Mihir Bhatia

Mihir Bhatia inquired about the Fiserv partnership, its objectives, the interest from regional banks, how the product would function, and unit economics. He also asked if Max Levchin's thinking on the Affirm Card has evolved, specifically regarding its use as a top-of-wallet vs. considered purchase card.

Answer

Max Levchin, Founder and CEO of Affirm Holdings, explained that the Fiserv partnership aims to offer Affirm's platform to financial institutions through their core banking providers, enabling them to offer BNPL capabilities on their debit cards. He noted it's too early for unit economics. Regarding the Affirm Card, he stated that usage bifurcates, with some consumers using it as a top-of-wallet card, while the majority use it for considered purchases, and Affirm is excited to build differentiated products for these segments.

Mihir Bhatia inquired about the Fiserv partnership, interest from banks, product functionality, unit economics, and the evolution of Affirm's thinking on the Affirm Card's usage as a top-of-wallet card.

Answer

Max Levchin, Founder and CEO, stated it's early for Fiserv unit economics but noted excellent interest, aiming to enable banks to offer BNPL on their debit cards using Affirm's platform. He explained that Affirm Card usage bifurcates, with a minority using it as top-of-wallet and the majority for considered purchases or via wallet partnerships.

Mihir Bhatia asked about the deceleration in WEX's direct payables business growth, from 25% in H1 2025 to 15%+ in Q4, despite investments, and what growth expectations are for 2026.

Answer

Melissa Smith, Chair and CEO, WEX, explained that the deceleration was due to lumpiness in customer spend post-implementation rather than a fundamental issue. She expects continued double-digit growth in 2026, driven by consistent salesperson additions and high customer retention, aligning with the investment thesis.

Mihir Bhatia sought clarification on the 6%-7% Q1 benefits account growth, specifically whether it includes the UAW benefit and if a step-down in growth is expected in subsequent quarters after the enrollment season.

Answer

Jagtar Narula (CFO, WEX) clarified that Q1 benefits account growth is expected to be 5%-7% and includes the UAW benefit, which will continue. He explained that a typical step-down in account numbers occurs from Q1 to Q2 due to new onboarding in Q1 and customer attrition in Q2, but the UAW contract itself is not an account loss, rather its year-over-year comparison impacts growth rates in the second half.

Mihir Bhatia asked about WEX's underwriting practices in the Mobility segment, particularly concerning the challenging trucking backdrop and potential bankruptcy risks, and requested a reminder of the business's fuel and interest rate sensitivities.

Answer

Melissa Smith, Chair and CEO, WEX Inc, stated that WEX tightened credit standards some time ago and invested in risk models, including AI, resulting in good asset quality despite market weakness. She mentioned new prepaid options for smaller businesses. Jagtar Narula, CFO, WEX Inc, detailed the sensitivities: a $0.10/gallon fuel price change impacts revenue by +/- $20 million and EPS by +/- $0.35; a 100 basis point interest rate change impacts revenue by +/- $40 million, and EPS by -$0.30 for an increase and +$0.35 for a decrease.

Mihir Bhatia from Bank of America asked about WEX's credit underwriting strategy in the challenging Mobility segment, particularly concerning the trucking backdrop, and how WEX manages credit risk amidst ongoing investments. He also sought clarification on the business's sensitivity to fuel prices and interest rate fluctuations.

Answer

Melissa Smith, Chair and CEO of WEX Inc., detailed that WEX proactively tightened credit standards in Mobility, utilizing advanced risk models and AI, and introduced prepaid options for smaller businesses, maintaining good asset quality. Jagtar Narula, CFO, outlined that a $0.10/gallon fuel price change impacts annual revenue by +/- $20 million and EPS by +/- $0.35, while a 100 basis point interest rate change affects annual revenue by +/- $40 million and EPS by approximately +/- $0.30-$0.35, with an inverse relationship for EPS due to liabilities.

Mihir Bhatia followed up on the portfolio review commentary, asking about the degree of customer and operational overlap between WEX's segments. He also inquired about the specific levers the company could pull to manage costs if the economy slows down.

Answer

CEO Melissa Smith described cross-sell activity between Mobility and Benefits and noted increasing synergies in the technology stack, with common infrastructure and some shared applications. CFO Jagtar Narula identified levers for a slowdown, including scrutinizing hiring, re-evaluating investment spend based on ROI, and cutting discretionary costs like travel. Melissa Smith added a focus on automation and AI to improve efficiency and customer experience while preserving key investments.

Mihir Bhatia sought to clarify the ongoing impact of the large customer transition in the Corporate Payments segment and whether the current quarter reflects a new run-rate. He also asked for confirmation of the fuel price impact on EPS guidance and the company's assumption for same-store sales softness.

Answer

CFO Jagtar Narula clarified that the impact from the OTA customer transition will increase further in Q4 before stabilizing next year, consistent with the previously guided ~1% impact to 2025 revenue. He also specified the Q4 EPS impact from lower fuel prices is about $0.23, in line with historical sensitivity, and confirmed that guidance assumes the recent same-store sales softness will persist through Q4.

Mihir Bhatia asked about the potential impact of higher tax refunds on OneMain Financial's customer base, specifically concerning credit performance and loan demand, and whether this is factored into the company's guidance. He also sought clarification on the expected trend for interest yields in 2026, considering the growth of credit card and newer products.

Answer

Jenny Osterhout (CFO, OneMain Financial) explained that tax season drives credit performance, improving delinquencies in Q1 and lowering losses into Q3. She noted that if returns are better than expected, it could lead to the lower end of their loss guidance. She doesn't expect higher refunds to significantly mute loan demand, which is driven by product innovation. Regarding yields, she expects consumer loan yields to remain around current levels (22.5% in Q4 2025) in 2026, assuming a steady product mix and competitive environment, noting that most yield gains from pricing actions since mid-2023 have been realized.

Mihir Bhatia asked for insights into the expected trend of OneMain Financial's interest yields for 2026, considering the growing credit card product and other new offerings.

Answer

Jenny Osterhout (CFO) noted that consumer loan yield was 22.5% in Q4 2025, up 26 basis points year-over-year, and 43 basis points for the full year. She stated that future yields would depend on product mix, with auto loans having lower yields but better credit performance. Most gains from pricing actions since mid-2023 have been realized. She expects 2026 yields to be similar to current levels, given the company's focus on risk-adjusted returns.

Mihir Bhatia asked about the competitive landscape's impact on yield outlook and whether potential inflation from tariffs would affect credit performance differently now, given the underwriting changes made since 2022.

Answer

CEO Douglas Shulman described the competitive environment as 'constructive,' allowing for strong origination growth at good pricing, and highlighted their balance sheet as a key advantage. He explained that their credit outlook can tolerate some inflation, as the 30% stress buffer applied to originations since August 2022 provides a significant cushion for profitability even if economic conditions worsen.

Mihir Bhatia asked for an expansion on the company's forward flow and whole loan sale strategy, particularly how they balance originating for their own balance sheet versus for private capital. He also inquired about the long-term implications for loss rates as the company continues to originate a higher proportion of loans in its top risk grades.

Answer

CFO Jenny Osterhout characterized whole loan sales as 'additive versus necessary,' emphasizing that strong public market access is their key differentiator. She noted the program was expanded to $900 million for 2025, providing funding diversity and flexibility, but that they remain disciplined on economics. CEO Douglas Shulman explained that they don't manage to a specific loss rate but to a 20% return on equity for each loan. While the shift to higher-quality loans is driving losses down toward their long-term 6-7% target, the ultimate goal is profitability and capital generation, not just a low loss number.

Mihir Bhatia from Bank of America asked if any loosening of credit standards at the margins contributed to the strong origination growth. He also inquired about evolving consumer behavior regarding online channels versus the branch network and the continued strategic importance of the physical branches.

Answer

CEO Douglas Shulman clarified that the credit box was not loosened in aggregate. Instead, growth was driven by product innovations like using direct payroll data for income verification, which improves the customer experience and pull-through rate without compromising credit quality. He affirmed their commitment to an omnichannel strategy, stating the branch network remains a key competitive differentiator that builds customer trust, even for those who transact digitally.

Mihir Bhatia inquired about lessons learned from Corpay's PayByPhone divestiture, reflecting on what worked and what didn't. He also asked for clarity on the timelines and implementation lift for various corporate payments priorities, distinguishing between meaningful 2026 contributors and longer-term initiatives.

Answer

CEO Ronald Clarke shared that while the initial thesis for PayByPhone didn't fully materialize, Corpay successfully tripled its profits and sold it for 50% more than the purchase price. He identified monetization in payables and Alpha consolidation/synergies as short-term (2026) contributors, while the Mastercard FI channel opportunity and international bank account capabilities are longer-term initiatives.

Mihir Bhatia asked about lessons learned from the PayByPhone divestiture process and the timelines and key contributors for various corporate payments initiatives, including building U.K. payables, adding enterprise accounts, new monetization options, and growing sales in the FI channel.

Answer

Ron Clarke, Chairman and CEO, shared two lessons from PayByPhone: the initial thesis of leveraging active users for network expansion didn't fully materialize, but the company still generated a significant return by tripling profits and selling it for 50% more than the purchase price. For corporate payments initiatives, he identified monetization in payables and Alpha consolidation/synergies as short-term 2026 contributors, while the Mastercard FI channel opportunity and international bank account capabilities are longer-term building blocks.

Mihir Bhatia asked for a big-picture perspective on stablecoins, inquiring about the opportunities and risks to Corpay's existing business, the most exciting aspects, and the transaction economics compared to traditional payment rails.

Answer

President, Chairman & CEO, Ronald Clarke, framed stablecoins as part of a new payment ecosystem that Corpay will incorporate as another tool, particularly for 24/7 and exotic geography payments. He sees the main opportunity in providing on/off-ramp services between the new digital and traditional fiat ecosystems. He clarified that economics are not a major factor, as the vast majority of B2B cross-border revenue comes from currency conversion, not the minimal cost of the payment rail itself.

Mihir Bhatia asked a broad, strategic question about stablecoins, inquiring about the opportunities and risks they present to Corpay's existing business, the most exciting aspects, and the transaction economics compared to traditional payment rails.

Answer

President, Chairman & CEO Ronald Clarke framed it as a 'new payment ecosystem' beyond just stablecoins. He stated Corpay will incorporate these new rails as another tool, with key use cases being 24/7 payments and exotic geographies. The main opportunity is serving the new digital asset players by bridging their ecosystem to the traditional fiat world. Economically, Clarke explained that since 90%+ of value in B2B cross-border comes from currency conversion, not the payment rail, the impact of free blockchain rails is de minimis on revenue.

Mihir Bhatia inquired about specific regulatory or government actions Enact is monitoring, such as potential FHA re-rate cuts or affordability agendas, and also asked about the company's assumptions for the 2026 mortgage market, including new insurance written (NIW) and insurance in force (IIF) trends, and expectations for default rates.

Answer

Rohit Gupta, President and Chief Executive Officer, stated that Enact is actively engaged with the administration, Treasury, FHFA, GSEs, and policymakers on topics like inventory, affordability, credit scores, and institutional investor bans. For 2026, he projected a 10%-15% increase in the mortgage insurance market size based on external purchase origination forecasts. Dean Mitchell, Chief Financial Officer and Treasurer, added that new delinquencies are expected to continue moderating from 2025 to 2026, with recent book years performing in line with or better than expectations.

Mihir Bhatia asked about specific regulatory or government actions Enact is monitoring, such as a potential FHA re-rate cut or affordability initiatives, and also sought insight into the company's 2026 mortgage market assumptions for new insurance written (NIW) and insurance in force.

Answer

CEO Rohit Gupta confirmed active engagement with the administration and policymakers on topics like inventory and affordability, providing input on ideas such as credit scores and GSE actions, but noted no specific idea was high on the execution list. Regarding 2026, Mr. Gupta indicated planning for a 10%-15% increase in the MI market, driven by purchase originations, based on external forecasts. CFO Dean Mitchell added that default rates are trending as expected, with newer vintages contributing more delinquencies as they age, and anticipated a continued moderation in new delinquencies year-over-year for 2026.

Mihir Bhatia of Bank of America inquired about the delinquency outlook, asking if negative housing headlines are appearing as stress in Enact's data, and whether to expect typical seasonality in Q3 new notices given different vintage sizes. He also requested an update on the regulatory front in Washington.

Answer

President & CEO Rohit Gupta emphasized that the labor market and borrower balance sheets remain resilient, with no meaningful stress yet appearing in their prime borrower data. He acknowledged regional home price slowdowns but noted they are comparable to 2022 trends. EVP, CFO & Treasurer Dean Mitchell added that new delinquency rates are consistent with pre-pandemic levels and cure rates remain elevated due to embedded HPA. On the regulatory front, Gupta confirmed Enact is actively engaged with the GSEs, FHFA, and legislators on all key housing finance topics.

Mihir Bhatia inquired about Enact's underwriting and pricing adjustments in response to recent macroeconomic uncertainty, particularly actions taken in April. He also asked about the tangible impacts of evolving government policies on loss mitigation efforts and cure rates.

Answer

President and CEO Rohit Gupta stated that Enact is actively monitoring economic conditions and has used its Rate360 engine to strengthen pricing in reaction to market uncertainty. He noted that while the company maintains prudent underwriting, it continues to support qualified borrowers. Regarding policy, Gupta mentioned constructive engagement with the FHFA and clarified that recent significant loss mitigation changes have been concentrated on FHA/VA loans, while strong GSE programs continue to support favorable cure trends.

Mihir Bhatia inquired about Enact's reaction to recent macroeconomic uncertainty, asking if the company has adjusted its underwriting and pricing standards, and questioned the on-the-ground impact of evolving government policies on loss mitigation.

Answer

President and CEO Rohit Gupta explained that Enact is actively monitoring economic conditions and has used its Rate360 engine to strengthen pricing in response to uncertainty. He noted that recent government loss mitigation changes have primarily affected FHA/VA loans, while GSE programs remain strong and benefit from post-COVID best practices.

Mihir Bhatia of Bank of America inquired about the reserving methodology for upcoming hurricane-related delinquencies, the growth trajectory of Enact Re, and potential housing policy changes under a new administration.

Answer

CFO and Treasurer Dean Mitchell explained that reserving for hurricanes Helene and Milton will depend on the magnitude of Q4 delinquencies, noting that historically such events lead to high cure rates and low claims. President and CEO Rohit Gupta described Enact Re as a long-term, capital-efficient growth opportunity that will grow gradually over quarters and years. Regarding policy, Gupta stated it's too early to speculate on specific changes but emphasized that mortgage insurance has strong bipartisan support and the company has a track record of navigating different administrations successfully.

Mihir Bhatia asked about the slight decline in the in-force premium yield this quarter after being steady for most of 2025. He also questioned why insurance in force is expected to remain flat even with a potentially larger market, given the expectation of lower persistency, which didn't materialize in Q4 despite increased new insurance written (NIW). Finally, he asked for insights into credit trends and default rates for 2026 and 2027, considering vintage size and persistency.

Answer

Nathan Colson, Chief Financial Officer and Chief Risk Officer, attributed the slight decline in in-force premium yield to increased Q4 new business due to refinance activity, which boosts ending in-force but not premium in the first month. Tim Mattke, Chief Executive Officer, clarified that increased refinance activity, even with higher NIW, typically leads to downward pressure on persistency, offsetting growth in insurance in force. Mr. Colson added that expectations for 2026 are for a similarly sized market with modest home price appreciation. He noted that new business written in 2023-2024 was off the lows, and there might be more upside risk to NIW, which could benefit the in-force delinquency rate, though any impact would be modest.

Mihir Bhatia from Bank of America asked about the slight decline in the in-force premium yield in the fourth quarter of 2025 after a period of stability. He also questioned why insurance in force is projected to remain flat despite a potentially larger market, citing expected persistency giveback, and sought insights into future credit trends, including default rates for 2026/2027 and the impact of vintage size on delinquency rates.

Answer

CFO and Chief Risk Officer Nathan Colson explained that the minor dip in in-force premium yield was within the margin of flat, potentially influenced by increased Q4 new business from refinance activity boosting ending in-force without immediate premium collection. CEO Tim Mattke clarified that increased refinance activity typically exerts downward pressure on persistency, which can offset new insurance written volume, leading to flat insurance in force despite a larger market. Mr. Colson added that vintage size might positively impact the in-force delinquency rate, with new business off its lows and potential upside risk to new insurance written from refinance volume.

Mihir Bhatia asked about the potential impacts of GSE reform on MGIC, the conditions required to lower the initial claim rate assumption, and the company's view on a normalized delinquency rate or credit cost.

Answer

CEO Timothy Mattke stated that while GSE reform is uncertain, it could increase volume for private MI, emphasizing the need for proper guardrails. CFO Nathaniel Colson added that lowering the claim rate would require conviction in a sustained favorable economy. He defined a 'through the cycle' underwriting loss ratio as being in the 20-40% range, far above recent performance.

Mihir Bhatia of Bank of America asked about the key high-impact initiatives American Express is focusing on for 2026, following the significant Platinum refresh in 2025, to understand the company's priorities for the upcoming year.

Answer

CEO Steve Squeri outlined 2026 priorities, including continuing to win in the premium space, building the commercial position, expanding network and coverage (especially internationally), developing digital capabilities for small business customers, and combining Resy and Tock. He characterized 2026 as 'more of the same' in terms of ongoing product and technology refreshes, building partnerships, and delivering value to card members.

Mihir Bhatia inquired about the high-impact initiatives and strategic priorities for American Express in 2026, following the significant Platinum refresh in 2025.

Answer

Steve Squeri, Chairman and CEO, outlined priorities aligned with strategic goals: winning in the premium space, building commercial position, and network initiatives. He emphasized continuing to leverage the Platinum launch, expanding international coverage, building digital and small business capabilities, and integrating Resy and Tock. He characterized 2026 as 'more of the same' in terms of ongoing product and technology refreshes, partnership building, and delivering value to card members.

Mihir Bhatia inquired about American Express's marketing spend strategy for Q4 and longer term into 2026, asking for details on the allocation between broad-based sponsorships/brand building and more micro-targeted efforts like card member bonuses and retention.

Answer

CFO Christophe Le Caillec explained that the largest variable component of marketing spend is welcome incentives. He emphasized a disciplined approach, balancing the desire to invest more with the need for efficiency, ensuring every dollar meets profitability criteria. He noted increasing sophistication in measuring and tracking returns on marketing investments, which guides spending decisions rather than a fixed budget.

Mihir Bhatia of Bank of America asked how increased competition has impacted customer acquisition strategies, including costs, the mix of new customers, and the overall returns in the premium card space.

Answer

CFO Christophe Le Caillec explained that heightened competition has actually expanded the total market demand for premium products. This creates more opportunities for American Express to deploy marketing dollars at attractive returns, as customers considering any premium card almost inevitably consider the Platinum card. He noted that while the quantity of marketing spend is much higher than a decade ago, it is a direct result of this larger, more active market.

Mihir Bhatia noted the confident outlook and asked for more detail on the cost structure's flexibility to protect earnings in a choppy environment, beyond automatic adjustments like rewards.

Answer

CEO Stephen Squeri reiterated that long-term technology investments are non-negotiable. However, he confirmed there is 'tremendous' flexibility in the marketing budget, where acquisition thresholds can be raised, and also within the operating expense line. He stressed that the company will not cut costs to hit a near-term EPS target if it means sacrificing good long-term growth opportunities, a lesson applied during COVID.

Mihir Bhatia asked about the evolving competition from fintechs on the consumer side, particularly if rich cash-back offers from new entrants are impacting AXP's customer acquisition.

Answer

CEO Stephen Squeri stated that AXP has not seen any significant inroads from consumer fintechs. He explained that AXP's target customer values the unique balance of rewards, experience, and service, which is a proposition fintechs have not replicated. He pointed to record levels of consumer card acquisition as evidence that their model remains highly effective. He did acknowledge the tech-integrated competition on the SME side, which the company is addressing.

Mihir Bhatia of Bank of America asked about the drivers behind the acceleration in airline spending and whether investments in dining (Resy, Tock) are expected to make restaurant spending a larger, faster-growing part of the business.

Answer

CEO Stephen Squeri confirmed that the company is 'doubling down' on the restaurant category and expects to continue gaining share, making it a key growth driver. He downplayed the minor quarterly fluctuations in airline and restaurant growth rates, stating the 1-point change in each was not significant. He emphasized the strategic importance of dining, reinforced by the Gold Card refresh and recent acquisitions.

Mihir Bhatia from Bank of America asked about Bread Financial's priority regarding credit quality, specifically whether achieving the 6% net loss rate target is a near-term focus or if the company is comfortable in the 7% range while prioritizing growth. He also questioned the drivers behind the slowdown in the 2026 revenue outlook from 5% growth in Q4 2025 to low single digits, seeking clarification on the puts and takes.

Answer

Perry Beberman, Executive Vice President and Chief Financial Officer, clarified that getting back to 6% is a priority over time, but not by forcing it detrimentally to partners or customers. He emphasized dynamic underwriting based on credit quality and the natural healing of the existing portfolio. Regarding revenue, he attributed the Q4 2025's higher 5% growth to an easier comparable period due to accommodations from hurricane-related fee waivers in Q4 2024. He reiterated the expectation for stable to slightly up net interest margin (NIM) in the coming year, considering various puts and takes.

Mihir Bhatia asked about Bread Financial's credit strategy, specifically whether achieving the 6% net loss rate target is a near-term priority or if the company is comfortable in the 7% range while pursuing growth. He also questioned the drivers behind the projected slowdown in revenue growth from 5% in Q4 2025 to low single digits in the 2026 outlook.

Answer

Perry Beberman, Executive Vice President and Chief Financial Officer, clarified that reaching the 6% net loss rate is a priority over time, but the company will not force it, emphasizing profit-driven, dynamic underwriting. He explained that the higher Q4 2025 revenue growth was partly due to easier comparisons from Q4 2024, which included accommodations for hurricane-related fee waivers, and that the 2026 outlook anticipates a stable to slightly up net interest margin.

Mihir Bhatia asked about Bread Financial's outlook for credit sales into 2026, specifically addressing the moderation observed after a strong back-to-school season and expectations for holiday shopping, including insights from retail partners. He also inquired about the expected trend for interchange revenues, particularly given a significant step-up in the current quarter, and its relation to RSAs and big-ticket items.

Answer

Perry Beberman (EVP and CFO) noted that credit sales growth moderated in September and October but remained positive year-over-year. He anticipates retailers will be aggressive with early holiday discounts and promotions, as consumers are budget-conscious and seeking deals. Regarding interchange revenues, he explained that the line item is complex due to netting, with increased sales leading to higher compensation to partners (rewards, loyalty funding, revenue/profit shares), while softness in big-ticket purchases can pressure MDFs.

Mihir Bhatia asked about Bread Financial's credit sales forecast into 2026, noting moderation after a strong back-to-school season, and sought insights into holiday shopping expectations and retailer feedback. He also questioned the trend of interchange revenues, particularly as a percentage of credit sales, and the impact of RSAs and big-ticket items.

Answer

Perry Beberman (EVP and CFO) stated that early Q3 back-to-school sales were strong, with September and October moderating but remaining positive. He expects retailers to be aggressive with early holiday discounts as consumers seek deals. Regarding interchange revenues, he explained that RSAs are complex, with increased sales leading to higher partner compensation and lower big-ticket purchases pressuring MDFs, making forecasting challenging.

Mihir Bhatia from Bank of America inquired about the health of the consumer, trends in credit sales and loan growth, and the company's capital return plans, specifically regarding share buybacks.

Answer

EVP & CFO Perry Beberman stated that while the consumer remains resilient, the economic outlook is mixed. He noted that July sales trends were positive and that the company has reached the low end of its CET1 target range of 13-14%. Beberman confirmed that capital priorities remain funding growth, investing in the business, and returning capital to shareholders, with discussions ongoing with the board.

Mihir Bhatia asked for a quantification of the consumer spending pull-forward effect and inquired about the specific levers the company would pull if hard economic data begins to weaken in line with soft sentiment indicators.

Answer

EVP and CFO Perry Beberman stated it is difficult to precisely quantify the pull-forward effect but noted anecdotal evidence and mix shifts toward electronics and auto parts. He cautioned against extrapolating this short-term trend. If hard economic data were to follow sentiment downward, he said the company would maintain its current conservative credit posture, which would likely lead to slower improvements in credit metrics and potentially slower spending, but not a fundamental shift in strategy.

Mihir Bhatia inquired about the company's progress on balance sheet cleanup and the outlook for capital returns in 2025. He also asked if further credit tightening is needed to reach the long-term net loss rate target of ~6% and for a potential timeline to achieve this, assuming a stable macro environment.

Answer

EVP & CFO Perry Beberman stated that the capital deployment priority remains funding growth and reaching target capital ratios (e.g., ~14% CET1) before significant shareholder returns. On credit, he expressed comfort with the current posture, noting it's not a time to loosen. He explained that reaching the ~6% loss rate target is macro-dependent and unlikely by the end of 2025, as the current environment requires a slow, steady improvement rather than a quick, unemployment-driven cleanse.

Mihir Bhatia inquired about the outlook for credit losses, asking if they are nearing a peak and if 2025 losses could improve. He also asked about the status and current benefit of mitigants for the CFPB's late fee rule.

Answer

EVP and CFO Perry Beberman explained that future credit losses are highly dependent on the macroeconomic environment but expects a return to historical seasonality. He stated that it will take time for consumers to recover from prolonged inflation. Regarding the late fee rule, Beberman confirmed that mitigation efforts, such as APR increases and statement fees, are in the market but their benefits will build gradually over time and are not intended to cause over-earning before the rule's effective date.

Mihir Bhatia from Bank of America asked about Synchrony Financial's reserve rate, noting its proximity to day one CECL levels, and sought insight into its future trend in 2026, especially with a potential widening of the credit aperture. He also followed up on the progress of the "Pay Later" offering, inquiring if the reported 10% sales increase was across all platforms and for specific insights from major rollouts like Lowe's and Amazon.

Answer

CEO Brian Doubles explained that the reserve rate has decreased in line with the loss rate, and while the 2026 outlook assumes rising unemployment, there's a potential downward bias on the rate if the macro environment stabilizes, though dollar reserves will increase with growth. CFO Brian Wenzel expressed satisfaction with the "Pay Later" offering's performance across all partners, confirming strong new account growth and no cannibalization of existing products, indicating it attracts a net new customer base for future migration.

Mihir Bhatia followed up on Synchrony's PPPC (Product, Pricing, and Policy Changes), asking how they are tracking against expectations, particularly the 75% priced-in target by mid-year, and the expected NIM lift post-2026. He also asked about the expense growth guide being in line with receivables, inquiring about the nature of growth-related investments and expectations for positive operating leverage after 2026. Later, Mihir Bhatia asked about Synchrony's reserve rate, noting it's approaching day one CECL levels, and how it might trend into 2026, especially with a widening credit aperture. He also followed up on the Pay Later conversation, asking about its progress, the impressive 10% sales increase where offered side-by-side, its applicability across platforms, and any learnings or updates from Lowe's and Amazon rollouts.

Answer

CFO Brian Wenzel stated that Synchrony is slightly ahead of schedule on APR changes due to elevated payment rates, which accelerated the paydown of protected balances. He explained that significant investments are primarily in reserves for asset growth (Walmart, Lowe's, new programs), with expense components including launch costs, early marketing, and staffing, and mentioned increased capital spend in AI, cloud acceleration, and Health & Wellness. Regarding the reserve rate, CFO Brian Wenzel acknowledged it has come down in line with the loss rate, and suggested a potential downward bias on the rate if the macro environment stabilizes. CEO Brian Doubles reiterated satisfaction with Pay Later's performance, confirming no cannibalization of private label or co-brand cards and that Pay Later accounts are net new, attracting a new customer base.

Mihir Bhatia asked about the allowance ratio and reserve rate outlook, specifically the puts and takes in the quarter, macro scenario contributions, and expectations for a typical seasonal step down in Q4. He followed up on growth and credit actions, asking what is needed for average accounts to start trending up and if the unwinding is focused on existing accounts or new acquisitions.

Answer

Brian Wenzel (EVP and CFO) attributed the Q3 reserve rate reduction primarily to strong credit performance, including lower delinquency entry rates and stabilization in early-stage delinquency, with a minor contribution from macro improvement in the Moody's baseline. He expects Q4 reserve dollars to reflect asset growth but not as much seasonal balance. He noted that new account applications are up 10% year-over-year, average active accounts inflected sequentially in Q3, and that Q4 holiday re-engagement, Walmart, Amazon Pay Later, and PayPal modifications should drive increases, with some unwind being acquisition-related.

Mihir Bhatia asked what makes the new Walmart program different, particularly with OnePay's involvement, and followed up by asking if management believes loan growth has officially troughed.

Answer

President and CEO Brian Doubles stated the new Walmart program is different due to its advanced technology and deep integration within the One Pay app, creating a seamless digital experience. He highlighted a stronger value proposition and better partner alignment. EVP and CFO Brian Wenzel added that the program is structured to have significantly lower loss content than the prior portfolio. Regarding loan growth, management indicated that moving from -2% to a flat outlook for year-end implies an inflection point, expressing confidence in a return to growth in 2026.

Mihir Bhatia of Bank of America asked for commentary on the macro environment, including how retail partners are preparing for potential tariffs and whether recent weekly sales data showed any holiday-related pull-forward. He also inquired about the competitive landscape for large portfolio acquisitions and the status of partner contract renewals, referencing a disclosure in the 10-K.

Answer

CEO Brian Doubles differentiated between macro uncertainty and actual consumer behavior, noting that spending remains strong and responsible. He stated that while partners are discussing tariffs, it has not yet materialized in the data. CFO Brian Wenzel added that recent sales uplifts were driven by seasonal home trends and specific partner campaigns, not a broad pull-forward. On renewals, Wenzel confirmed they continue to make progress on extending contracts, with revenue beyond 2027 now in the high 80s.

Mihir Bhatia sought clarification on the net revenue outlook, asking about the underlying assumptions for portfolio repricing in 2025 and its potential for upside in 2026. He also questioned the credit outlook, asking if underwriting tightening is complete and what consumer behavior trends, like minimum payments and credit utilization, Synchrony is observing.

Answer

EVP and CFO Brian Wenzel confirmed they are slightly ahead of schedule on portfolio repricing but maintained previous guidance. He stated that broad-based credit tightening actions concluded in Q2 2024, with current actions being standard refinements. Wenzel noted that while minimum payments are up versus 2019, overall consumer line utilization has not changed significantly, and the company sees no major cracks in consumer health, suggesting a potential easing of credit restrictions in late 2025.

Mihir Bhatia asked how Synchrony's net interest margin (NIM) would perform in a declining rate environment and what gives the company confidence that the decline in purchase volume has stabilized.

Answer

EVP and CFO Brian Wenzel detailed that in a declining rate environment, NIM should see tailwinds from a lower cost of funds, particularly as high-yield savings and CDs reprice, and from higher revolve rates as payment rates moderate. On purchase volume, Wenzel stated that daily sales data shows stabilization after a decline in Q2 and Q3. CEO Brian Doubles added context that the slowdown is a normalization after record levels of consumer spend in the prior two years.

Mihir Bhatia requested an update on the debit transition to Discover, any learnings from the process, the timeline for transitioning credit portfolios, and the potential to move Brex cards to Discover.

Answer

Chairman and CEO Richard Fairbank reported that the debit migration to the Discover network is nearly complete, with network synergies already appearing. He stated that Capital One credit cards would originate on the Discover network by mid-2026, with existing cards moving early next year, and a long-term focus on increasing international acceptance. He noted the debit conversion has been smooth and met or exceeded expectations.

Mihir Bhatia requested an update on the debit transition to Discover, any learnings from that process for credit portfolios, and whether there's an opportunity to move Brex cards over to Discover.

Answer

Chairman and CEO Richard Fairbank reported that the debit migration to the Discover network is nearly complete, with network synergies already appearing in results. He stated that Capital One plans to originate credit cards on the Discover network by mid-year and move some existing credit cards early next year. Longer term, the focus is on building international acceptance and strengthening the network brand. Mr. Fairbank expressed satisfaction with the smoothness of the debit conversion and customer take-up.

Mihir Bhatia asked about Capital One's recession resiliency, including the levers it can pull during a downturn and how its position has changed compared to the last 'normal' recession 10-15 years ago.

Answer

Richard Fairbank, Chairman and CEO, emphasized that their business model is built for resilience, with underwriting stressed for downturns. He noted key differences from the past include having card assets on-balance sheet and operating under CECL. Executive Jeff Norris added that their modern technology provides significant advantages in speed, data granularity, and AI-driven diagnostics, enhancing their ability to monitor credit and react quickly.

Mihir Bhatia asked for the puts and takes on Net Interest Margin (NIM) for 2025 and inquired about the capital return strategy, specifically whether the pace of buybacks is being conservatively managed due to the pending deal approval.

Answer

CFO Andrew Young noted that Q1 NIM will see a ~15 basis point decrease from day count. Longer-term, he identified modest asset sensitivity as a headwind, while a steepening yield curve and continued card loan growth are potential tailwinds. On capital return, Mr. Young confirmed the pending deal influences their approach, as they are subject to regulatory pre-approval. He expects a slower repurchase pace until the deal closes and they can reassess capital needs as a combined company.

Mihir Bhatia requested details on the Venture X card portfolio, asking about its growth, materiality to the overall card business, and the performance trends that are encouraging further investment in the premium card space.

Answer

Chairman and CEO Richard Fairbank expressed strong satisfaction with the market response to both the consumer and business Venture X cards. He positioned these products as key milestones in a long-term strategy to win at the top of the market, which also includes investments in the Capital One Travel portal and airport lounges. While not providing specific metrics, he emphasized that winning requires a comprehensive effort to build a premium brand and experiences. He confirmed the strategy's success by noting that the company's fastest purchase volume growth is coming from its highest-spending customer segments.

Mahir Bhatia followed up on underwriting guardrails, asking if Fannie Mae's removal of minimum credit score requirements or other Washington initiatives are leading to originators attempting to approve more loans that might not have qualified previously.

Answer

Mark Casale, Chairman and CEO, stated that GSE systems (DU and LP) have not changed, preventing lenders from easily 'getting things past' them. He noted that lenders are focused on efficient origination costs rather than credit expansion, and Essent's credit engine is credit score agnostic, performing well even with more disparate data.

Mihir Bhatia of Bank of America inquired about the performance of the EssentEDGE credit engine, the potential business threat from AI tools helping borrowers cancel MI more easily, and the outlook for operating expenses.

Answer

Mark Casale, Chairman & CEO, stated that the best evidence of EssentEDGE's success is the company's higher earned premium yield compared to peers with similar default rates. He acknowledged that AI could facilitate MI cancellations but does not view it as a significant threat, seeing it as a net positive for borrowers. CFO David Weinstock addressed OpEx, reaffirming the full-year guidance of $160-$165 million and noting they are tracking toward the lower end.

Mihir Bhatia from Bank of America inquired about the evolution of unit economics on new business over the past few years and requested an update on the company's title business, including its performance and strategic outlook.

Answer

Chairman and CEO Mark Casale explained that unit economics have remained strong, targeting a 12-14% return range, and likely improved in late 2022. He highlighted the difference between these strong new business economics and the reported GAAP ROE, attributing the gap to the strategic value of holding excess capital for defensive or offensive opportunities. Regarding the title business, Casale stated its performance is as expected in a slow transaction market and that he is confident in the new leadership team's ability to position it for growth when interest rates decline.

Mihir Bhatia of Bank of America Corporation asked for clarification on the larger-than-usual quarterly increase in default inventory and inquired about a potential shift in investment philosophy given the increase in corporate debt holdings.

Answer

Mark Casale, Chairman and CEO, attributed the default inventory jump to seasonality and the normalization of cure activity post-forbearance. David Weinstock, CFO, added this reflects a return to normal pre-COVID seasonality. Regarding investments, Casale explained there was no change in philosophy; the company is simply returning to its normal asset mix after favoring short-term treasuries in 2022.

Mihir Bhatia of Bank of America sought an update on the timing of the divestitures for the mortgage conduit, title, and real estate services businesses, which were previously targeted for completion by Q3 2026. He also questioned what factors would lead Radian to adjust its initial default-to-claim rate below the current 7.5%, especially given the high cure rates observed. Furthermore, he asked if post-COVID changes in the housing and mortgage servicing backdrop, such as increased home equity or forbearance programs, have fundamentally altered cure rate trends compared to pre-COVID periods.

Answer

Rick Thornberry, CEO of Radian Group, confirmed the divestiture process is on track for completion by Q3 2026, noting significant inbound interest and active engagement with bankers. Sumita Pandit, President and CFO, explained that the 7.5% default-to-claim rate is a through-the-cycle assumption, updated a few quarters prior, and is considered prudent despite current favorable cure trends. Rick Thornberry added that while home equity growth and improved servicer muscle memory from COVID-era forbearance have positively impacted cure rates, the company continuously evaluates market uncertainties to maintain a through-the-cycle view for reserving.

Mihir Bhatia questioned the mechanics of the share buyback, asking if the 10b5-1 plan's structure had changed to allow for more opportunistic execution. He also asked about factors beyond home price appreciation that are driving the historically strong cure rates.

Answer

President and CFO Sumita Pandit confirmed the buyback is still executed via a 10b5-1 plan, but the company has adjusted the execution grid to be more aggressive given the perceived value in the stock. CEO Richard Thornberry addressed the cure rate drivers, acknowledging embedded equity as a key factor but also crediting improved industry and government loss mitigation structures, which he called 'muscle memory' from the GFC and COVID. He also cited the strong employment cycle as a significant contributing factor.

Mihir Bhatia sought to clarify the portfolio yield, asked for the insurance in-force growth outlook for 2025, questioned the credit quality of recent originations, and inquired about the issuance cadence and materiality timeline for Radian Mortgage Capital.

Answer

CFO Sumita Pandit confirmed the overall portfolio yield was 3.9%, with new money yields between 4.75% and 5.25%. CEO Rick Thornberry declined to give specific in-force growth guidance but noted the positive combination of high persistency and a solid purchase market. Derek Brummer, President of Radian Mortgage Insurance, stated that 2023 origination quality was high and performance has exceeded expectations. Rick Thornberry described Radian Mortgage Capital as a medium-term opportunity and said the company expects to increase its securitization pace in 2025.

Mihir Bhatia from Bank of America asked about the competitive pricing environment in the mortgage insurance market and questioned the rationale for maintaining an 8% default-to-claim rate assumption despite consistently lower actual rates and high cure rates.

Answer

Derek Brummer, President of Radian Mortgage Insurance, described the pricing environment as rational and stable, allowing Radian to leverage analytics to find value. CFO Sumita Pandit explained the 8% default-to-claim assumption is a prudent, through-the-cycle view. CEO Rick Thornberry added that this conservatism means the business is outperforming pricing assumptions, and while the housing cycle supports high cure rates, they will continue to monitor trends before making changes.

Mihir Bhatia questioned the primary factors impacting the conversion rate, specifically the role of UMI, and sought more detail on Upstart's efforts to limit conversion rate variability. He also asked about the drivers and credit implications of increased repayment speeds.

Answer

Sanjay Datta, CFO of Upstart, confirmed that model conservatism due to macro signals was the dominant driver of conversion rate changes. Paul Gu, CTO of Upstart, explained that improvements in calibration methodology are expected to cut unwanted month-to-month volatility by about 50%. Sanjay Datta also noted that increased repayment speeds are an empirical observation, likely reflecting improving consumer health, which could lead to immediate model conservatism but is a positive long-term signal.

Mihir Bhatia questioned if UMI was the sole factor impacting the conversion rate, asked for elaboration on limiting future variability, and inquired about the drivers behind increased repayment speeds, their credit implications, and any related delinquency rate movements.

Answer

CFO Sanjay Datta confirmed model conservatism as the dominant conversion rate driver, while CTO Paul Gu detailed improvements to reduce 'unwanted variance' in the model's macro response by 50%. Sanjay Datta noted increased repayment speeds across the board, suggesting improving consumer health, which in the immediate term leads to model conservatism (higher coupons) to offset shorter loan duration, with no direct delinquency rate movements.

Mihir Bhatia of Bank of America asked about the expected funding partner mix for new products, the potential for Q3 conversion rates to benefit from the full impact of Model 22, and for an update on the Walmart partnership.

Answer

CEO Dave Girouard stated that new product funding will involve a mix of banks, credit unions, and institutional capital, with depository partners likely playing a larger role in home and auto. He cautioned that conversion rate gains are often reinvested into growth. He confirmed the Walmart partnership remains successful but offered no new details.

Mihir Bhatia asked about the expected funding partner mix for new home and auto products, the outlook for conversion rates following the launch of Model 22, and for an update on the Walmart partnership.

Answer

CEO Dave Girouard indicated that funding for new products will involve a mix of banks, credit unions, and institutional capital, with a likely heavier weighting toward depository partners for HELOCs. He declined to forecast conversion rates, noting they are actively managed against growth, and confirmed the Walmart partnership remains successful with no new details to share.

Mihir Bhatia asked how funding partners have reacted to recent market volatility and whether Upstart has adjusted its underwriting or business operations in response to increased macro uncertainty.

Answer

CFO Sanjay Datta and CEO David Girouard both confirmed that there have been no pullbacks from any funding partners, including private credit firms, banks, or credit unions, stating the partnerships are performing as designed. Girouard added that Upstart operates conservatively, with guidance assuming no Fed rate cuts, and relies on its highly adaptive models to manage risk.

Mihir Bhatia asked for commentary on competitive intensity and margins at the channel level, and followed up with a question about the protections for MSR owners and brokers in subservicing arrangements.

Answer

CFO Brian Brown explained that the TPO channel saw pricing pressure in January and April due to seasonality and market volatility, respectively, but noted conditions were improving in May. On the follow-up, Brown detailed that Rocket supports various subservicing models, including assisting MSR owners with recapture or operating under non-solicitation agreements, emphasizing flexibility to meet partner needs.

Mihir Bhatia inquired about the credit performance of different loan vintages, the average equity in defaulted loans, and the financial impact of the renewed IT services agreement with Tata Consultancy Services (TCS).

Answer

President and CEO Adam Pollitzer explained that while newer loan vintages show higher incurred loss ratios due to less home price appreciation, the underlying borrower quality remains consistent with past vintages. He also stated the TCS renewal was on favorable terms and would not materially change the company's expense run rate. CFO Aurora Swithenbank added that the average mark-to-market loan-to-value (LTV) on the defaulted loan portfolio is 73.2%.

Mihir Bhatia from Bank of America inquired about the optimal level of PMIERs excess capital, the stability of the expense ratio despite scale, and the reserving methodology for hurricane-related defaults.

Answer

President and CEO Adam Pollitzer described their capital strategy as 'balanced' and comfortable with current levels. CFO Aurora Swithenbank and Pollitzer explained the expense ratio is stable and within targets, with some calculation nuances related to reinsurance. Pollitzer also confirmed that hurricane-related defaults are reserved at a lower rate due to historically higher cure rates.

Mihir Bhatia from Bank of America requested more detailed 2025 guidance at the segment level for both revenue and contribution margin, with a focus on the Financial Services segment.

Answer

CFO Chris Lapointe projected 60-65% revenue growth for Financial Services, low-double-digits to teens for Lending, and low-double-digits to teens for the Tech Platform. He expects continued margin expansion in Financial Services. CEO Anthony Noto detailed investments in SoFi Plus, Invest, SMB lending, and Credit Card to drive future growth.

Mihir Bhatia inquired about the Financial Services segment's monetization path, asking for targets on revenue per product and what the next major growth driver might be after the loan platform.

Answer

CEO Anthony Noto stated there is significant upside to the current $81 revenue per product. He detailed future monetization opportunities in SoFi Invest, SoFi Money, and credit cards, while noting SMB and Protect are still early-stage. He also highlighted that the segment's current profitability is masked by long-term investments in the credit card and Invest businesses, which are still in their growth-focused, pre-profitability phases.