost not delinquency. of the and of all the have for final a sort we a respect lower to average. provide plays rulemaking time comments. proposal, the pay And clear system, play because important will way get Late leads also for we'll price of incentive in the customers avoid to greater CFPBs and on in issuers public risk on it's access credit First

So, a have of point one. view we certainly on this

change the A to affect consumer the in it certain and late affect access change could delinquencies, population. parts a behavior significant fees of in -- payment could

be Capital wanted source One obviously are might of So measures. But on is say working what One, there's this Capital lot about to and thinking an I what stake. it's kind - for at impacts, mitigating revenue -- a we for those important

One about maybe have all take to an other thinking for development think I players This we're but to is going very companies, and And not well. so, important based but some for our early we're that into it, seriously. as only Capital partnership

please. question, Next

Our next from John Jefferies. with Hecht comes question

is line open. Your

guys. good Rich, if I the have to the afternoon, some but answered, environment. apologize up you've metaphors came and Good and asked given me, questions past, us about been nebulous. somewhat think Actually, all But in to my it's something

context period I analyze a then like in this content. or really a pandemic avoid which in And inflation. whether can in You're bad. you going previous boring think categories, we've think both or advancing wondering good not, as in talked a pulling back level it some us stimulus unique you this. previous you markets well, Is and of mountain a comparison of on of how the lived you're or equity stimulus, a have to or factors during comparison I'm back, because time stepping environment? others. some we about lot there We're time? and us where overall you to give helped got how Many metaphor the the certain to other zone, leased loss through of in it's do describe haven't world about

love stimulus me things complex each boring with John. and you, all to the through the are well, going thank while. I forgotten about better were think government than in had and been way ways Well, that we we was striking we the kind can otherwise about. metaphors credit come quarter to all to think can quarter, back, be mountain pretty the metaphors, of to tremendous about. remember very the pandemic. know through a then it talk other got I the we're be view say, the so of could on. the for side, a Every I and that of the are I you've quite sometimes we'd talking whopping losses from through mountain, what we mountain point imagine. anything we upheaval that from back and think boring If But back around

usually That uncertain indications how strikingly labor of accumulated strong, savings many and U.S. over an most the performance, I The although if the have about we consumers. consumer for relative up think credit seen health I I say, am remain consumer, remains the feel So, The of standards. historical which pandemic by are? just do When servicing remain I where of burdens a we some a economic important where in the source driver just some of about pull is market, positive consumer low economy. -- strength remains the softening.

Now, know really on none I have a really effects us home falling been hand, the the believe Inflation, other of little inflation. of prices bit.

out manage figure to out. can't one pull intuitively PhDs this to to So, be here. needing We we're going

assume people Inflation versus to on -- here's interesting the a terribly. us going inflation we affects Unemployment number affects an is inflation all So, small somewhat. of unemployment, John. thought of

when tail biggest And view, believe has unemployment the of the so, from happen the because the a I charge-offs driver reason at is moves. that moves the distribution been the tail credit economy point of and

I purchasing is is effect, something the power, little us of cumulative, all in effect another will doesn't of a what slow metaphor effects is feet, its bit little the unemployment it you, believe of play I cat it losing the But So, gut sort my for that our that there's still of out. feel just have does. it's on think John, it's precipitous

time life. here. other credit The back to believe almost in markets I of know enough don't I competition, to this to the I opposite and want kind and with business talking about respect It effects with not to but of say -- for I I do around been other one a and but it's what effect want long the for I'm side. that's does extreme metaphor have perfect it, that period on a again, go respect just to create I've even

of edge, on that to they always Let's a just and vulnerable shock. are living the have of they're absorb say much certain percentage don't consumers there's a buffer

trouble somewhat that it along, washed over then, was got we a is feel in like when that who with of came said was just our people effect. from we own way, coming keeping that, financial the the losses. forecasts followed in tsunami this the a by In had vulnerable everyone -- this situation a I that crisis of global in survivorship sort so many it finally where up period So good sense and the wave was were

I going many effect on The the the doesn't some sort anytime all about you of probably it, pandemic, had there we'll people necessarily That that why have quantify -- them their lifelines that so had going charging lives of vulnerable and I prove of many intuitively -- when changed can mean it during so that's got were survivorship accelerated from think the to still statistically you period low is or think a point, And I that of never is reverse not able and I that you effect. just this sort catching real but the of the the no believe very, have losses. off that way that, up And survivorship survive sort I effect very maybe and believe something reverse recession great at anybody to happen. we to thinking it, could soon probably a effect charge-offs were be therefore of intuitively, it effect.

And a is so consumer if shape. I I pull up, the think great in

economy You're wild going quite to have and uncertain then go. sort terms catching effect. the of the a in on inflation than you greater of that effect usual card things where creates cat a And feet might up little of volatility have

was continues answer And of consequences that you the one we opportunities we it for couple inflow that saying the be But this remember tremendous credit sorry, all just question. extraordinary the there But happen a credit. -- abnormal already of other and of that saw thing, if fintechs. one to your marketplace unsustainably period real of environment other saying of context long see you it's What good in a in my a thing remember when long. may back the I too competitive saw ago, will years really in is the

You be subprime were -- rear-view saw we that of would definitely doing data, primarily it where on that of that a in would a the in rear-view is extremely and mirror below would huge We expansion play it's this have unreliable. not that credit, them have worried of underwriting based any even -- if space. sort were

is this marketplace to terms play and I of even over effects in with probably to happening feet are cat time. So, a healthy credit thing of the out environments that going normalization still happen I very great that's some competitive environments, think pull sort back, will

all, read really are. So, right getting the feel there. all my if detect about you're good in And I where we in optimism voice, you

helpful. Very

Next question, please.

One moment please.

with Our next Dominick Oppenheimer. Gabriele from question comes

line is Your open.

thanks American cards of have my is payment rewards, and out. question last types Almost little Hey, card talk on much new FedNow about so there you for a Could how as debit say, space? been discover credit the of questions. Synchrony and like that competition types change bit, PXP, just One you Express, preferences and types? versus, or both not might debit among issuers coming piggyback card payment taking and a consumers over lot the but time, how expect Thanks. let's And of evolving to could positioned offerings Capital And other is change? payment

lot really a list, that Now innovation marketplace. add Yes. last Buy Well, quite to quite we've that -- made of I'd seen over one years. is which your Later number one came of the Pay into splash, a the was

came remember I out, of with Later Now this the and Let Buy me Buy sort product Pay one. credit really called Later extraordinary Pay saying of ironic, of is sort the card. having that because start still Now is original kind

good is says, now buy an there. what on one stacks can really of was impact the quite and that tech new made modern clever later. relationships you some merchant that So, of on back But anyway, pay and this riding very it sort technology

it's customers, was think a And credit bank into be way play isn't hailed saying more revolution by access certainly with Well, we when innovation, revolution. it a flock to quite from I payments. payment at some there, And a I'm a think credit challenges everything but I'm it was some on, was early than -- clever else, and play. to it that customers our clever not it Now a and very turned we -- things. necessarily. out that it a running challenges respect the look looking and in credit a but it of merchant was From access it credit who as other rates at saying everything very card I was saw discount innovation.

of fortune the different bigger in at that that, anyone and has well, that card, sized promising than has Anyone to networks opportunity debit came for space versus interchange networks and a smaller think -- different the players the differential who tried other that's you players. on innovating ride for card them. the look different access back choices law a debit If I the to from to that created advantage

-- payments space payment And to continue evolve. will so, the

that when payments it's point you customer it, and the a and that what had all One area is banking. think regulated. about -- it's up on pull of not a money I holy heavily the banking affected. get major has areas have itself, companies grail think that way The it's look the biggest of really which because experience single and in aspects fintechs it's importantly of tech tech been was kind -- we when course kind other that of where from thing payments biggest company's the would you say of or biggest is worried real It time activity, about impacted impact view

worth, For kind other other space, enduringly stacks. what the that had of either on tech I the payments building platforms greatest it's have -- impact modern tech the platforms play companies or is in the think platforms

thoughts news. marketplace. can be yesterday's forefront some are innovation on stay just in the those got So, reminder, we the Capital But a of One or has

Next question, please.

comes question with Sanjay KBW. from next Our Sakhrani

Your line is open.

Maybe the just from questions excess follow-up basis at some away I've you. the does first, some on for Andrew got points drag does point? year, course go that the cash, of Thank the comments. of on or some persist the XX over that

talking compared we my levels. points, to elevated I something remain I Well, expect said at do is pre-pandemic Sanjay, in that think to as least that

So probably that. -- would yes, I I leave where would that's

just Thanks. the you accrete and just comments secondly, that. help capital to think get color to capital on then CETX return? like then, of assume work capital maybe what with level AOCI of consider inclusive you're of And to there? course And Okay. sort at the the could rate into on then year? would should how over or going love some return, of we up us read moves levels comments your through and Just your some any maintain does that we should AOCI Or way

now that to 'XX. will of don't first, end look second which AOCI, the start AFS XX% pull between at the I of and about -- is Why our one with you Yes. if par

AOCI. terms targets factors this targets, growth regulatory we referenced absolutely a lot about is In of mechanical we There's are linkage uncertainty capital it's addition of point. not treatment. of just of It included would regulatory just one that, economic capital our of a and that that not thinking is inclusive of at a uncertainty I number say at look our I thing ratios in to other that inclusive in opportunities. our

above so that's we how flexibility with those if we a shareholders, target. And now, keep been lot return have of we've to for on going as things. appropriate. certainty future, eye an we of operating to We're capital have our more And the

question, please. Next

John Our from question final with comes Pancari Evercore ISI.

is open. line Your

evening. Good

on how net On from give from just some level, margin front, X.XX% the wanted you to color you possibly see trajectory the interest us margin the could here if I see cash then said what this that maybe deposit about you're you And Thanks. thinking beta given at how to cycle balances about pricing plays elevated? how into and the point? likely deposit remain through

cumulative ago, reverse from the about will quarter higher order I which too, you response rate comments talked remind beta my I'll be could company beta feed a for the that the cycle, where on Well, in overall NIM somewhat I'll last deposit there. one, XX%. into go because of was the than

much will a today, XX%. here. sit it's to we It further quarter hard how cumulative was ago, beta from mid-XX%-s. predict I is deposit the in increase our Where betas think

Fed unprecedented market of sheer if month betas lowering the the in competition when on unique of and predicting pricing, the Fed that's other is especially fund a deposits Fed of side to insured the just that events makes starts Everything and following pace number the a what factors, the to rates, context of happening really there's from last intense executing of is There's this and hikes happens product mix in for challenge. magnitude more the duty. eventually all a competitive and

yield if wouldn't given pressure upward from competition, resets, be say, surprised where first products, deposit we to customers' I from is at least relationships, for of I appetite our number here deposit needs. by where asset were a on going beta be tends will funding some lag in factors, the quarter. to focus pricing there's impacted So we But on go different industry customer

given I thinking headwind potential we the over be could lag a also likely suppression. in then us, as deposit see particularly of pull continues go continue a And to headwind. pricing. the as could wholesale is normalize, about for So, costs that credit to Where NIM term, near into that time, funding revenue

from will few sit back for tailwinds almost to a elevated hand, But position to our term, headwind assuredly are over relative a though to think in levels, first that tailwind response potentially be that average today. provide where question period will we pre-pandemic cash NIM. necessarily what in the and the Sanjay's on time, we would longer definitely not those come near things to stay quarter. saw other of my real some So NIM will a there's the a even But down relative I eventually

in we'll more see percentage could second card of term, the balances growing also revolving keep mind, the in and day a We immediate in have one quarter.

forces So, wanted but I a of a and at know of of play that headwinds you just all there. the give tailwinds, that's sense to lot

types of that update any partnerships you could confirm negotiations front? lastly, timing discussions, seen provide stands. Thanks. you change then And Walmart I if regarding bit know where the just Thank that very any headlines there And us upcoming on when of Maybe maturities and a secondly, if helpful. you. the then, partnership. color That's on you we've don't can of can be? or other can of little And some other the

Thank you, John. Okay.

the in course, middle of of are, we litigation. So,

so by much to So on there's an which right in call only arguments a share to the But terminate and contractual has the deny we an the points of we cured that various trying side. legal a have failures early they each portfolio. I'm deal no in that at And about high value to going XXXX Walmart made Walmart us earnings being sued the some had early. to service impact level, termination.

SEC committed periodic while will in our filings. to in litigation Now keep contractual in are meantime, we updated ourselves court. on meeting And defend we the the commitments we you our

right Then to will will early. how termination terminate And long occur. a to of there's a question they We early question their timing have it impacts, to unknowns. so, potential if course of to for whether Walmart win Walmart deny issuer. respect There's of take any of a the a lot course, of seeking that new when litigation that there will are transfer the With of the, portfolio

than they January portfolio transfer issuer litigation. to earlier currently Walmart no that the the even XXXX, of a win if occur We expect would their new

So, if our changes. we updated timing you expectation will keep

Well, thank answer that One. The and earnings you night, here for that to concludes for us this call Capital on a in joining call, conference evening. any later team evening questions your may IR Have the for this will you be this good interest remain. everybody. Thank

call. you conference Thank today's concludes This participating. for

You may now disconnect.