Capital One Financial Corporation

Good day and thank you for standing by. Welcome to the Capital One Q3 2024 earnings call. 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.

Thanks very much, Josh, and welcome, everyone. We're webcasting live over the Internet as usual, and to access the call on the Internet, please log on to Capital One's website at CapitalOne.com and follow the links from there. In addition to the press release and financials, we've included a presentation summarizing our third quarter 2024 results. With me today are Mr. Richard Fairbank, Capital One's Chairman and Chief Executive Officer, and Mr. Andrew Young, Capital One's Chief Financial Officer. Rich and Andrew will walk you through this presentation. To access a copy of the presentation and the press release, please go to Capital One's website, click on Investors, then click on Financials, and then click on Quarterly Earnings Release. Please note that this presentation may contain forward-looking statements. Information regarding Capital One's financial performance and any forward-looking statements contained in today's discussion and the materials speak only as of the particular date or dates indicated in the materials. Capital One does not undertake any obligation to update or revise any of this information, whether as a result of new information, future events, or otherwise. Numerous factors could cause our actual results to differ materially from those described in forward-looking statements. And for more information on these factors, please see the section titled forward-looking information in the earnings release presentation and the risk factors section of our annual and quarterly reports accessible at Capital One's website and filed with the SEC. Now I'll turn the call over to Mr. Young.

Andrew. Thank you, Jeff, and good afternoon, everyone. I will start on slide three of tonight's presentation. In the third quarter, Capital One earned $1.8 billion or $4.41 per diluted common share. Included in the results for the quarter were adjusting items related to Discover integration costs and a small downward revision to our FDIC special assessment estimate. Net of these adjusting items, third quarter earnings per share were $4.51. Pre-provision earnings in the third quarter increased 3% from the second quarter to $4.7 billion. Revenue in the linked quarter increased 5%, driven by higher net interest income. Non-interest expense increased 7%, driven by increases in both operating expense and marketing spend. Provision for credit losses was $2.5 billion in the quarter, down $1.4 billion relative to the prior quarter. The quarterly decrease was primarily driven by the absence of the second quarter's one-time allowance billed for the termination of the Walmart partnership, a decline in the coverage ratio in card, and a $40 million decrease in net charge-offs. Turning to slide four, I will cover the allowance in greater detail. We released $134 million in allowance this quarter. and our allowance balance now stands at $16.5 billion. Our total portfolio coverage ratio decreased seven basis points to 5.16%. The decrease in this quarter's allowance and coverage ratio was largely driven by allowance releases in our card and consumer banking segments. I'll cover the drivers of the changes in allowance and coverage ratio by segment on slide five. In our domestic card business, we released $66 million of allowance, which decreased coverage by 18 basis points to 8.36%. Our credit outlook has improved slightly as our confidence in the stability of underlying credit trends has grown, driving a modest release in allowance. In our consumer banking segment, we released $50 million in allowance, resulting in a 10 basis point decrease to our coverage ratio. The release was driven by strong credit performance and increasing recoveries in our auto business. And finally, our commercial banking allowance decreased by $14 million, resulting in the coverage ratio remaining essentially flat at 1.76%. Turning to page six, I'll now discuss liquidity. Total liquidity reserves in the quarter increased about 9 billion to approximately $132 billion. Our cash position ended the quarter at approximately 49 billion, up about 4 billion from the prior quarter, driven primarily by continued strong deposit growth. Our preliminary average liquidity coverage ratio during the third quarter was 163%. up from 155 percent in the second quarter. Turning to page seven, I'll cover our net interest margin. Our third quarter net interest margin was 7.11 percent, 41 basis points higher than last quarter and 42 basis points higher than the year-ago quarter. The sequential increase in NIM was largely the result of three factors. First, we had higher card and auto yields. As a reminder, the card yield benefited from a full quarter impact of the termination of the revenue sharing agreement with Walmart. The removal of revenue sharing increased the total company NIM by 12 basis points quarter over quarter and 22 basis points relative to the year ago quarter. Second, there was one additional day in the third quarter. And finally, we had a higher mix of card loans on the balance sheet. Turning to slide eight, I will end by discussing our capital position. Our common equity tier one capital ratio ended the quarter at 13.6%, 40 basis points higher than the prior quarter. Higher net income in the quarter was partially offset by the impact of dividends, loan growth, and $150 million of share repurchases. As a reminder, the announcement of the acquisition of Discover constituted a material business change. Therefore, we continue to be subject to the Federal Reserve's pre-approval of our capital actions until the merger approval process has concluded. With that, I will turn the call over to Rich. Rich?