Capital One Financial Corporation

Good day and thank you for standing by. Welcome to the Capital One Q1 2025 earnings call. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. 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 to everyone. To access our live webcast of this call, please go to the Investors section of Capital One's website at CapitalOne.com and follow the links from there. A copy of the earnings presentation, press release, and financial supplement can be found in the Investors section of Capital One's website at CapitalOne.com by selecting Financials and then Quarterly Earnings Releases. With me this evening 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 are going to walk you through our presentation, summarizing our first quarter results for 2025. 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 factor section of our annual and quarterly reports accessible at Capital One's website and filed with the SEC. And now I'll turn the call over to Mr. Yonnell. Andrew.

Thanks, Jeff, and good afternoon, everyone. I will start on slide three of tonight's presentation. In the first quarter, Capital One earned $1.4 billion, or $3.45 per diluted common share. Included in the results for the quarter were adjusting items for legal reserve activities and Discover integration expenses. Net of these adjusting items, first quarter earnings per share were $4.06. Pre-provision earnings in the first quarter were largely flat to the fourth quarter at $4.1 billion. On an adjusted basis, pre-provision earnings increased 2% from the fourth quarter. Revenue in the linked quarter declined 2%, driven by two fewer days in the quarter. Non-interest expense decreased 5% on an adjusted basis, driven by declines in both marketing and operating expenses. Our provision for credit losses was $2.4 billion in the quarter, a decrease of $273 million compared to the prior quarter. The decrease was driven by $148 million lower net charge-offs and $123 million larger reserve release. Turning to slide four, I will cover the allowance in greater detail. We released $368 million in allowance this quarter, bringing the allowance balance to $15.9 billion. Our total portfolio coverage ratio decreased five basis points to 4.91%. 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 $458 million in allowance. The allowance release was driven by continued favorable credit performance in the quarter, partially offset by higher consideration to our downside economic scenario and increased qualitative factors to account for heightened uncertainty. The coverage ratio remained largely flat as the impact of the allowance release was offset by the denominator effect from the pay down of seasonal balances. As a reminder, Our domestic card coverage ratio is about 100 basis points above CECL Day 1, after taking into account the impact of the termination of the Walmart agreement. The allowance balance in our consumer banking segment was largely flat at $1.9 billion. Observed credit favorability and the impact of stable auction prices was largely offset by growth in the auto business. The coverage ratio decreased by four basis points. And finally, our commercial banking allowance increased by $117 million. The billed-in allowance was driven by increased qualitative factors to account for heightened uncertainty, as well as specific reserves for a small number of individual credits. Coverage ratio increased by 12 basis points to 1.73%. Turning to page six, I'll now discuss liquidity. Total liquidity reserves in the quarter increased to $131 billion, about $7 billion higher than last quarter. Our cash position ended the quarter at approximately $49 billion, up $5 billion from the prior quarter. The increase was driven by continued strong deposit growth in our retail banking business and the pay down of seasonal card balances. Our preliminary average liquidity coverage ratio during the first quarter was 152%. Turning to page seven, I'll cover our net interest margin. Our first quarter net interest margin was 6.93%, 10 basis points lower than last quarter. The quarter over quarter decrease was driven by the 15 basis point impact of having two fewer days in the quarter. Beyond day count, NIM increased five basis points as the beneficial impact of the reduction in the rate paid on our deposits was only partially offset by the seasonal impact of lower average card loans and higher cash. On a year-over-year basis, NIM increased 24 basis points, driven by a favorable mix towards card loan and the termination of the revenue sharing agreement with Walmart. partially offset by one fewer day relative to last year's leap year. 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%, approximately 10 basis points higher than the prior quarter. Net income in the quarter and the impact of seasonal loan declines were largely offset by the impact of the final CECL phase-in dividends, and $150 million of share repurchases. Looking ahead, we expect the record date for the second quarter dividend for both Discover and Capital One to be after the May 18th closing date. As a result, we expect current Discover shareholders will be shareholders of Capital One's common stock as of the expected record date and will therefore receive Capital One's $0.60 second quarter dividend subject to board approval. With that, I will turn the call over to Rich.