Capital One Financial (COF) 26 Oct 232023 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to Capital One Q3, 2023 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jeff Norris, Senior Vice President of Finance.

Please go ahead.

and XXXX to ] Amy, Quarter One's much, [ (sic) Earnings very welcome, Capital everyone, Third Thanks Conference Call.

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

One's press Executive and are financials, third With through and this evening we XXXX addition Young, Chief quarter included a In Capital results. Chief release presentation. this and Financial to have Richard Chairman Fairbank, Mr. Andrew Officer. Capital Mr. the you Officer; Andrew our the and presentation summarizing One's walk will me Rich

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to the turn Now call over I'll Mr.

Young. Andrew?

earned billion, common of tonight's and I will quarter, or everyone. $X.XX quarter earnings on compared second presentation. Capital $X.X share. the and were of Pre-provision X third diluted good billion up to Slide Jeff, afternoon, Thanks, per deposits In the the $X.X Domestic increased Driven increased for to Period-end X% One the and in Card year by growth our loans relative were period end X% average flat. quarter, the Both quarter. ago while investment average business. compared deposits quarter. X% to in XX% held prior start

FDIC insured XX% percentage deposits. at Our ended deposits quarter the total of of

expense provided the net We appendix. quarter, in Provision expense on noninterest higher by linked Revenue driven with both interest trends Slide XX partially as have offset in charge-offs X% billion on higher Noninterest quarter and additional increased and in expense by increased million. marketing an income. the of operating build of details X%, was the $X.X expense. allowance lower net $X billion $XXX was deposit

million our I'll Slide XX. to the Relative X. now on as by Turning is from cover $XXX the total balance last allowance assumptions X drivers basis X. points underlying improved. in coverage allowance ratio The quarter allowance most I'll to the quarter's balance company brings cover quarter. coverage total Slide changes greater of company of key for and forecast segment increase the up ratio economic up The detail. September allowance in the allowance, baseline in X.XX%, prior billion this the variables to in $XX

Card of Domestic improved variables of in assume period, increased key ratio by and content lost economic levels. the largely allowance reasonable the the coverage the XX-month supportable the with loans. impact includes the of million. now quarter our $XXX third XXXX. the from positive modestly balance from XXXX flat The to impact by replacing continue that largely we economic The quarter of was X.XX%. outlook the offset business, today's a However, In of several driver was predominant at allowance third growth The worsened increased was

interest build economic the corporate outlook reflected by allowance in business, and and million. rising in In million. borrowers, other including $XX the our loan estate rates our declined factors increased Consumer portfolio. real $XXX commercial Banking drove decline balances office on Banking of certain our segment, commercial and the by balance And The improved release. allowance Commercial the a impact The

in office portfolio that previously commercial for by quarter, approximately The we Commercial held million and included the that ratio the the as sale. coverage on have -- note the completed sale our On I'll third Slide loans appendix, $XXX additional XX we of details at business X.XX%. from were marked increased the of the portfolio. in basis points XX in stands office also commercial now

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

quarter You can last see ratio year average and quarter XXX% XXX% was XXX%. preliminary from third coverage during Up ago. our liquidity the a

decline our were the reserves balances the largely securities in liquidity of by market billion. a in value cash portfolio. Higher offset investment Total quarter were $XXX flat at

approximately cash Our quarter. billion at from about $X up billion, prior position $XX ended the quarter the

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

card Our in the net by higher quarter-over-quarter additional last loans paid X.XX%. the deposits. XX by was shift quarter, margin lower year basis quarter The mix towards than largely basis XX day and third X quarter a yields quarter. on was increase card rate continued NIM driven partially and interest higher points than points offset in higher ago

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

capital higher the share we quarter. completed quarter Rich. turn in in Rich? income the Net preferred X will the to XX With at quarter was over than risk-weighted assets, the common quarter. repurchases Tier and ratio dividends an I and Approximately ended in offset that, prior equity the common increase partially XX%. Our call the basis by points

Thanks, year-over-year. Credit third and volume up card trends, top function domestic from Andrew, XX. evening, are and last year. everyone. was a quarter third our $XX of line quarter. are our quarter results quarter Slide which largely results card credit Slide XX% the strong X% increased Ending domestic shown segment results of loan business. balances billion good or for card about business card another shows growth. Purchase on year-over-year posted third the in The XX Of

strong driven than factors: purchase quarter year-over-year, and loans XX.XX%. revenue growth XX% Revenue X prior third at remained revenue basis grew the in purchase decline the driven and reversed dynamic net faster increased in and loans. charge-offs were was second, XX increased, in volume increase And margin quarter from First, by This an volume was interchange a up The offset the is declined so On to margin. points year by XX charge partially revenue by factors seasonally revenue revolve basis, And dollars, quarter fee revenue the to points. a we more margin These quarter. and rate. a finance revenue. tailwind linked but by headwind basis

during we rate charge-off Domestic rate points with end sequential strong The from are Card rate XX-plus pandemic, credit XX-plus consistent saw expectations. delinquency XXX the the historically basis the normalize at basis up results and the X.XX%. charge-off quarter flat charge-off for points. to rate and year-over-year now quarter quarter rate X.X%. was Both the increased basis, monthly was a continue levels. above up to essentially The XXXX year to prior the results the our from points delinquency was modestly the rate basis On delinquency monthly XXX XX

XX%. Our the quarter delinquencies expense the the for the sequential Total increased year-over-year. compared are essentially of to domestic rate the third card flat flat company and million 'XX also indicator is of of best quarter, slowing. quarter credit of leading to Noninterest expense performance was delinquency was marketing Compared relatively $XXX pace normalization of marketing XXXX.

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

see Domestic in to business. growth attractive our Card opportunities We continue

are enhanced transformation. our Our opportunities technology by

across domestic our the card business. And continues marketing account new to growth deliver strong

drive card leaning a resilient growth As are into franchise. our to and marketing we enhance domestic result,

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

We marketing fourth expect seasonally be higher. quarter will

X.X% auto growth. decline for Slide year-over-year, in On flat. were shows year-over-year. our deposit In driven XX business. about quarter the basis, or XX% essentially results originations declined year-over-year third linked-quarter another by ending strong in Banking decreased banking ending We the originations, posted third Consumer loans quarter, quarter billion a auto $X.X retail loans consumer

bank XX% in year-over-year. consumer quarter $XX the were deposits or about ending up Third billion

of from auto balances to was XX% and about auto Banking The X% Compared was national X%. the driven deposits up were charge-off results. our modern bank. sequential strategy was partially the deliver paid Powered for offset the and year-over-year. and for quarter, about digital-first continues year-over-year capabilities, Consumer rate our direct by deposits to points revenue up deposits Noninterest on quarter by marketing were by rate technology margins. down the our compared ending and sequential digital strong quarter. support up Average increase to banking Lower expenses year-over-year quarter were leading national quarter the X% lower third X% digital basis XXXX. an higher down to in the X.XX% loan XX expense operating up about

to The better basis rate expectations. year-over-year. the linked X.XX%, up points basis was than XX charge-off Compared quarter, of XX-plus increases delinquency these seasonal points, while linked the up rate both basis points, quarter the was XX rate XX-plus up delinquency were typical was XX

tighten quarter, made deposit linked in and XX Compared year about for to decline the our about Slide were is manage to Both were loans general third Ending flat. average selected balances The credit. ending the business. the seen earlier the results X% Average essentially with Commercial quarter, linked we balances. for deposits continue down attractive we've consistent quarters of result to loan from were Banking choices down we X%. largely trend deposits as several less down quarter the commercial shows

from rate XXX X% points was up the X.XX%. revenue The banking quarter the declined charge-off commercial linked about to expense third X%. basis quarter the Third quarter Noninterest quarter. from up second was for annualized

office we recognized quarter. when held elevated moved The for portfolio We portfolio third to second quarter of commercial the completed was charge-off loans sale charge-offs we the in rate of that by the sale.

of information The results loan rate presentation compared loans. was linked commercial than at up Which XXX points the the Slide basis office X.XX%, remaining to the less flat The Banking third criticized nonperforming essentially XXXX X.X%. quarter about criticized quarter. our XX performing is additional loan of total rate X% was Commercial shows portfolio.

we already strengthen slowed. And and results volume of in purchase the top sheet. loans. capital revenue, posted In and deposits. delinquency quarter strong The growth strong deliver to in third domestic card domestic We balance we quarter. further consumer closing, We added grew another resilient pace continued and and of total our normalization card to liquidity line solid

operating to now Turning efficiency.

ratio operating and from quarter operating expense. quarter-to-quarter, of strong. third timing revenue by Operating was driven particularly The efficiency efficiency vary ratio the can

expect will set our capabilities operating XXXX modern of modestly down opportunities expanding be are We across an adjustments, up, XXXX. net our annual generating technology of ratio to businesses. efficiency Pulling way compared

at possible long-term value a growth, and and term. scale. questions. deliver We of Jeff? engine well our to value are leverage learning now At improvement tech machine broad range in increasingly your to drives as we'll long underwriting, We efficiency to thrive and in remain shareholder answer the creation positioned economic modeling over driving happy scenarios. enduring improvements And compelling be we marketing

Rich. Thanks,

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

comes Nash the of first from question Our line Sachs. Instructions] Ryan [Operator Goldman with

evening, Good everyone.

charge-off September like pressure not noted times was just we you several hearing But prime. performance broader, are becoming it's has into normalization that also Rich, slowed. looked we delinquency expected. others sub-prime, from So have better but that than It would is

you can your think you have losses delinquency just inevitably talk seeing the normalization? What you're within any sight of line portfolio? maybe do you of pace what about when think do you will peak? So And about

Thanks, Ryan.

on let's So metrics here. up just pull the

quarter up domestic was X third from to basis points essentially quarter, rate charge-off prior card Our the flat X.X%.

from pre-pandemic XX prior points modestly levels. our to X.XX%. and their are Our above basis XX-plus delinquency losses rate both On our increased delinquencies quarter the

normal essentially let's here. The time movement our the in In in slowing. in was at for to what's began. with normalization margin our delinquencies metrics of credit Now September, normalization sort of appears since line month-to-month talk the the and first about August be seasonality happening trend

stabilization also to Relative seen in patterns. new delinquency normal seasonal some entries. We've

hopeful are stabilization trends we these So continue.

auto, of stabilization even have up longer. charge-offs, months some metric, a we course, to they lagging so In Now still do. seen catching have are of

in Our the normal levels, modestly but for past free pandemic few losses are above seasonality quarters. moving line with

which to see business So trend moment. card rate. stabilization a we well, There's is our that back another recovery our for as

had of recovery rate because years been low the for pandemic. Our charge-offs of level through falling several the

meaningfully the average. industry higher we've recoveries, less once, seen work than competitors a of tend inventory, come they for so So we One on. in effect stabilize. own because our if had larger the recovery time was recovery most to tend our rates not all in for recover now over than Capital And rates debt like And because this a and sale. you we to at have to will, We've

it remains low unusually Although at levels.

when our but recoveries, a significant pre-pandemic -- of impact and delinquencies, course, particularly pretty our don't when charge-offs they Now to factor in our are charge-offs comparing benchmarks.

recent stability point that's One's Capital in the origination driving another for specific There's vintages. is of factor been this time. And another here. going has sort a stabilization, long Now performance of credit our but on --

So making looking to resilience ahead, the in resilience always, as all focused over source still lot unemployment And our a rate coming and remain the we underwriting we very uncertainty. that of choices. worsen expect sure outlook, as always, economy year. is, into the resilience of our In our on a of build we

build highlighted just Maybe, terms have included a Rich, allowance little Maybe stable. is and we're closely be a macro think . the following relatively obviously, regarding remind growth? forward. Andrew, us slowing at is going where going you up as what X more that charge-offs I loan can take tailwind allowance allowance closely of different so think my bit. the you allowance perspective was Do domestic the said to headwind had the can And a you follow-up question, replacement from gave the we factors. in And the delinquency you are card what again more catch And a finally of Rich if less of unemployment? following point I now and

Ryan. Sure,

to focus on middle the the considered a of not point, So whole But the now assumption unemployment a [ is that 'XX economic into unemployment are hold basically assuming the whole moves time. period for ]. but your bunch of it's just although there by variables, we of a more rate more level I'll mid-Xs unemployment. And rate, absolute lot recall

the the factors performance. underlying through into the though, As we've calculation. change then How like number a that before, talked of that allowance it's going allowance about influences plays are also credit

projected framework the quarters. generally credit I wider noting to And of biggest couple and many of going I leading we've go about the worth best that credit that or in times, particularly the driver. we've won't a through supportable delinquencies and it over periods uncertainties beyond either is indicator of outcomes elements by will are said, are As allowance range but be discussed talked rates the loss far the transitions. And the reasonable improving performance, and Rich reversion are considers next as of previously, say -- process worsening forecast, the which of

So related a uncertainty of could least lower term declined, may in in quarters allowance. in we otherwise flat we your than the core coverage period a a might today incorporate projected at well even losses ratio very be and future the near at the as where or indicate that question, remains see modestly release only the into

every And and quarter. through year forward process our of those we'll into go we take to do so factors as all roll account each the allowance

question please. Next

America. question with comes of next Our from Bhatia Bank Mihir

I credit we of consumer, between seeing diverge go was of health as recovery? curious if in FICO and terms the or scores, was it's FICO higher performance lower the curious spending trends at whether on I all through the you're

question. Yes, Mihir. Thank your for you

strikingly, score. in credit were end those let's the or trend by first pandemic. So low the about this early performance. at out talk When we started the that And had income most market, normalize, credit improved credit defined to segments whether more of called pronounced that the was the

of not quarters observed each to normalization us. other more quarters to words, had at broad-based. fact, So you relative other. of becoming we like look that where every to any its metrics normalizing segment this example, now at on was many surprising caught now, was rate. for credit for if segment delinquencies, kind up. every In for same for about top . Later, in the was And several relative pre-pandemic were it's basically Everything was segment

of are the more Now at seeing stabilization lower quickly end come we the market.

bit our behind the last basis. in a on that. seasonally segments over a And of these months, are just our segments upmarket stabilized delinquencies little sort adjusted In few essentially fact, have

I the this now what description don't is marketplace se. a One. necessarily see we per at of Capital is So This think

the Our underwriting performance FinTech's over the of response that market. flooding we assisted inflating would in has made to changes especially couple the been scores to credit past we of impact by of what credit years, some the anticipated be

So we in things risks and here. now has we see overall were now, edges contributing what to -- really couple -- performance and the policy, talking and think, for or as our about I to that saw and contributed, originations in we've we we credit anticipated, around for strength that's trimming that years this our a of been we stability

of basically customer, spend, look per the terms spend at the spend pretty -- this -- of the coming really In we is after moderated spending of when has surge out pandemic.

for spend So growth per several flat commit year-over-year, [ I'm Year-over-year been has point. months. Capital roughly overall an One customer ]

So growth really in new origination. by that our metrics the being seeing spend account you're in driven is

of probably -- growth to the we've -- respect spend end across we the seen various moderated, it with Now at segments. segments. although certainly The marketplace first, the on our most lower is moderated the the spend

of been end side has but market. Sort fairly of moderated, effect the biggest the moderating in on the say the lower I'd

And where then about Can of the . some maybe go? competitive just puts you takes the on deposit side. betas particularly on thoughts on you turning competition deposit the Any near a quickly. and to are What term, in NIM standpoint? from them very just seeing talk

as respect to couple really discussed are previous that -- With we've Yes. of in calls, key impacting beta there's factors a betas.

product is mix. first The

Sort would that notion second across include rotation deposit of And of pricing then just that, customers I the the is competitive of And products. within we've the pricing. talked about. lags

beta quarter-over-quarter lag with was the like something us, XXX%. for so And that effect

[ Our cumulative million beta $XX now ]. stands at

the piece. rates pricing into pressure there near be on driven upward look NIM those I higher wouldn't be And dimension, mix by described, term, so we that if stay some at if ahead and I beta factored the on longer, do that that as getting surprised factors in assuming for least particularly product to continues

a I up bit. funding think card, the have on depending NIM, suppression potential about in path here bit in there's So for costs revenue then, Rich a and beyond seen the And credit, increased we at talked wholesale that least spreads of widen the suppression. but are

even lump card of all particularly I look and thing will growth headwinds. historical today level balances a card think tailwind than percent we settle standards, but quarters. things the perspective, relative it than other out a saw quarter. at of are we see in remain cash that's continue can higher potential revolving lower together then X elevated those as like as see note, pre-pandemic So the this would multiple sheet a would you I as we to from balances -- I though where And that ultimately balance But ahead you over to

really are are the those respect to play NIM. So that primary at would say factors I with

Next question please. .

next Our Citi. from Cyganovich question comes Arren with

on higher the last loan base on than and expansion bit touching was card quarter. rate the margin. XX yields The quite discussion think, net for I a basis expanded, points, interest Just that the

maybe mentioned that Is You they pre-pandemic? where what the you're And compare versus do today of revolve revolve there? were rates. part higher how rates seeing

Yes.

which a the So as seasonal Arren, year. Fed rates the and they -- higher is changes is see Fed just looking rate part the the is, other does are changes, you're yield the also factor than opposed from there. I largely tailwind but larger bit we be get of tend piece more just said, say, it, fee the on to the margin would third primary at And typically we than just naturally quarter to late see a revolve in if you throughout

little Rich dimension terms talk are a in we about a in is rates where we're bit the seeing revolve seasonality forward. portfolio. trends that the I'll with going there of let So

Arren. Yes,

our in Card were. are overall, business, basically they where So rates revolve Domestic

offset right is it's XXXX, on sort before very higher I But our business bit with partnerships bit place partnerships The overall across net that. in that segments. branded our XXXX a -- So book they pandemic quite rates And book impression have have a but the else example, the bit Walmart revolver rates is top the third everywhere are little bit leave were rate branded the quarter a We would quite have of speaking because within for quarter is very we lower. so you, somewhat didn't and our the a third little portfolio. the lower different revolve much of before. revolve pretty than generally to

year-over-year, kind there think perspective. And on will was double marketing down it how almost peak then where just do go hit a you a that? And essentially terms pre-pandemic you it dollars? of expenses a it. Got like the was Have respect of it here with slightly to from almost the still marketing, from in looks

on Well, the Okay. Arren, marketing. --

XX% So quarter compared let's drivers just marketing. big pulling prior pull and the talk and to flat of up total our company just marketing year-over-year. up up the about was

transformation products, like Including growing market. in expanding to opportunities the what that for seeing card is -- do get continue we data. we're we create learning in to and additional technology advantage powerful channels We're machine of of First, better that the have take really number leverage we consumers. the our as in from more models, experiences sort customized the opportunities able of the we everywhere we benefit

have continues are and a into of that So leaning to lot traction, we that.

marketing spend very is our a important part into heavy of our also and spenders. on focus thing we're really leaning a We

when that push And -- about a think our our card, spenders, spenders, need and to and since. it to win attractive servicing, was Venture putting course, for there. launched than we quest we goes we customer out that just product an with value jaw-dropping course, continued more propositions. XXXX involved spenders great that great ever experiences, of really the have of accelerated of when strategic beginning heavy heavy So Heavy we back

less years is And succeed the a builds. and And the sustained investment and brand this much marketing -- all traction investment the about doing and all this promotions business and one very players who in significant ultimately, this a building. is those who my takes of about and upfront in that here get in watching brand observation,

in also the to the the heavy of top experiences building properties growth spender invest at to continuing drive and we're market. So

of the experiences, and sustained even So grown One exclusive helped overall the market in momentum but we've these drive the investments -- business, include and faster to at our our our top airport spender Capital Access properties of in investment shopping. spenders. heaviest with has lounges And travel portal.

very much this And business. we like

very to investment growth course, addition our our is branch spend in locations final The low our powered we the it growth course, brand by the marketing levels of lifts build low And has obvious driving losses, attrition. strong In factor revenues, the generates entire we're continuing enjoying, to company. our a have the in footprint, as experience, smaller sustained is heavily a modern compelling nation of investment a national marketing. of across in bank. technology presence digital And traveled and, cafe

So compelling these board, we opportunities of great are driving long-term see we an important to our shareholders. pretty are across that really continue traction these value And levels. the continue much into of And part and the lean our creation for marketing opportunities. the it's to

next comes Rick from Shane Our JPMorgan. with question

the the concentrated I'd you talked . market bit this cafes, -- the year Rich, just you about network, you're seeing competitive describe banking little less Can Obviously, been think franchise, depository in franchise. particularly the about little -- just approach. little talk what strong there's where you bit a landscape growth about you But a bit of a broadly the in sort the like you're consumer you branch talk deposit started to the the gaining very on share? side. can

-- of one thank the you, Well, Rick.

it marketplace idea with how of really really the and the to all we've choices of driving the winning question a noise discern is such [ ] of defines One in marketplace One, is And try company of the is almost things? it driving Where going forces and -- the to pretty core it's the where that be? much Tsunami at to these Capital of change. all founding always, change What's the future technology the these that made look the in are is marketplaces. and strategic approaches sense

balance company so by And capital insured our course, transform in we, deposit-driven driven retail driven the way an reliance balance in entered balance back quest desire mid deposit a franchise. importantly but sheet, get a deposit to OOs the not market most a from banking, sheet just get to away and the of hence, consumer sheet, for banking of

the reliance at think the respect important banking trying Now in the retail branches. along strategy time important From branches world say be going will where out want in get we But the the corner from -- look see by an was the the the over sorry, the to branch as to hand on with over hand, way, a a to in consumer of part both to, your far a your that's customized time, to where to interactive banking. forward being life bank -- can't way, really as over digitally very the bank in basis. proactively see. needs on just as I on the at We outset, go your can heavy and there and our for well. very you in evolution a branch but time And forefront as real-time of help and the to reactively to I thing it

that's working -- that that's where we've been have we So backwards from. -- the vision that's

that just full-service and bank. have branches retail to in was it's matter And a in Capital checking nation the a unique not I offering do a but course, that, banks of So that, a we One a was national But with step, business, was a of accounts, experience our to worked first business much retail central but in strategy the beyond to XX% very about just a having savings build position, banking. not balance sheet building the of journey, that lot national company. savings have of for national of absolutely in think sort

Our branch able a and to just on everything going a view in in was digital digitize National to we're -- entire for be about that that if Banking, customer you win get we to experience can customers actually the basis. have to get to

So growth we nice the done everywhere bank. build bank, as a full getting build-out service our what to and traction that our of and then this leveraged years base national is digital, bank. customer realize have big a have One, [indiscernible] added then over consumers the we And really of the is have though in built have, national we we national the full side the we branches Capital marketing -- and this, service on a that across we've and really brand the national the even a traction, we're of strategy, lot as lot brand nation

our years. strategy So that's for been

We we important of from lean thing view. an continue a point it's to that -- marketing into

to our national and getting of there quest is build of build acquisitions basically, branch-based banks. to virtue just -- by lots continue without of But bank lots a

Wells with Our next Don comes question Fargo. Fandetti from

Rich, to I you into making that little need inclined was something auto to be you of see harder wondering, in auto are given decision? . Or your before leaning good sort delinquency, a lending? trends do

thank funny. Don, for question. you your It's

sensitive environment with certainly competitive to competitors in [ is ], the ZAG it's always sort we matter. the this see underwriting others remember objectively because strategies, [indiscernible], and isn't at card in sense, it's -- the I choices a opportunities are. choices of more credit ] to at while auction-based to the where really of quite the in a in the our from our the is And plays dealer holding really look because others -- role This as long business long can this strategies that credit And that business dealership business card make of growth business where business. have terms the our a just our are amplified is while volatile -- as credit that [ so ], -- particularly marketplace. We auctions Zig a such the business growth credit card then [ contrast as strategy Zing auto dealers in for the

see customers you more growth card into really and it's and on see one-on-one That's of stability so with sort our the much prospective leaning marketing the still the of and marketing the customers. a why in But you sort that business the and side.

when last as So few think about you years. the

invested with our So by X and and or data, the X we've certainly traction -- we capabilities the in the And business, the that powered auto the our deep years, had so technology been underwriting the was business. dealers. that relationships strategy we've we've in building very in tremendous growth last

what they in at margins and rate pressured concerned early was happening couple XXXX. as with last Over XXXX were were the by increases of interest years,

to slow adjust competitors were pricing. their Some

to margins recently, many movers, have pricing. stabilized including players, more have rates Now largely as normalized continued interest lending late industry have increase and

and we in -- of the concerns more auto side the -- in in the to watching other the and from with closely for card significantly thing, business. -- the anticipation The score drift was And did as more worsening business, probably actually back with of respect very just credit of trimmed edges we consumers. we the certain course, in around data about proactively

and -- Capital that you've back quite a data has pulled the So bit. has where seen One that

little Our outstandings have a bit. been shrinking

in seeing You of we've also the seen have is striking what terms long quarters X credit and various now metrics. that we're stability had least performance at the credit on

point. for we're at book the do on not we and and good So certainly certainly this front to here acceleration, metrics seeing like predict the performance opportunities, marketplace, of our the seeing I'm back both the lookout but book but an our

Sakhrani Sanjay from comes question with next KBW. Our

efficiency First adjusted rate. operating question just on the

just seen the X of trends . into nice about we or And over I'm sort if this next level sustain last could You've some year? Rich, know, wondering I quarters. itself year see outlook. the type talked of you improvements

in real be and also over these as continued of starting guidance investment a inside Sanjay, in the We time business giving we're we've are at progress even where generating technology. we're see at on and technology really pleased out both going going to -- Capital with a that efficiency same X to efficiencies ratio things competing and time, operating from this benefits that on bunch have operating in we the point One, to we've goes. efficiency invest certainly the on not made

we've strides of net has put able X reliance much things been -- X quarter. in these been result also too and tremendous wouldn't make some really to any way. the forward efficiencies on the along So technology I get

to kind probably now down. You and our flat around. modestly year with and respect part for ratio of took of guidance, know these we're modestly our to bounce at full in certainly, But that XXXX, you efficiency we out, just the flat numbers had the down noticed guidance we

think, So promise efficiencies an part we term, I is delivering technology offers for over of, value important equation and lot that operating our the continue to for of a efficiency believe, investors. creation long the operating transformation

the at say, continue though, time, really business. opportunities to do the I same to in want we great see

on over that's our technology operating in still We of ratio. And greater opportunities even to story continue capitalize that's to invest time. the efficiency

question the flowing the you adjusting talked transactor curious on parameters, I'm side have all a Or go-forward obviously, credit on that's Where basis? exactly Perfect. it balanced is more and in segments? improving. through Then the on it you're into risk just obviously follow-up I the across card. Is leaning into growth happening? that of sort about mean, growth? that a numbers the is leading just in I implications

Thank Yes. you.

really. we the traction So spectrum are across finding

say So the for pandemic. for players for One and well, all for these blown My growth, the to is in this view of is of industry have do outstandings a I loan if just we bit spectrum. want across loan reversing we're growth effect. the And pullbacks Capital think about a what I -- past about lot just -- the and in and reflect really levels. there's One was little the just growth the thing from we said, numbers leaning strength growth Well, the this. sustained striking Capital while, the think But let's prior has loan the us on a industry, One

significant growth. have lot to continue loan powers that We of obviously growth, new and a account overtime

the within segments, pre-pandemic. than come as I payment mix of spending to a at rates, because if we've they're Payment down even side. Part down they rates traction higher to quite lot statement, coming were were are still But have they they rates But on Interestingly, that a generalize, where One were before. down. general a payment the of are not had bit. effect Capital

Capital So effect. that, One the effect, a also partly again, there's think consumer strength inside of a but sort I of

the and likely underneath I payment one's surface. When that that inflation things cost going as and is, there are inflation I natural, growth. the able more inflation be And this come to well. as to some no effects have think prove but powered have rates long that think I drive some has as somewhat of consumer this, incomes growth stay down generally However, -- think, where stay effects you up to

a of strength see there. we lot So

points. those of are specific really One Capital I'm those industry comments of are making several some kind And and of

comes question John ISI. with Pancari next Our Evercore from

to of -- citing could indicated it to and how about that give Can -- I Is your to you're commentary for the a way maybe that. X- slowing through should in of the looking of that course, that X-quarter the you you type increase for back pace some lag seeing stabilization long the think in the lag around follow On that to us on charge-offs . delinquencies be? know card that you're window some of we're front? losses that

to of ultimately of precise say, to basically thing that. credit it's but is looking Delinquency side, months go prediction couple months is delinquent look the pull really the of first more have make at Well, look what that the encouraging. is and we at we tell X we that card and the we off last on delinquencies been why want which on is That's customers and what because everybody later. I -- charge even all, up at the is quarterly just want seeing first don't not a sort say indicator. stabilization we the to very talking -- I -- that when is

times go And between these slower. course, things delinquencies about go But we're is they And relationship quarters. and lots the make so in of couple there -- measured they of the The of over their being charge-offs a payments. but . they talking faster, sometimes sometimes

Next question, please.

with comes Our question UBS. from Erika Najarian next

but Yes. want I lot investors to quarter. a a hate this I make re-ask fine think fourth question, on the in to this of point

that -- credit charge-offs the financials Ryan back that delinquency holding I positive recent pace everything what's of but vintages. normalization you've rate Rich, to back Going in and has credit-sensitive of of stability recession said slowing, prospect net obviously perhaps is think John's question about seen performance

the think rate as rate in we normalization look fair what to has the terms charge-off the that rate it stability third given the mostly in second charge-off the card driven quarter. quarter As about rate we conclusion net Is now? to rather seasonality September at for draw if happened and forward indicators of quarter charge-off that fourth that normalization of and look in be charge-off leading the stabilized will all by the quarterly than

Yes.

So Erika, question. your thanks for

say me few a things. Let

day. is is everyone one of the first that volatility, things -- studying for those us live every the in of seasonality. element of which that business big challenging seasonality it, of makes let's who So all, including the this already a it

delinquencies each then the tax let's the just refund seasonality. of let's the to little bit just auto So Card over . rest they and talk around gradually improve and about season a year tend year. worsen

losses low for quarter relative to is second typically delinquencies. point. delinquencies the QX is and the seasonal The seasonal point card Card high lag

delinquencies third tend they So be first to the and domestic quarter. the quarter, And third so seasonally in the card in lowest highest increased. our quarter in now

quarter a talking sequential a a of of for versus -- about so a basis. of basis sort that looking most a basis can that kind neighborhood on quarter we've for we're leveling the the of sort kind points. kind of quarter at And But delinquencies -- seasonal. the direction that it's that interesting points where increase the So we that's seasonal stabilizing actually when went we're up expectation in you typical said. of somewhere XX then -- even that's like see of was But observed of XX

month-over-month -- to zoom and August seasonal you the normal month close getting in is months If the trend. just really of the the September, movement

so of that stabilizing. normalization And one this trend been we've the be is the may indications early of seeing

obviously, declare arms bullish I'm not my I my thing a want hear man turn. in to and one say, commentary, just here to you Now wave

the of in encouraging talked the is auto the couple data. a months lower where and we of a love end the to on business. longer have quarters we've very more a data I seen couple about, have stretch as of business, more seen data in card We see We'd of -- where interestingly, of

So that's to have have appear kind things of really where stabilized.

a there getting not quite is little business not card bit as yet. upmarket Our there quite --

So I of be to a confident see we're start seeing. saying to by love we'd more what little fully data

earlier first charge-offs, especially question of with as about up want show of what to to in now really with the soon quarters of question say September, really a your then sort -- charge-offs that we that couple August line all, charge-offs the quarter I as it's was not to -- quarters months is in with thing the of performed fourth going the the asked, of because a delinquencies. to and it stabilized second you're with the see, -- see The that couple before

predictions they try make here, just I and to we be we're what pretty a -- we ahead we're kind and happen not see. head as some fake positive be appear. going here, to of So can I very -- fake be as also but things as to on always don't they We always and as not I see clear can good

Next question, please.

Our next question comes Oppenheimer. Dominick with from Gabriele

mind. and effect I the follow-up, factor if about you ratios and and a of how could at on and lines think you capital capital And lines, then you have about maybe XX% given just mitigating the Basel to us just going of the today, over about game your unused specifically talk unused lines to the When need capital about and if think target ROTCE your do target? for Basel capital levels you unused all, don't build mitigating your

unused I'm going people back, terms start them with followed to of lines, to long-standing has grow. and last strategies of question. smaller your of lines allow in half been come our the I wasn't it. because Dominick, Yes, to one I sure But

shift say, assets. in the would wouldn't I I expect so meaningful service risk-weighted that in a And strategy solely of

as at the that you game overall, have end So though, in proposal. weightings look the risk out come

not us, For trading. aggregate, in in recall, mortgage or we're

just the you net didn't quite else, the overall at of of fighting plating, operational around risk-weighting specifically follow from me? largely the we're and RWA. the of gold risk your an course, a commercial, those are impact But ROTCEs. I Like everyone Could the for have half asset on terms second draw of looking to -- side. retail going So to in question impact, inclusive of

Sure.

I that you Sorry more capital now. versus drawn it's to to hold basically my understanding lines about capital have against unused if you that. because just had was just would curious additional hold lines

on ratio if affect your and curious I if was and just in return capital any so -- would on that the long-term would And like have return way? to rise

opt quite of proposed. that being that follow the it I half my ends lot in That holding of be up explain answer sorry, what all Got it's relative more and again, focus part is should to denominator the as was material it. final net side, comment the to a we highlight relates strictly it for ultimately assets risk capital the where period, Yes, trying I was it. didn't -- on impacts will outcome the wash, second particularly a of a there the in risk-weighting industry well, of to what's could on the calculation, be I

what us, risk outside taking risk to specifically capital. the require is to it's going more really the a But draw side of currently hold us and asset operational just up proposed, for roughly the that's operational ends being

please. Next . a have you question, follow-up? Dominick,

Our from comes next with Bill question Research. Carcache Wolfe

So be is that might proposal. us get to speak any it path I with possibly the likely Can very be your It associated to we'll anticipate soon. that view it? The ask the fee costs you will on give you view that immediately consensus and potential litigated. leaf wanted would about

Okay. Bill. Thank you,

the the So proposal we a soon, would the fee end proposal And before not finalized, currently yet XX%. been fees CFPB contemplated late as CFPB's late reduce CFPB's by publish year. while expect the proposal the approximately probably has of to

CFPB the industry longer. a the rule or P&L is of our this rule. second this publishes maybe the significant implementation likely delay implemented, in . that of rule, final If could And least be implementation XXXX we litigation the will once be delay to at to term. block impact half Now until litigation expect will near the proposed there rule and there of the the its

the we we're our rule believe impact into have that These actions we include changes of a effect. that years set choices. a goes investment choices However, resolve to mitigating working products of through after couple this and policies, gradually will

will . the the rule these of will Some change effect place effect take after rule takes change before takes come actions many

. please. question, Next

question Oppenheimer. Gabriele final Our is a follow-up with Dominick from

that. about Sorry

I you off. Can me . got I hear okay? think cut

can we Dominick. Yes,

right. All

yield. of increase a third just know sometimes that in actually quarter, we've lot us walk seasonality previous was in could I guys. quarter-over-quarter that, dynamics hikes just I in wondering the there's card rate the domestic domestic third the quarter-over-quarter some if you was also in about of in Sorry on the years the card? I and around through increase had curious some quarter.

an answered of function of But a dimension. not I is -- lump And fees, we would the you third into drove the revolve talked in saw relative points, finally, I what over the then necessarily seasonality quarter-over-quarter at least but or to the And the can't the see earlier, largely of the a asked Those the peers, of sense. answered reiterating part it in day of but Fed in we more had own that late did bit quarter, an Dominick, we absolute which which I rates big Fed Yes, I one is those count driven think so which of your is question, yield. course some the sense, was just there absolute nature Rich then the is by of in about also question some dynamics remember move. who drivers seasonality year, the think are the earlier. day

be and evening, answer the here questions later will Relations conference in everyone. continuing your this for Have for you One. may joining Capital have. Well, thank to team evening everybody, that on Investor any a you us call great thanks, evening, interest this

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

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