Capital One Financial Corp Q3 2024 Earnings Call Transcript

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

Question: Ryan Nash - Goldman Sachs & Co. LLC - Analyst : Hey, good afternoon, everyone. So Rich, maybe just start on credit. You obviously have -- what you can see lots of different parts of the consumer market, high-end consumer, subprime, prime, private label, different parts of auto. And you guys seem to be bucking the trend with really solid credit results. So I think some others aren't. So maybe can you just talk about what you're seeing across consumer in some of these different cohorts? And maybe what do you think it means for where losses could be in some of your main asset classes. I have a follow-up.

Question: Ryan Nash - Goldman Sachs & Co. LLC - Analyst : Yeah. And it would be helpful if you can comment on Capital One, specifically, but maybe I'll throw another question for Andrew, and you guys can handle both of them. So Andrew, obviously, there was a big beat on the net interest margin. And the Fed has begun easing. I'm just curious if you can maybe just talk about the drivers and expectations for the margin from here? And just given you've historically operated in this kind of six, eight or nine range, but given the balance sheet -- the changing balance sheet dynamics, do you think we've sort of broken out of that range?

Question: Sanjay Sakhrani - Keefe, Bruyette, & Woods, Inc. - Analyst : Just following up on credit. -- Rich, you had mentioned, I mean it was last quarter or the quarter before, that we should start to see the credit, the delinquency improvements do better than seasonality. And I guess, stabilized at -- it's moving along with seasonality. Is some of that related to the stuff you were just talking about? Or do you still expect the improvement to be better than seasonality at some point?

Question: Sanjay Sakhrani - Keefe, Bruyette, & Woods, Inc. - Analyst : Maybe my follow-up question would be the question you were looking for later. What's the path to normalization? And I guess for credit as well as the reserve rate. We're well above the levels we were in 2019. Maybe you and Andrew can tag team on that one. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 9:00PM, COF.N - Q3 2024 Capital One Financial Corp Earnings Call

Question: Terry Ma - Barclays Bank - Analyst : I wanted to touch on the auto business and ask kind of what you're seeing in the competitive environment and how you're thinking about growth going forward? You called out originations have been positive the last three quarters and looks like loan growth is going to turn positive. I know you're still mindful of used car prices. So should we expect more measured growth in auto going forward?

Question: Bill Carcache - Wolfe Research Securities - Analyst : Following up on your NIM commentary, Andrew, if credit continues to trend in line or potentially by the normal seasonality from here? Is it reasonable to expect revenue suppression would begin to serve as more of a NIM tailwind that would arguably overwhelm some of the NIM headwinds that you described in your earlier response?

Question: Bill Carcache - Wolfe Research Securities - Analyst : And then also another follow-up for you, Andrew. On your reserve commentary in prior quarters, qualitative overlays it seems, and please correct me if I'm wrong, it seems like it had the effect of preventing you from releasing reserves. Is it fair to conclude that this quarter's reserve release suggests you expect consumer credit conditions to continue to gradually improve from here to the point where that would support peak losses likely being -- or -- peak reserve rates likely being behind us at this point? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 9:00PM, COF.N - Q3 2024 Capital One Financial Corp Earnings Call

Question: Donald Fandetti - Wells Fargo Securities - Analyst : Rich, on the Discover merger, do you still feel like owning a network helps your position with regulatory approval. I mean I guess the DOJ suit against Visa does validate that. I'm just trying to get a sense on whether or not you feel like your arguments are resonating with regulators and you have confidence in the deal closing.

Question: John Hecht - Jefferies LLC - Analyst : Most of them have been asked and answered. I'm wondering if you guys can maybe give us some color on spend trends, the build business volumes. We've heard that the consumers being a little bit more cautious and careful or responsible with their spending as opposed to reacting to some sort of weakness or concerns about the economy. And I'm wondering what your opinion is on that and how that affects your business.

Question: Mihir Bhatia - BofA Securities - Analyst : Actually, just following up kind of similar lines as John's question about spending. Maybe just drilling down specifically on the venture ex portfolio. And I was wondering if you could just talk a little bit more about it. It's been in the market for a couple of years. Now just how much has it grown? How material is it to the overall card business? What are you seeing in terms of performance in that portfolio that's encouraging you to invest more in it, just any additional details would be great.

Question: John Pancari - Evercore ISI Institutional Equities - Analyst : It's John Pancari, Evercore ISI. I wanted to just ask on capital CET1 ratio at 13.6%. I wanted to get your updated thoughts here on how you think about buyback in that context? I know you had indicated that the Discover transaction could impact the pace of buybacks ultimately but you still bought back about $150 million in the third quarter. So I wanted to get your updated thoughts there.

Question: John Pancari - Evercore ISI Institutional Equities - Analyst : Got it. Andrew, if I could just ask one more on the loan yield increase up about 58 basis points this quarter. How much of that increase was the impact from Walmart for the full quarter? And was there any impact on the APR from any increase to the APR in response to the proposed CFPB late fee rule?

Question: Jeffrey Adelson - Morgan Stanley - Analyst : Just one for me to follow up on John's question there. Just on a late fee rule, I fully appreciate that things remain in flux at this point. Look, can you give us an update in your latest thinking and how you're potentially preparing for that with any offsets or mitigating actions. Have any of those actions have been taken yet? And I get that, you talked on taking a more mindful approach here. Just wanted to make sure that this is still the same approach you're taking? Or if there's anything else we should be thinking about in our models here?