Capital One Financial Corporation (COF) Earnings Call Transcript & Summary

To those in the room, good morning. To those on the webcast listening in from the States, I'm Jason Goldberg, and I cover the U.S. large-cap bank stocks here at Barclays. And next up, very pleased to have Capital One with us. From the company I have Jeff Norris, who's the Senior Vice President in Global Finance. Jeff has been in the Capital One for many years, before that he had some senior positions within the card business and knows the company as good as anyone, I would say -- knows the company as good as anyone. Capital One has been a very strong supporter of this conference. They're -- I think, back to the 1990s they've been here almost every year, or participated in one form another almost every year. And I'm very pleased to have him back again this year in-person. I think most of you know, Capital One story pretty well with one of the largest credit card issuers in the United States, one of the largest auto lenders in the United States, one of the largest retail deposit franchises in the United States and certainly one of the largest online deposit takers. So Jeff, good to have with us.

It's great to be here, Jason. Great to be back in-person.

Maybe the best place to start is big picture. On one hand, the consumer is experiencing kind of waning fiscal stimulus, a jump in gas prices, elevated inflation, higher rates and some are telling me recession is on horizon. But on the flip side, labor market appears really strong, payment rates are elevated. Maybe as we look across your consumer businesses, can you share us with your thoughts on the overall health of the consumer? Have you seen any changes in spending activity, in payment rates? Maybe what metrics are you looking at to kind of determine how this plays out going forward?

So thanks. And thanks to everybody listening in on the webcast. Hello, everybody in the room. The bottom line is, the consumer looks to us to be still in a pretty good place. Now stimulus and forbearance are moving to the rearview mirror, but I think that there's some persistent benefit from the elevated savings we saw through the pandemic and consumer deleveraging. Of course, if inflation continues to take hold, that could reverse that, but there appears to be some persistent benefit. And as you said, labor markets are quite strong, and demand for labor remains high. So while we certainly have our eye on inflation and the gathering uncertainties, the consumer looks pretty good. In terms of metrics we look at, when we're thinking about our origination strategies and our credit risk trends, we look mostly at internal data. And when we look at roll rates and flow rates, cure rates and recoveries and so forth in the card business, there's still a lot of strength. So from a consumer standpoint, we feel like we're in a good space. From a competitive practices standpoint, things are still looking good. We've got an eye on inflation and broader economic risks. But for the time being, we think that there's still a good runway to originate resilient and attractive loans.

I guess on the point of origination, domestic card purchase volumes have seen continued improvement on a year-over-year basis. As we go into the back half of this year and into next, do you think that momentum can continue against tougher comps? And just are you surprised how long payment rates have remained elevated.

So payment rates are elevated, which is generally speaking, a good thing because it's -- it goes along with really solid credit results, which is good for the bottom line returns of the business. It dampens growth a little bit. And we've seen the payment rates remain elevated. The last couple of data points, it looks like they're at least leveling off, if not maybe starting to very gradually come down a little bit, but they remain at historical highs, and that's kind of okay with us. Payment rates in our own portfolio are benefiting not only from the cyclical trends that are driving higher payment rates across the industry, but from this 10-year strategy that we've been talking about of focusing on heavy spenders at the top of the marketplace. And so that could cause a little bit more of a secular elevated level for us versus historical norms. And we're getting really good traction with the spending, right? 26% year-over-year increase in Q1, it's up 47% from the pre-pandemic quarter in 2019. So we're seeing just really healthy spend behaviors by consumers. I think obviously, there's some pent-up demand that's coming through. And we continue to get good traction with our marketing and our traction at the heavy spender space, which is a big driver of our purchase volume trends.

Okay. I guess on the heavy spender cohort, you've made some recent enhancements through reward program in cards. Can you maybe just talk about kind of the competitive landscape, what you're doing there and just how you kind of measure the return on those investments?

Sure. So since 2010 when we launched the Venture card, so it's like more like 12 years, I guess. We've been strategically focused and committed to growing in this space. Now it takes a long time to build the traction because there's a lot more to it than just the product and the product structure itself. You need to have a winning customer experience, which is more and more of these days driven by digital capabilities. You need to have high-end experiences and you need to sort of earn your way up the ladder in the marketplace. So we started with Venture and Quicksilver. We got good traction and growth. And over time, we improved our customer experience. We've built some enhancements around the franchise, most recently in the form of airport lounges and the travel portal. And we've driven increasing customer experience scores and Net Promoter Scores. And over time, you sort of earn the right to move upmarket, and that's -- we thought we'd reach a place where we were in a position to launch Venture X late in 2021, which has been a successful product launch to say the least. The economics, as you know, are a little different than other parts of the card business. The cost to acquire these customers is quite high, because in addition to the initial marketing, there's all the investments in the enhanced experience that I just talked about what our Capital One happened to mostly run through the marketing line item. We -- the economics work because you have this ROA positive net interest margin -- net interchange margin on the spend. It's an annuity-like revenue stream because the charge-off rate and the voluntary attrition rate are so low. And you actually do build finance charge generating balances gradually over time. So it's a segment of the market that I think we've been chasing in a dedicated way for more than 10 years, and we're just getting some really nice traction at the moment as we pushed our way upmarket, and I hope that continues. The -- it's a resilient space -- probably the most resilient space in the card market, which -- and we think the card market is pretty resilient through the cycle. And in the face of inflation, it's a nice place to be positioned. We haven't changed our strategy and moved in this direction because of all the recent activities. But being where we are in the 10-year journey at the moment is feeling like a pretty good place to be.

You mentioned successful launch of these customers that are coming from like Platinum and Sapphire, or is it customers that previously didn't have this type of card.

I don't know that I have a ton of visibility into that. I think it's probably some of both. But not something we'd probably specifically discuss anyway.

At our September conference, I think you talked about potentially piloting a buy now, pay later type offering, and that's certainly kind of been a buzzword we've heard over the last year or so as a competitive threat to card. Can you just talk about in terms of kind of what you're seeing from that cohort and kind of your plans there?

Sure. Our plans are the same, which is we're on a fairly small-scale testing with a limited amount of our customers buy now, pay later offering to see what we can learn from it. I do think that on the plus side, there's a lot to learn from it. Some of the buy now, pay later players have really cool and slick digital customer experiences, which we can learn from. They've done some pretty interesting things with new forms of digital data in underwriting. But it's been our view that from the beginning, most of the volume that they've taken has been from debit as opposed to credit. At least that's been our experience. And it's really an interesting contrast from a year ago. Like I said, I still think that there are some winning models and companies out there that we're looking at and watching closely for opportunities we can glean. But just to compare and contrast a year ago when we were doing virtual conferences, it was not unusual for us to go and have 7 investor meetings in a day and essentially have 7 conversations about the buy now, pay later market, and I get 2 questions all day about Capital One. And the balance has really shifted the other way now. And so I think you're seeing margins come down in the business a little bit. There's still really strong demand from merchants and consumers. There's some emerging questions about credit trends in the space and whether it's a payments revolution or maybe an equal part and access to credit play and the regulatory scrutiny is increasing. And we've sort of had a lot of that on our radar screen a year ago, and we've -- it's played out fairly consistent with the expectations we've had all long. But I still think it's an interesting space that bears some watching.

Helpful. And then I guess in the private label co-brand and we continue to see kind of movement of partners. You guys have had some in, some out, and some others do the well. So maybe just talk about your thoughts around that segment, how you kind of determine when to exit relationship, environment for picking up new relationships.

So the thing that's been consistent in that space is our strategic approach to it, which is to really try and leverage our data analytics and digital capabilities to drive a partnership with companies, particularly in the retail space that have a vibrant strategy and growth model of their own that have a shared vision of what a card program can be as a part of a larger growth strategy in retail and who share a vision of our emerging digital capabilities as a source of value so that we can compete on that basis and not just price in the auction process. And that selectivity and that view and disciplined about sticking with partners that share that vision has really driven our trajectory in the space. So if we had relationships where we got through acquisition that didn't fully share that vision. You've seen some departures. And where you've seen us gain some traction with new partnerships. It's where we've been successful in finding kindred spirits and people who share that vision, and we come to a contract that sort of institutionalizes that in the way that works for both parties. The other thing that's a little bit of a new development there is that in the past, we had separate technology platforms for our branded card business and our partnerships business. And so while we did bring a lot to the table in terms of capabilities, we didn't -- we were never able to provide the full suite of all the digital capabilities and analytics that we can do on our Branded Card platform, where we've actually migrated now to a single platform. And that expansion and our ability to bring to bear the full power of our digital transformation, our data analytics, our brand and so forth has led to some recent successes. But again, the more things change, the more they stay the same, we are going to stick with that disciplined approach. It's going to be opportunistic. We're going to be disciplined in auctions and don't operate from any manifest destiny. It's a nice adjacent space to our branded card business, and we like what we see there, but we'll continue to have that same selective and disciplined approach.

Got it. And maybe shifting gears, no pun intend to the auto business. We had -- there was your peer presenting this morning and they talked about pulling back in the auto business. I sat in the meeting with another regional bank this morning, they also kind of were pulling back in that business. You talked to -- you've had very strong growth in that segment of late. Just want to talk in terms of what you're seeing there?

So starting with credit, we still see a pretty strong credit. I mean, like our card business, although charge-off rates are still less than half of what they were before the pandemic, and they continue to normalize. As Rich said last week, the word of normalization is normal. So we're not particularly scared to see things return to normal. It stands to reason that they would. And it's actually taking place a little bit more gradually than we would have expected. So from a credit standpoint, I think what we're seeing still looks like good origination opportunities. We are seeing some pricing pressure, particularly in the prime auto space, where competitors, largely credit unions are not really passing along rate increases in terms of price, and I think that could put some pressure on margins for a little while. I think eventually, in a rising rate environment, you'll see the pricing adapt, but margin pressure could be with us for a little while. And then there's the whole issue of used vehicle prices, which -- there's a couple of very recent data points that look like they might be coming off highs a little bit, but they're still really high. And while that does really good things to credit, it also creates future risk for anything you originate in an environment where the recovery values and auto price -- used auto prices are so high. So there's a note of caution as we move forward. But -- and then there's the broader auto industry issues around supply chain constraints and so forth. So net-net, we've seen strong growth, but our philosophy will continue to be what it always is, which is we set product terms and conditions that meet our resilience hurdles, and we believe will attract loans with good returns. And then we see what the market gives us. And of late, it's -- what it's given us is a little bit more growth in the prime side and a little bit less on the subprime side where we see some -- a little bit more competitive pressure from some of the smaller, more independently funded auto players. And we're happy with that. Even though it's got a little bit lower margins, taking what the market gives us, meaning our resilient hurdles seems to be working well for us. And then the other factor is Auto Navigator, which continues to generate good growth in origination volumes, both direct-to-consumer and with dealers. As dealers -- we've adapted Auto Navigator to be a tool for many dealers as well. And it's a piece of our digital strategy that's, I think, delivering results today, which is kind of nice. So pulling off and thinking about it, net-net, we've got a couple of things like our technology driving continued growth. We've got a couple of things that might temper a little bit from a competitive standpoint, and we'll see how the economy goes. But credit still looks good, and that's the main thing to keep us going in auto.

Before we pivot away from loan growth, maybe just touch on the commercial segment. To think Capital One I think more consumer, but you've built out, I think, a good commercial franchise with some specialty businesses. Can we talk about in terms of what you're doing there and some of the current trends.

So I think we've been through a period of several years where we're spending a lot of time building and enhancing our commercial infrastructure and capabilities, adding to non-interest income sources like investment banking and treasury management services and being a lead syndicator of loans and continue to get traction with all those investments. We continue to focus on industry vertical specialties that I think increasingly, in our view, have a chance to provide us an opportunity to have a differentiated level of service to our customers, differentiated insights into underwriting because of our ability to specialize and be experts in the particular industry in question, open up some relationships beyond the branch footprint, kind of a trend we've written -- a number of our consumer businesses as pieces of banking sort of one product at a time, go from local branch-based distribution to more national scale. I think you -- there's a theory that, that could be at a very early stage in some selected industry verticals in commercial. And so we're focused on healthcare, for one example TMT, banking non-bank financial institutions. In the real estate side, we have a nice specialty in REITs and REIFs and agency multifamily and so forth. So where we're seeing growth is in those selected specialties and on the back of the sort of capabilities we've been investing to build. And we've also been through a period of time where we were selectively kind of downsizing or exiting certain segments. And I think we've -- that's played out in a way that it's not as much of an offset to the underlying growth trajectory and we're seeing that show through in the top line numbers. I also just kind of for the record that we've got a new Head of Commercial Bank, Neal Blinde, who joined us recently and I think standing on the shoulders of capabilities we've built and the investments we made over the past few years, I'm excited to see where Neal takes the business from here.

Yes. No. Neal is pretty respected. I guess maybe shifting to the liability side of the balance sheet. Although you don't break it out for us, you have a lot of branch-based deposits and a lot of direct bank deposits.

Yes.

Maybe just talk to kind of kind of what you're seeing doing at least some kind of first quarter results that, that had 25 basis points when you see much move in deposit pricing. They take another 50 basis points and presumably we're going to hike throughout the summer, maybe to your expectations for both kind of deposit levels, deposit and deposit betas against that backdrop.

Sure. There's a little bit of wild new frontier. I think this rate cycle, I'm not saying anything everybody doesn't know already. The last rising rate cycle, there was something like 8 increases over 3.5 years, and we're likely to get more than 8 increases in less than a year. So it's a little bit of a different animal. But in the last rising rate cycle, our betas ended up at around 40%. They were about 50% in the falling rate cycle we've just come through. I could make an argument on both sides of that, right? Faster and more pronounced rate cycle, higher levels of growth than capital wind in the industry, technology advancements and a greater number of digital and direct-to-consumer deposits. I'll argue for potentially higher betas. On the other hand, you've got low loan-to-value ratios, a lot of the financial institutions pushed with deposits, bank industry NIMs kind of low levels, which I'll argue for maybe slower. But so I'm not sure what the puts and takes where we'll come out this time. But I think we'll continue to see our best growth opportunities in our national digital direct banking franchise. We still very much like the value that we generate in our branch-based deposits, and we'll continue to operate those and rationalize them as consumer behaviors change. But I think the predominant growth strategy is going to be in the digital-first national bank, and we're continuing to get good traction there.

Got it. I guess let me turn to expenses, which is certainly an area I think heightened investor interest. Marketing has been elevated for the last few quarters, particularly in the first quarter, I think, came in higher than people had expected.

Right.

Maybe just maybe -- I guess, first, maybe provide more color in terms of where that money is going? And then secondly, maybe just talk in terms of how you kind of measure return on that investment to know you're actually spending the money wisely.

Okay. So there's a lot to unpack there. And Rich talked about this on the call. So some of this might sound familiar, but I'll give you a little bit of color on that. First and foremost, the corporate marketing is driven still most predominantly by what we're doing in domestic card. There's a couple of things going on there. First of all, just the growth opportunity in general, we're seeing across products and channels continue to be very strong. And as we say, we continue to lean into it. We've talked about how that opportunity is enhanced by our digital transformation and just a little bit of additional color there. With our digital capabilities being all in on the cloud now and with big data streaming in real time, we're able to leverage machine learning at scale in underwriting and targeting models, expand our product offerings and features, expand our channels. And we're seeing traction, particularly in purchase volumes and now increasingly in loan growth. As we continue to see that traction and the opportunities remain open, we continue to lean in there and invest in our traction upmarket with heavy spenders and the annuity like purchase volume revenue streams that we're seeing, I think we're seeing the payoff already in the above average, I'll call them, purchase volume growth metrics. We're also seeing particular traction in branded card loan growth. So loan growth is picking up and accelerating over the last couple of quarters. And it's -- we have some ins and outs in the partnership portfolio, as you mentioned, but we've had pretty steady particular growth in branded card, which is nice because there we -- all the economics accrue to us. So one thing is just the continuing traction. The second thing is that where we are on this 10-year-plus journey on strategic focus on the heavy spender market. So that drove some of the marketing that you saw in the first quarter because in addition to the direct stimulus and response marketing, we are investing in the high-end customer experience and building out of airport lounges and the travel portal and customer experience benefits like that, we run through marketing. Philosophically, we've always liked businesses that are sort of paying first game later. We try and take as much of those upfront costs upfront as possible as opposed to amortize a number looking at as contra revenues. So it's a little bit of a potential geographic difference in how we account for that, that's driving some of the market increase. And we had a very successful product launch at the end of 2021 and very strong spend follow-through on those new originations for Venture X, and that drove some early spend bonus marketing costs in the quarter. We're also investing to continue to build and leverage our brand. And then away from the card business, the digital transformation has opened up some new opportunities in businesses like capital and shopping, Auto Navigator. And marketing is a big driver of our national digital banking strategy that I was just talking about. So it's an interesting distinction. We're aiming to be a national banking franchise on the deposit side. And other companies that have that ambition or already at that destination have done that by building and acquiring -- or acquiring national branch footprint. We're doing it through marketing. So that's going to elevate our marketing expense a little bit relative to some others, but it's going to save us a lot of money and acquisition costs and brick-and-mortar fixed infrastructure costs over time. So that's a fairly comprehensive view of what's driving marketing levels in Q1 of this year. And we'll see where it goes from there. But I think that -- I think that we're going to continue to lean into growth.

So I guess, spend money to make money. So should we take it kind of the first quarter marketing levels kind of the new run rate, and that's kind of...

Well, so we don't have marketing guidance, and I won't go there on a webcast or in private meetings, especially. But the -- what I will say is that the normal seasonal pattern might look a little different given some of those broader elements that I talked about. So I don't think you need to seasonally adjust and call it a run rate. I think we'll have to see how the seasonal pattern plays out this year.

Fair enough. Maybe away from marketing, you talked to a 42% operating efficiency ratio ex the marketing spend at some point. I think the pandemic kind of changed the timing around that. Just maybe talk to in terms of kind of what you think you need to do to kind of get to that number? And any thoughts on what time frame that would take.

Sure. So I'll start by saying we're in the midst of a very long journey to drive operating leverage and operating efficiency ratio improvement. And we continue to be on that journey. The engine of that is the digital transformation because it drives revenue growth opportunities and cost efficiencies and digital productivity gains. So the pandemic interrupted our journey a little bit, first by changing the trajectory of revenue. But the lasting impact of the pandemic is not the impact on revenue, which is already rebounding quite nicely. The lasting impact is on the marketplace investment imperative. So the pandemic essentially, in our view, accelerated the digital adoption in banking. And that creates challenges like what we keep referring to as the war for tech talent. And technology, we believe, is a competitive advantage is something we work hard to in-source. And so we have actually a larger proportion of our associate population in modern tech jobs software engineers, data scientists, user experience designers and folks like that. They're the most sought after, most expensive parts of the labor market, and we have more of them proportionately than other banks. So we're feeling that pressure in the near-term. But the digital adoption also creates opportunities to go on offense and emerging growth opportunities create what we think is a marketplace imperative to invest in a ticking clock for that investment. And for the future benefits that they can drive -- we feel like the time is right to do that. So taken together, the sort of more persistent impact of the pandemic, driving the sort of marketplace investment opportunity with a ticking clock, does put some near-term pressure on our operating efficiency ratio. You saw that in the first quarter. But it doesn't change where we think we're headed and the fact that we've been continuing to drive for those long-term improvements. I don't have a time frame. The time frame has to incorporate the realities of the marketplace that we're in. But we're still driving for operating leverage, and we still believe that operating leverage over time is one of the key ways of our whole technology investment paid off for investors.

Makes sense. Maybe you touched on it a little bit earlier in terms of credit quality, but maybe you could delve more into that. You got a good quote that -- remember the word normal and normalization. But I think one of the things we struggled with is just charge-off has clearly been lower for longer in the cycle and kind of everything we're looking at, say, that should remain benign for -- at least for the near-term. Can you talk to just how you think this normal optimization process plays out? And what are you kind of paying most attention to.

So the normalization process is playing out more gradually more slowly than we would have expected. And we continue to assume fairly rapid normalization when we're doing things like selling our allowance, but we're watching the actual trends, and they're playing out more gradually, which is a good thing. What we tend to watch mostly is our own credit metrics, the flow rates, the roll rates, the cure rates and so forth. And as I said before, we still see strength there. From a macro perspective, I think we pay more attention to competitive practices as competitors -- everybody is marketing heavily now. That tends to, over time, transition from heavy marketing competition into potentially more price-driven competition. That tends to evolve over time into potentially loosening underwriting. It can lead to some adverse selection and eventually evolves to a place where you might even see bad customer practices. And we look at the competitor cycle distinctly from the credit cycle or the economic cycle. And that's probably the thing we watch most closely outside the company. And then, of course, at a time like this, you've got to keep an eye on inflation and the Fed moves and all that kind of stuff. But there's no particular external economic metric that we look at more than others. We kind of study the world. And I think the most salient point, though, is that I think we've long held the view that we don't necessarily have any distinctive advantage in predicting and timing cycles. And so we don't try as much -- we pay a lot of attention to sort of booms and busts and look for turns in the cycle. But the predominant way we prepare for turns in the cycle is by the choices we make during the good times, right? So selecting the businesses we're in very carefully, trying to avoid more heavily indebted customers focusing more on highly engaged transaction-oriented customers, being selective about the populations that we market to and so forth, are things we do all the time. And we're assuming recessions and we're assuming stress in all our underwriting choices and trying to satisfy ourselves that the originations we make today will be resilient. That doesn't mean bulletproof. Obviously, if there is a recession, that's a bad thing for all consumer lenders. And we certainly make less money if that's the way the world turns. But we try and assume enough worsening such that we'd still be in a position to weather those storms, more than making adjustments in real time by making those resilience choices all the time.

In that vein, we saw in the beginning of 2020 -- in 2020, in part with the adoption of CECL and the onset of COVID, we saw this massive reserve build. We've seen it kind of all the led back. As you kind of think about the next cycle, I guess, have you learned anything from that experience? And just how do you think the CECL kind of play into your thought process? And how do you think in a more kind of elongated scenario you think it plays out?

So that's -- I think we've learned something, but I don't think we've learned enough to know how the next cycle plays out when it comes to provisioning and allowance. Just going back to basics, right? Our allowance depends on 3 factors: the trend in our credit performance; the rate of loan growth and what we call qualitative factors, which are sort of outside our modeling, but in the allowance to account for uncertainties. And at the moment, credit normalization is happening slower than we assumed. Growth is picking up and normalization and growth would tend to drive the allowance up even though slower growth or slower normalization is maybe mitigating that a little bit. Qualitative factors are relatively high. We initially had a high-level qualitative factors in our allowance for the pandemic and the qualitative factors are really rotated now more towards things like inflation and uncertainty in the international, war in Ukraine and so forth and provide some buffer. So if normalization continues to go slower and the uncertainties around our qualitative factors diminish, we could actually see the allowance kind of stay the same or diminish a little bit. If normalization happens faster or growth continues to pick up, we could see allowance builds. And it's one of the hardest things to predict. So internally, let alone to guide about. So we don't have any guidance or forward-looking statement on what we expect. The one thing I'll say is that CECL does pull forward the growth impacts. We talked in years past about Growth Math. And given the growth rate that we're putting up now, I expect that there will be some of that growth math effect that's exacerbated by CECL as we go forward. All that said, it is our current view that the normalization of credit, it will be the dominant trend for the foreseeable future as opposed to Growth Math. Growth Math is the front-loading of losses in the front book of new originations. And what that does to the overall portfolio charge-off rate given a more highly seasoned back book. When we had our kind of Growth Math journey back in 2014, 2015 and 2016, we had a particularly seasoned backbook. We're not quite in that same space today. We also were the only ones growing. And today, it's a more industry-wide thing. So I think it will be in the numbers, but I think it will be less visible and really the driver will be normalization. Coming back to the allowance, there's puts and takes, and we'll just have to see where the world takes us.

And then you guys have probably been one of the more active repurchasers of your stock over the last several quarters, yet you're still kind of above your 11% CET1 target. We've seen a lot of other banks kind of slow buybacks of late. I guess, just kind of your thoughts on the kind of pace of share repurchase. I know you just matched the organization for Q3.

Yes, we bought back about $2.5 billion -- I don't know the exact number in Q1 and have about that same amount remaining on the prior authorization and we announced a new authorization that's effective in Q3 for an additional up to additional $5 billion. We ended the quarter at 12.7% CET1. We continue to think 11% is the long-term target. I know that we've had some discussions with investors in the marketplace that our stress capital buffer was meaningfully lower than that. However, that can vary from CCAR cycle to CCAR cycle, and there were some -- the starting point in the particular stress scenarios that were in the last CCAR cycle, are not necessarily going to replicate in the upcoming cycle. So I don't think I'd overindex on how low the SCB framework came out the last CCAR. And we'll continue to work back from the 11% target, I think, for the foreseeable future because we want to be sufficiently capitalized to grow and to be in a strong position in the event of risks that everybody is talking about manifesting themselves. So at 12.7%, we still have some room to keep going. I'm not sure what will happen to the pace as we get closer to 11% over time. But when we get there, we'll look around and assess the world and our growth trajectory and make some choices about the pace. But for the time being, I think that there's no news there.

And then maybe sticking with the capital theme, just turning to acquisitions. It seems like acquirer of late, but kind of several kind of smaller FinTech type acquisitions over the last several years. It's hard to us actually see underneath what you're doing with them, although some of them we see ex being customers, but someone we don't. Just maybe talk to in terms of just what you've accomplished there? And maybe looking forward, what else do you think you need to do?

Okay. So I think our view towards acquisitions for a long time has been what we call opportunistic and focused a little bit on -- excuse me -- FinTech acquisitions that can enhance or accelerate our organic technology journey. And we've had a lot of success in that space. So some of our internal capabilities -- excuse me again, what happens when you talk all day.

Right. You have back meeting schedule it to you.

That's right. The -- some of our key technology leaders have come from the companies we've acquired. Some of our key technology talent has come from the companies we've acquired. Some show up as business ideas, Capital One Shopping was a company we acquired called Wickibuy. And the leaders of the Capital One Shopping business are the founders and leaders of Wickibuy. So one of the reasons for success is that we've done all the investing that we've done to build the modern technology stack from the bottom up. So we've got capabilities and platforms and in-house talent that is comfortable and familiar place for the associates from the acquired companies to land as opposed to landing at a kind of a bank stuck in the past, where you don't have access to the cloud and so forth. So that's helped us a lot on the integration front. And I would say, as a whole, the FinTech acquisitions we've done have enhanced our talent, enhanced our journey and accelerated our progress on this strategic journey we've been taking anyway. We've also done some smaller acquisitions in asset businesses that we know well. A couple that have helped us to build capabilities in the commercial bank. Whether that be treasury management services or getting scale in an industry vertical that we were already in, but needed to accelerate the growth. And it's brought some new talent to our commercial franchise. And then of course, there's a card portfolio acquisitions, which you see from time-to-time. So I don't think I'd forecast any change in our acquisition strategy or approach. I think it will continue to be mostly opportunistic in assets or capabilities where we're already playing or in service our technology journey.

Great. Why don't we pull up here and see if there's any questions from the audience. I guess you mentioned kind of the competitive environment in the card space. And I guess from a -- I think from the headlines, it seems like it's become more and more competitive, although we've done some work and kind of peel back the onion, it's actually still somewhat rational. Can you maybe just maybe kind of give kind of your thoughts in terms of where we are? We've seen kind of increasing rewards, increasing marketing spend, but just kind of the overall kind of return profile of that segment that changed at all? And you -- any kind of shifts in the landscape?

So I think it's -- the primary focus that I have is the heavy spender space at the top of the marketplace where you see what we characterize as intense but rational competition. We are seeing some elevation of rewards propositions and early spend bonuses, but nothing really material. So it's probably returned to slightly higher levels of intensity that we're seeing before the pandemic that waned a little bit over the last couple of years and have come back, but I don't think it's a meaningful change to a part of the market that's always pretty high in terms of competitive intensity. Pricing remains pretty stable. I think that's one of the ongoing gifts of the CARD Act is that price discipline is more important that you can't retroactively reprice that's forced some pricing discipline in the marketplace, which I think has been quite healthy. And in other parts of the card market, we haven't seen meaningful changes in competition. At the upper end of sometime, we tend to see competition from all the mainstream issuers who are in a benign credit environment, not uncomfortable drifting into subprime. And from the bottom up, from more fee harvested products that are not as good as a customer value proposition and it's pretty stable in that space. We don't play as much in the prime revolver space on purpose because we're trying to stay away from the more heavily indebted revolver customer. So I don't really have much comment on that space. But I think we continue to see MX, Chase and ourselves as having a fairly consistent focus on the heavy spender space and relative stability at the moment.

Any last questions from the audience? If not, please you join me in thanking Jeff for his time.

Thank you.