Capital One Financial Corp at UBS Financial Services Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Erika Najarian - UBS Equities - Analyst : Andrew, let me start with you. Rich gave us a great update on the state of the consumer when reported earnings several weeks ago. And I was hoping to unpack some of that even more. So spending accelerated nicely at Capital One and your closest peers and one of your peers supported later and gave us some insight that the momentum from Q4 continued into January. Could you perhaps provide us some color on what you're seeing in consumer spending?

Question: Erika Najarian - UBS Equities - Analyst : And you alluded to this, you also talked during the earnings call about the lower end consumer doing relatively better at the moment, but also that a proportion of customers are making just the minimum payment could you isolate that to a particular cohort? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 11, 2025 / 8:30PM, COF.N - Capital One Financial Corp at UBS Financial Services Conference

Question: Erika Najarian - UBS Equities - Analyst : Yes.

Question: Erika Najarian - UBS Equities - Analyst : That being said, the delinquency data that you reported from both a seasonally adjusted and year-over-year basis was encouraging, which would imply that losses could trend lower from here. Now I know you don't give charge-off guidance. That being said, if the U.S. economy continues to be strong footed, are we closer to going back to a better correlation between delinquencies and unemployment this year?

Question: Erika Najarian - UBS Equities - Analyst : Thank you for the summary. So switching gears a little bit. Competition in the premium segment has always been fierce. But as a consumer and an analyst, it does feel like the temperature continues to turn up. So the momentum in high-end travel cards are particularly strong at Capital One. How are you approaching customer acquisition in 2025? And could you share a bit about your strategy to win against your peers in this particular space?

Question: Erika Najarian - UBS Equities - Analyst : Taylor Swift.

Question: Erika Najarian - UBS Equities - Analyst : As we think about overall domestic card growth in '25, how much of it will rest on organic momentum accelerating versus new account acquisitions?

Question: Erika Najarian - UBS Equities - Analyst : So talking about maybe the other side of the balance sheet. It's been a while since we've seen a non-0 neutral rate. What's your strategy for deposit repricing from here? And do you expect to see similar deposit betas on the way down as on the way up? Or your growth prospects translate into a lower ability or lesser ability rather to reprice?

Question: Erika Najarian - UBS Equities - Analyst : Yes.

Question: Erika Najarian - UBS Equities - Analyst : And that was very helpful. And before I get into my next set of questions, I just want to remind the audience that if you want to ask a question later, if we have time, use the QR, Q-code and scan. I think there's a little sign at the table. I'll get it in this iPad. We also have the old-fashioned way in terms of a mic in case you don't want to do that. So another question for you. Investment spend for the future has always been a hallmark of Capital One. And it feels like these investments like in the cloud have set the company up well for a more seamless integration of Discover ahead. How much of the tech spend would you classify as front-loaded versus continuous improvement for a company that always likes to be at the forefront?

Question: Erika Najarian - UBS Equities - Analyst : No, I don't think so of you there. So let's talk about the Discover deal. You continue to sound confident about an early 2025 close which hasn't wavered since you announced the deal a year ago. Investors were less confident prior to the election, we're confident now. What can you share with us that gives you confidence on the path forward to approval.

Question: Erika Najarian - UBS Equities - Analyst : The feedback from investors indicates a pretty widespread positive reception to the deal -- the one piece of pushback that I receive is the amount of reinvestment you would likely need to put back into the Discover credit and debit network. Is there a way for you to help frame the level of investments contemplated within your expense synergy estimates?

Question: Erika Najarian - UBS Equities - Analyst : Very helpful. You mentioned risk and compliance. So on legal day one, you do inherit discovers regulatory issues. Of course, your risk and control processes are completely different, I would imagine, and you just talked about the dissynergy of investing more. Should investors expect a quicker resolution after legal day one of Discover's regulatory issues. Or maybe I should ask this another way, should we expect any of the regulatory issues at Discover to be prohibitive to any business momentum for the combined company?

Question: Erika Najarian - UBS Equities - Analyst : So in 9 days, it will be the 1-year anniversary of the announcement of the deal. I think it was like President's Day. I think everybody was eating breakfast. And it's like in that breakfast is still a (inaudible) in the calender. Clearly, the macro and the regulatory outlook did materially since the announcement. Have there any been -- has there been any changes in how you feel about deal economics. So what's coming in a little bit better as you refine the math and what's coming in a little bit worse?

Question: Erika Najarian - UBS Equities - Analyst : So just as a technical follow-up, as we think about credit does that impact sort of the day one loan mark or the day 2 provision or it doesn't matter because it all falls to the impact on book value pro forma book value and CET1?

Question: Erika Najarian - UBS Equities - Analyst : So a few more questions from me. The Discover Network was 1 of the key assets, clearly, that attracted you to the acquisition. And there are certainly some benefits that come from having that direct relationship with merchants as you work to integrate Discover over the coming years, where do you see the greatest potential for Capital One to extract value from becoming an issuer with your own network?

Question: Erika Najarian - UBS Equities - Analyst : Great. And just maybe to end on a few questions on Capital. There's been significant regulatory momentum or at least signal coming from Washington. What in the pipeline could be most material to Capital One? And just maybe a technical question. Are you entering a '25 stress test as a stand-alone company? And if the deal closes early '25, as you expect you need to resubmit for this year?

Question: Erika Najarian - UBS Equities - Analyst : Even the rest of your peers, right? So finally, as you assess the risk of the company from the inside, what do you think is the proper normalized CET1 target for either Capital One? Or you could answer it also for the combined company?

Question: Erika Najarian - UBS Equities - Analyst : Well, that was pretty perfect timing. We're out of time, and there are no questions on the iPad. So thank you, Andrew, and Jeff, for coming to Florida.