Capital One Financial Barclays 24th Annual Global Financial Services Conference

If we read the news every day, it is pretty alarming the things we see out there. I think it is natural for people to be pretty concerned about where the consumer is. But if we actually look at the numbers, some of the macroeconomic numbers and our own portfolio, we see really quite a striking strength. Let us just talk about the macro numbers for a second. Unemployment is low. The new job creation just rebounded very recently. Consumer spending is pretty strong. Bank balances, when we look at bank balances, they are up a little bit over last year on average per person. The consumer, there is a lot of indications that despite all the noise out there and despite the inflation and tariffs and wars that are going on, the consumer seems to be in a pretty good place.

With respect to our own metrics, if we start with credit, our credit delinquencies continue to come in strong. We just posted our monthly numbers yesterday, and delinquencies were coming in right consistent with seasonality. Charge-offs came in, again, better than seasonality, and that would be powered really by the high level of recoveries that we are enjoying, which came really from the higher level of charge-offs from the last few years. But really over the course of pretty much the whole 2026, consumer credit has been in a very generally slightly improving kind of place. Most recently looks right there steady with seasonality. The consumer spending on our portfolio continues to be strong. With respect to income levels, we see a similar spending strength across our credit spectrum, including some of our lowest income consumers.

Now, I do want to say that is not the same as a statement about what is happening across the whole economy because income is one of the things that we use in underwriting. I do not think we have a window into the very lowest income consumers. But overall, the consumer continues to show a lot of strength even in the face of a lot of uncertainty out there. Obviously, we are monitoring it closely. But this would be one of the reasons we continue to lean into growth across our credit businesses.

The auto business is a very competitive business. The swings are amplified relative to our credit card business. Let me compare the difference from our point of view. In the consumer credit card business, we are underwriting each customer one customer at a time and have a direct relationship with each customer.

In the auto business, there's a dealer right in the middle of the transaction, and the dealer is holding an auction across lenders saying, "Who can give me the very best deal?" Included in that is if there's a lender out there who is undercutting and maybe cutting the corners from an underwriting point of view, the dealers can turn to other lenders and say, "You need to match this particular offer." What we learned long ago in the auto business is we have to take what the market gives us and not lean in too hard for growth. We've got to always hold firm with respect to what is the credit profile and the margin and the overall resilience of the product that we are booking.

That has, over time, caused us to sometimes be the lowest in the league tables in growth, sometimes being the highest in the league table of growth. We have often zigged while others zagged. Let me turn to the credit story in auto. It's really interesting to look back and go back to pre-pandemic and look at what happened to credit since then. Of course, you had the pandemic and credit performance became amazing all across all lending businesses. But we flagged that there was a dangerous downside in the form of artificial inflation of people's credit scores because their credit performance was sort of artificially improved by all the windfalls consumers were getting in the form of stimulus and forbearance during that period of time.

We flagged this to investors, and we intervened in our own underwriting to try to do the best we could to normalize for credit scores. That caused us to, for a period of time, be at the bottom of the league tables in terms of growth. But over time, the industry started seeing some worsening credit performance that we did not observe. Capital One has turned around and now powered through quite a bit of growth, and we're sort of at the top of the league tables these days. While I think the industry has had a lot of volatility with respect to credit, I'm pleased with the stability in credit performance we've had at Capital One, not only indicated by the charge-off rates that you can observe over the years, but if we look at the performance of individual vintages over the years.

For years now, our origination vintages have come in pretty much on top of each other and consistent with pre-pandemic, at a time when that would not be the case for the industry. This is a very competitive industry. We only take what it gives us, and it really helps not to have our divisions in the company feel that they are driven by growth targets. We do not have growth targets anywhere across our businesses. People have growth projections, but they all understand at Capital One, go out and create the business that's a healthy business, and we'll let the numbers be what they are.

Yeah. The Discover migration. Let me start with one of the most important lessons. This was not a surprise to us, but I'm still struck as it plays out. The tremendous value of the modern tech stack that Capital One has built because this is a very complex integration, but it really would be tough if we were taking a legacy platform and converting it onto another kind of old school set of capabilities. The modern tech stack that we have is very helpful in terms of the ability to do this in the time frame and the cost involved. There are some legacy vendor connections that we're still making that have quite a bit of complexity to it. Anyway, the timing is very much consistent with what you said, Terry. New originations. Originations of Discover credit cards as of the beginning of this month are now entirely on Capital One's technology.

The conversion of the back book is being done in waves. Starting from the first wave was in July, and the final wave will be in January of next year. It's a big effort, but things are moving along and very consistent with the time frames that we had projected.