Charge-Offs Outlook
Q: Will charge-offs rise in the second half of the year?
A: Management expects charge-offs to stabilize at about 15% above 2019 levels ( - ). They note that delinquencies have leveled off, tracking consistently with normal seasonality, and charge-offs are now catching up to this stabilized trend. By focusing on stable benchmarks like 2018 and 2019, they conclude that the charge-off rates are settling without expected increases in the latter half of the year.

Impact of CFPB's Late Fee Proposal
Q: How will you offset the impact of reduced late fees?
A: The CFPB's proposed rule could reduce late fees by approximately 75% ( - ). While the final rule and its timing are uncertain, Capital One is developing mitigating actions—including changes to policies, products, and investment choices—to gradually resolve the financial impact within a couple of years after the rule takes effect.

Marketing Strategy and Growth
Q: Are you increasing marketing spend to drive growth?
A: The company continues to lean in on marketing to capitalize on strong growth opportunities across the business ( - ). Investments in technology enhance data leverage and machine learning models, allowing for better identification of attractive opportunities and customized solutions, particularly focusing on heavy spenders and building their national bank.

Credit Environment and Growth Plans
Q: Does the current economic environment affect your growth plans?
A: Management feels confident in the health of the consumer and is continuing to lean in on growth ( - ). They cite a resilient labor market, low consumer debt servicing burdens, real wage growth, and stable competitive conditions as supportive factors for their positive outlook on growth.

Auto Loan Business Outlook
Q: Will you increase auto loan originations?
A: After a period of caution, Capital One sees some headwinds easing and feels more bullish about the auto business ( - ). Improved margins and strong performance of recent originations suggest potential for growth, though they will remain disciplined and adjust strategies as opportunities arise.

Commercial Real Estate Exposure
Q: What's the outlook on commercial real estate, especially office loans?
A: The company experienced over $80 million in office loan losses this quarter, with balances reduced to $2.3 billion, representing less than 1% of total loans ( - ). They have ceased originating new office loans and maintain a coverage ratio of around 13% for the remaining portfolio.

Opportunities in Lower Credit Spectrum
Q: Are you expanding into lower-end credit segments?
A: Capital One feels good about opportunities across the credit spectrum, including the lower end, and plans to lean in where appropriate ( - ). Their long-standing experience and disciplined approach in serving subprime customers support their confidence in this segment.

Heavy Spender Strategy
Q: How is the investment in heavy spenders progressing?
A: The quest to win at the top of the market is an ongoing effort, and they are seeing increasing traction with heavy spenders ( - ). Continued investments aim to build scale, enhancing offerings like digital experiences, customer servicing, and exclusive services.

Reserve Rates and NIM Outlook
Q: How should we think about reserve rates and NIM going forward?
A: Reserve rates are expected to remain stable or only modestly decline as projected losses inform coverage ( - ). For NIM, factors such as growth in card balances, deposit betas, and interest rate movements create a mix of tailwinds and headwinds, making near-term prediction challenging. Over the longer term, nothing structurally suggests NIM will be materially different from pre-pandemic levels.

Higher Net Charge-Off Rate
Q: Is the higher charge-off rate a new normal?
A: Management believes underlying credit dynamics are similar to pre-pandemic levels, and the higher net charge-offs are due to temporary effects like lower recoveries and delayed charge-offs from the pandemic period ( - ). They anticipate that as these effects diminish, charge-off rates will normalize closer to historical levels.