Capital One Financial Corporation (COF) Q4 2012 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen. Welcome to the Capital One Fourth Quarter 2012 Earnings Conference. [Operator Instructions] I would now like to turn the conference over to Mr. Jeff Norris, Senior Vice President, Investor Relations. Sir, you may begin.

Thank you very much, Lisa, and welcome, everyone, to Capital One's Fourth Quarter 2012 Earnings Conference Call. As usual, we are webcasting live over the Internet. To access the call on the Internet, please log on to Capital One's website at capitalone.com and follow the links from there. In addition to the press release and financials, we have included a presentation summarizing our fourth quarter 2012 results. With me today are Mr. Richard Fairbank, Capital One's Chairman and Chief Executive Officer; and Mr. Gary Perlin, Capital One's Chief Financial Officer. Rich and Gary will walk you through this presentation. To access a copy of the presentation and press release, please go to Capital One's website, click on Investors, then click on Quarterly Earnings Release. Please note that this presentation may contain forward-looking statements. Information regarding Capital One's financial performance and any forward-looking statements contained in today's discussion and the materials speak only as of the particular date or dates indicated in the materials. Capital One does not undertake any obligation to update or revise any of this information whether as a result of new information, future events or otherwise. Numerous factors could cause our actual results to differ materially from those described in forward-looking statements. For more information on these factors, please see the section titled Forward-Looking Information in the earnings release presentation and the Risk Factors section in our annual and quarterly reports, accessible at the Capital One website and filed with the SEC. And now I'll turn the call over to Mr. Perlin. Gary?

Thanks, Jeff, and good afternoon to everyone listening on the call. I'm going to begin on Slide 3, which provides a few highlights from the year and quarter just ended, as well as our outlook. While I will not speak to all of the items on the slide, I'd like to give a few high-level comments. 2012 was an exciting year for Capital One. We completed the acquisitions of ING Direct and HSBC's U.S. Card business, 2 businesses that will deliver attractive financial and strategic returns for years to come. 2012 full year results also reflect solid underlying performance across all our businesses, as Rich will describe in a moment. Our balance sheet also grew significantly stronger, with ending Tier 1 common capital at 11% on a Basel I basis, positioning us well to meet our fully phased-in assumed Basel III target in early 2013. While acquisition-related accounting created some pressure on GAAP earnings and substantial quarterly variations in our income statement during 2012, the variability abated considerably in the last couple of quarters. While purchase accounting explains a portion of the lower revenue and higher provision in our Domestic Card business in the fourth quarter, the linked-quarter reduction in corporate earnings is largely attributable to expected seasonal impacts on margins and noninterest expenses. We also issued a notice to call $3.6 billion in trust-preferred securities during the fourth quarter, which was completed earlier this month. The buildup of cash in the fourth quarter ahead of the actual redemption created some temporary pressure on net interest margin although future interest expense will be reduced. Our views of 2013 have not changed since we discussed emerging quarterly trends in October. Much of the expected impact of merger-related credit accounting has now about run its course and a majority of expected synergies are being realized. Revenue will continue to be impacted by about $200 million in remaining premium amortization in 2013, and noninterest expense will continue to be affected by the amortization of PCCR and other intangibles for several more years, albeit at modestly declining levels. Much of the remaining integration of restructuring expense will also be incurred through the balance of 2013. With a few exceptions, fourth quarter 2012 results give us a pretty good picture of what to expect in terms of pre-provision pretax earnings in 2013, assuming little change in the external environment. As we said in October, overall noninterest expense in 2013 is expected to total about $12.5 billion or just over $3.1 billion on average per quarter. This reflects a decline in average quarterly expenses relative to seasonally elevated operating and marketing costs in the quarter just ended. It also assumes that we incur about $600 million of intangible amortization and about $220 million of the $350 million of remaining merger-related expenses all in 2013. Average quarterly revenue levels in 2013 are expected to be in the same ballpark as in the fourth quarter of 2012. While average earning assets will fall modestly, net interest margin could be a bit higher, with steady yield on average earning assets and an expected reduction in interest expense. As indicated last quarter, we expect a modest reduction in loan balances in 2013 as runoff of some $12 billion in ending loan balances of acquired mortgage and credit card loans is only partially offset by organic loan growth. At the same time, cash balances are declining with the call of TruPS in early January. As for both ING Direct and HSBC, we continue to believe that they are both financially and strategically compelling. We are as excited about the acquisitions as we were the day we announced them. This is true even though the acquisition impacts will play through our 2013 financials differently than expected at announcement back in 2011. The deals created some $2.5 billion less in goodwill than originally anticipated due in large part to the impact of declining interest rates on fair value marks. As a result, we will achieve or exceed in 2013 our expected post-deal capital position, but we will do so earlier and with less reported earnings because we're amortizing fair value premium rather than accreting fair value discount. Because we expect to generate capital in 2013 in excess of what is required for our balance sheet and that which is necessary to meet Basel III requirements, capital allocation will be a key lever to create and deliver shareholder value. We expect to begin our journey of returning increased capital to shareholders through the 2013 CCAR process already underway, which Rich will address and you'll hear more about in March. Now turning to Slide 4, I'll discuss a few quick highlights of our fourth quarter summary income statement. Fourth quarter earnings were $843 million or $1.41 per common share. Compared to the third quarter, there was a modest expected decrease in revenue and increase in noninterest expenses. Starting with Box A, the decrease in revenue from the third quarter was almost entirely driven by the return to more normal levels of revenue suppression in our Domestic Card business. As indicated during our October call, suppression in the third quarter benefited meaningfully from the effect of the remaining SOP 03-3 mark on delinquent loans acquired from HSBC. In addition, the fourth quarter has seasonally low levels of fee and finance charge reversals. Looking at Box B, noninterest expenses increased 8% on a linked-quarter basis driven by year-end expense patterns, including marketing and somewhat higher integration expenses. Looking at Box C, provision expense increased in the quarter, reflecting more normal charge-off levels and runoff of the HSBC purchase accounting mark that reduced provision expense in the last couple of quarters. Turning to Slide 5, I'll touch briefly on net interest margin. Reported NIM decreased in the fourth quarter to 6.52%. Although interest expense was down by several basis points, 2 factors drove a much larger reduction in the yield on interest-earning assets. The first was a substantial increase in the proportion of lower-yielding cash and investment securities. In part, this was due to a buildup of liquidity in anticipation of the high-coupon trust-preferred securities which occurred in January 2 of this year and to an increase in investment securities designed to help move us toward our target interest rate risk position. The other factor causing NIM compression in the quarter was the expected increase in Domestic Card revenue suppression to more normal levels as I discussed earlier. Compared to the fourth quarter, we expect average quarterly margins can improve modestly, with more stable yield on interest-earning assets and improving levels of interest expense owing to the recent call of high-coupon TruPS and ongoing deposit portfolio management. It's also worth noting that we expect to incur an approximate $60 million onetime reduction in noninterest income in association with the call of the TruPS in the first quarter. But longer-term NIM trends will depend essentially on the general level of interest rates, ongoing pricing dynamics in the loan and deposit markets, shifts in the mix of earning assets and normal seasonal patterns. As noted before and on Slide 6, our Tier 1 common ratio on a Basel I basis was 11% at year end. We expect to continue generating substantial capital in coming quarters. As of January 1, we formally began our journey to adopt Basel II, also referred to now as Advanced Approaches, which for Capital One will take effect on or after January 1, 2016. Using our revolving estimates of this impact, Capital One's Tier 1 common ratio under currently proposed rules for implementing Basel III over coming years would be close to 8%. As with the estimate we provided in Q3, this incorporates 2 ongoing changes in our balance sheet, amortization of PCCR and the scheduled paydown of capital punitive investment securities. Even without these adjustments, we would reach the assumed 8% Basel III target in 2013. Given our previously assumed target of fully phased-in Basel III capital of around 8% and our current capital trajectory, this implies that we will continue to generate substantial capital well over regulatory requirements. With that, I'll turn the call over to Rich.

Thanks, Gary. I'll begin on Slide 7, which provides an overview of solid business results in the quarter. Our Domestic Card business continues to deliver strong results. Ending loans grew 3.1% in the quarter or 4.1%, excluding the expected runoff of higher-margin, lower-loss -- excuse me, higher-margin, higher-loss HSBC loans, as well as the continuing runoff of installment loans. The increase was consistent with expected seasonal patterns. Year-over-year, ending loans were relatively flat, excluding the HSBC acquisition and the expected runoff of installment loans. Purchase volumes, excluding HSBC, grew 9.4% compared to the fourth quarter of last year. Looking ahead, the first quarter is typically the seasonal low point for both ending loans and purchase volumes, so we expect seasonal declines in both items in the first quarter. Revenue margin decreased modestly in the quarter from 17.1% to 16.8%. The decline resulted from the expected seasonal patterns, franchise enhancements and purchase accounting effects we discussed last quarter. Our outlook for revenue margin has not changed. We expect the decline in the first quarter as the first quarter is the seasonal low point for Domestic Card revenue margin. Beyond seasonal patterns, we continue to invest in the franchise enhancements we discussed last quarter, which will have a modest negative effect on revenue margin. These effects will be partially offset as purchase accounting impacts abate. As always, other factors which are much harder to quantify and predict will also affect revenue margin. These factors, which include market and pricing dynamics, credit trends and competitive intensity, could have positive or negative impacts on the revenue margin. The charge-off rate for the quarter was 4.4%. For the last couple of quarters, our card -- credit metrics have been dominated by the addition of HSBC's card portfolio. HSBC ran at a higher loss rate than Capital One's Card business, but the addition of the HSBC portfolio temporarily improved our combined credit metrics because we took a credit mark on HSBC's credit card loans that had lost their revolving privileges. The credit mark absorbed the bulk of the charge-offs from the HSBC portfolio in the second and third quarters. The credit mark did not have a meaningful impact on fourth quarter charge-off rate, and we don't expect the mark to have a meaningful impact in future quarters. The Consumer Banking business posted another quarter of solid profitability. Ending loans declined about $1.6 billion, in line with our expectations. $700 million of continuing growth in Auto loans was more than offset by about $2 billion of expected mortgage runoff. Revenues decreased from the third quarter, driven by the absence of the favorable valuation adjustment to retain interest in mortgage securitizations we booked last quarter. Provision expense decreased modestly. While Auto Finance charge-off rate increased seasonally, the overall Consumer Banking charge-off rate remains below 1%. Our Commercial Banking business continues to deliver strong and steady overall performance. Loans grew 4% in the quarter and 13% year-over-year. Revenues were up 3% in the quarter and 11% for the full year of 2012. Noninterest expense in the fourth quarter increased 16%, largely as a result of several nonrecurring items. For the full year, our expenses increased 15%, roughly in line with revenue growth. Our charge-off rate of 10% in the quarter demonstrates our -- excuse me, to 10 basis points in the quarter demonstrates our disciplined underwriting of credit. We expect the strong and steady performance of our Commercial Banking business to continue. I'll conclude my remarks this evening on Slide 8. Capital One delivered strong results in the fourth quarter of 2012. Our legacy businesses continue to deliver solid profitability despite the industry-wide challenges of an uncertain and fragile economy, prolonged low interest rates and elevated regulatory expectations. ING Direct and the HSBC U.S. Card business are making strong contributions to our business results. Credit trends are in line with our expectations. We've already achieved the majority of the expected synergies and expect to realize all of the announced run rate synergies by early 2013. Both integrations are on track and going very well. We're working toward a smooth and successful brand conversion later this quarter. As we continue to integrate both businesses, we like very much what we see. The combination of Capital One, ING Direct and the HSBC U.S. Card business puts us in a strong position to deliver sustained shareholder value even in an environment with little to no growth and prolonged low interest rates. We've carefully chosen banking businesses with attractive and resilient risk-adjusted returns, and we've worked hard for decades to build our capabilities to manage these businesses well and to achieve relevant scale where it matters most. We've demonstrated our ability to deliver solid and resilient performance through cycles, including the Great Recession. We're laser-focused on execution because it is a primary lever to deliver shareholder value. We're executing well on 2 large integrations simultaneously with excellent results. We're making solid progress on our efforts to deliver a company-defining customer experience that builds and sustains a valuable long-term customer franchise. And even as we complete our integrations and continue to invest to stay ahead of the rising regulatory expectations faced by all banks, we continue to tightly manage our operating expenses. The other key lever to create and deliver shareholder value is, of course, capital generation and allocation, and we remain very well-positioned to deliver on this dimension. We're in a strong capital position, already very near our assumed Basel III target of 8% years ahead of regulatory requirements. Our assumed target represents the prudent level of capital we'll need to meet regulatory requirements under Basel II and Basel III, including the 7% regulatory requirement and assumed 50-basis-point SIFI buffer and 50 basis points to cover potential volatility in both the numerator and denominator of the Tier 1 common equity ratio. Our actual operating levels for capital will vary over time, with a conservative bent. Factors that will determine operating capital levels include our outlook for near- to medium-term growth, our view of where we are in the economic cycle and our resilience under ongoing stress-testing processes. Even as our operating levels for capital vary over time, we expect that we'll continue to generate substantial excess capital, and the cost of holding excess capital is not lost on us. Accordingly, we expect that we'll have significant capital to deploy in the interest of our shareholders. We'll apply a disciplined and thoughtful set of principles as we make capital allocation decisions. We'll deploy capital to fund growth with attractive and resilient returns and to pay a consistent, meaningful dividend. We expect to return to a meaningful dividend in 2013, following the completion of the current CCAR process. We expect to generate substantial capital beyond what we'll need to support growth in dividends. We currently expect average loan volumes to decline in 2013, and our longer-term growth outlook remains modest as continuing runoff is expected to offset more vibrant underlying growth where we're investing to grow. Although share repurchases are not part of the initial capital distribution in our current capital plan, we expect our capital generation will support significant share repurchases in subsequent iterations of our plan. Pulling up, we've put Capital One in a position to deliver sustained shareholder value through surefooted execution and disciplined capital allocation for the benefit of our shareholders even in a environment that might not present growth opportunities. We're highly focused on delivering that value in 2013 and beyond. And now Gary and I will be happy to take your questions. Jeff?

Thank you, Rich. We'll now start the Q&A session. [Operator Instructions] If you have any follow-ups after the Q&A session, the Investor Relations team will be available after the call. Lisa, please start the Q&A session.

[Operator Instructions] First question will come from Sanjay Sakhrani with KBW. Sanjay Sakhrani - Keefe, Bruyette, & Woods, Inc., Research Division: So I just had some clarification questions on the forward-looking commentary in the press release. I just want to be clear that we should assume roughly annual revenues of about $22.4 billion in 2013, and that basically annualizes the $5.6 billion that you guys did this quarter despite some of the seasonal pressures as well as those unique to the fourth quarter. And now on the expense side, the $12.4 billion, I guess, does that include integration costs?

Sure, Sanjay. It's Gary. Let me take the cost question first. I said $12.5 billion for the year, that's about 3.1 and change per quarter. And yes, that includes integration costs. That also includes about $600 million worth of amortization of PCCR and other intangibles as well. So that is a number that is GAAP-related. It also includes, as we've said before, about $11 billion of operating expense and $1.5 billion of marketing expense. And with respect to the view of revenue, yes, if you took the fourth quarter revenues and got to about a $22.5 billion number for 2013, that would be a reasonable expectation right now assuming that the external environment does not change materially, so we're dealing with the curve as we know it. We're dealing with loan demand as we know it. We're dealing with the amortization of premium, in revenue as well, that is about where we would expect to be.

And next we'll hear from Scott Valentin, FBR Capital Markets. Scott Valentin - FBR Capital Markets & Co., Research Division: Just with regard to the impact on margin, you mentioned you're holding a lot of liquid assets to pay off the TruPS. Is there any way you can quantify that in terms of either basis points or EPS for the quarter? And I have one follow-up question.

Scott, I can't really pull that apart for you other than to say that we did actually build that cash position relatively early in the fourth quarter even though we knew we didn't need the cash until January 2. With some of the uncertainties in Washington and so forth, we felt it was prudent to make sure we had that cash on hand. So we did have a full quarter worth of that additional cash, and you can do the math from there. Also, remember that we had a significant buildup in our securities portfolio as well, which is a bit below average for the overall margin. And it's something that you can expect we're going to continue to have. Roughly speaking, I think the combination of the impact of having that extra cash in advance of repaying the TruPS and the investment portfolio, let's call it about 20 basis points or just a little bit less than half of the compression in NIM you saw over the quarter. The balance would largely be explained by the increase in revenue suppression in card, which was a combination of seasonality and purchase accounting. Scott Valentin - FBR Capital Markets & Co., Research Division: And as a follow-up, in the -- I think it was in the presentation, it mentioned some nonrecurring expenses at the bank that increased expenses for the quarter by 15% or 16%. Just wondering if you could quantify what those are, maybe some of the major expenses or if it was a sundry item?

Scott, it's Jeff. I can follow up and give you a little bit more detail on that after the call. But it was essentially, I think, some accounting-driven changes that are kind of technical in nature and nonrecurring.

And our next question will come from Moshe Orenbuch, Credit Suisse. Moshe Orenbuch - Crédit Suisse AG, Research Division: So I guess, could you maybe just talk a little bit -- I guess I'm a little confused by the change in kind of the revenue guidance and how we should think about that in terms of the progression into 2013 and '14, and perhaps whether your thought process now, given the loan growth, would include reserve build or reserve drawdown in 2013?

Moshe, it’s Gary. So first off, we're not giving any particular guidance on what might happen to provision. Rich talked about stable credit, so you can assume that we might not speculate on big changes. But that would not obviously have a huge effect on revenue other than through suppression. With respect to the margins, we're really not changing our views. Things have become, I think, much clearer as the result of purchase accounting having played its way through. I think when you take a look at our net interest margin as we go forward from here, we've suggested it could be mildly higher with lower funding cost as we've repaid the TruPS. And then on the asset side, I think there are a bunch of positives and negatives that end up as best as we can tell, kind of evening each other out. On the negative side, it's mostly the industry challenges that Rich talked about. It's the interest rate environment, it's the competitive environment in many of our lending businesses, but we have some positives that are pretty unique to Capital One. We'll see a reduction in the impact of purchase accounting, although we have $200 million over the course of the year that is less than the average -- the average quarterly impact of that is less than what we have in the fourth quarter. The loans that are running off are predominantly mortgages, which tend to have the lowest margins. And then, of course, we'll be carrying less cash and we'll have the benefit on the funding side. Finally, we said last quarter that we would expect to see average loan balances going down in 2013, the combination of runoff of some $12 billion or so in ending loans from the acquired portfolios but very significant origination volume in our ongoing businesses, which would at least partially offset that runoff. So if you take together a modest reduction in average loans with a modestly improving margin, that would kind of get you to the ongoing level of revenue that we suggested this quarter. Moshe Orenbuch - Crédit Suisse AG, Research Division: Just to be clear, those amortization costs are in the cost numbers that you mentioned, right?

Absolutely. Everything we have talked about is totally GAAP. And again, we've given you what the impact on GAAP is from our amortization of both premium and intangibles. And we're happy to give that to you again.

And up next is Brian Foran, Autonomous.

I guess on the revenue suppression, which I think is a big part of the rebasing of revenue expectations for a lot of people. I guess maybe the question would be, you've referred to them as kind of expected and reaching a new normal. Clearly, there was an expectation maybe from some of the sell side and buy side that was lower, and so if you could give kind of a walk-through and maybe even just a little tutorial on how that works? And maybe within that also, you referenced seasonally higher revenue suppression but also referenced this being the new normal level, so what are the seasonal drivers of suppression? And is this the new normal of the fourth quarter level or is this just the new normal for the fourth quarter? And what's the seasonal patterns we should model in?

Okay. Brian, it's Gary. And, yes, what we're saying is that the levels are somewhat back to normal. I'll talk about the seasonality in a moment. But in the third quarter of this year -- or in third quarter of 2012, we still had a $70 million benefit from the credit mark which reduced our suppression level, and we called that out at that time. And in terms of the normal drivers of suppression, we also indicated that reversals were at or close to their seasonal lows because of the way that credit metrics go over the course of the year and the strongest credit performance tends to be in the third quarter, so our assessment of collectibility tends to be higher and we have fewer reversals. So fast-forward from the third quarter to the fourth quarter, we don't have the benefit of that $70 million absorption from the credit mark. We actually had a little less than $10 million, but that's going away very quickly. So we're without that benefit. And then in terms of reversals, because fourth quarter does tend to be a quarter in which the credit metrics start to become less favorable, you see that in charge-offs and other things. It also tends to increase seasonally the impact of reversals. What there was not any change in, between the third and fourth quarter to speak of, was any change in our long-term assessment of recoverability. So our finance charge and fee reserve isn't moving around. So from here on out, what you're going to see from quarter-to-quarter, assuming that we don't have big moves in our finance charge and fee reserve, you're effectively going to just see the actual reversals and the actual recoveries flowing through. So it should start to mirror pretty much what's going on in our other credit metrics. And again, you'll see some seasonal patterns there, but you won't see the kind of volatility that was introduced into these numbers over the course of the last year because of HSBC and the purchase accounting related to it.

If I could ask as a follow-up, I mean, just more broadly. It seems like you've always had more quarterly EPS volatility than a normal bank in part due to the different seasonalities of the card business, and it seems like the HSBC business is really kind of exacerbating some seasonalities. I mean, how should we think about what are the 2 or 3 key things? I mean, clearly, we have the elevated marketing and provision to worry about every year in the fourth quarter. It seems like now the third quarter is kind of the best every year we should expect for revenue margins, I think, based on what you've said. Is there kind of other standouts that we should be aware of?

Brian, yes. The card business has a lot of seasonality to it. And I think in some elements, Capital One has actually, I think, elevated seasonality because of our business model in some ways relative to other players. Let me just comment a bit about seasonality in some of these drivers. We have tended most often to talk about the credit seasonality metrics. And essentially, in delinquencies, they're slightly below average in the first quarter and they're at their lowest point in the second quarter because of tax refunds and consumer paying down holiday spending. The third quarter delinquencies tend to be slightly above average in the third quarter, and they peak in the fourth quarter. Charge-offs lag the delinquency trends and they see their peak in the first quarter. Second quarter charge-offs tend to be above average, while Q3 is the seasonally low point for charge-offs. And Q4 charge-offs tend to be about average for the year. Purchase volume, of course you know, is very seasonally intense and Q4 being really the big peak there. There's of course, seasonality in outstandings. They tend to be lowest in the first quarter, roughly average in the second and third quarter and at their highest in the fourth quarter. And average outstandings have some modest seasonal moves tending to be slightly above average in the second quarter and slightly below in the third quarter. One of the ones that gets more complex, and I think, over the years, we probably could have done a better job kind of, I think, articulating what happens with revenue margins. And revenue margins are influenced by both the seasonal -- I mean, by the credit and the purchase trends that I mentioned. And margins are the lowest seasonally in the first quarter because of depressed interchange as a result of the weak spending, coupled with the high revenue suppression from peaking charge-offs. And the second quarter is slightly below average primarily as a result of day count factors, to add another variable into this. And as we discussed last quarter, and you're right on that, Q3 margins are the highest seasonally because you get the credit impacts of some revenue from late fees as the delinquencies increase. And it's also -- and then Q4, is slightly above average as a result of purchases and interchange being at their highest levels. So I think what -- I think one thing, I think, we should take upon ourselves is to try to help and provide some systematic guidelines sort of around what we're talking about here and -- because I think there's enough seasonality and I think these quarters are examples of that, that I think we can provide a bit more. Rather than anecdotally discussing in a particular quarter, a little bit more comprehensive tutorial at some point on the nature of, in general, where the biggest peaks are and so on with respect to this.

And Brian, I might just add one other comment on that. Part of your question was that you thought that the HSBC acquisition had exacerbated seasonal patterns. We've taken a look at this and generally, we don't think that that's true. We think that our seasonal patterns are reasonably consistent. The one possible exception is the ending loan seasonality being a little bit more pronounced with the addition of the partnership business. I think the reason that seasonality seems to be more of a topic of conversation, more evident in the results these days, is relative stability of everything else. Normally, seasonal trends are somewhat obfuscated by cyclical trends, by growth and other things. And given the relative stability of everything else, seasonality is just showing through a little bit more these days.

Our next question will come from Chris Brendler, Stifel. Christopher C. Brendler - Stifel, Nicolaus & Co., Inc., Research Division: Can you discuss in a little more detail what you're seeing in the Domestic Card business from a credit perspective? It seems like delinquencies had underperformed the industry quite a bit, and we know you have more seasonality than most, but -- and I'm talking about trust not the managed base which includes HSBC. But is there any signs of some underperformance from your perspective? Because from our perspective, I mean, if you look at the trust in particular, it looks like your delinquency trends are quite a bit more than your peers. You've actually, if you look at the industry trust delinquency trends, you're now the highest among the big 6 issuers, which is -- I don't think has occurred in a long time. So I just want to make sure you're still comfortable. The reserves didn't go up this quarter, I'm making sure you're still comfortable with Domestic Card business and the credit you see there, excluding HSBC.

So Chris, the credit is very, very, stable adjusted for the mix changes going on with HSBC and the seasonality metrics. I think that our metrics, our losses, for example, our credit metrics, in general, have more seasonality than a number of the other competitors. And so at some quarters like this one, you will see amplification in that. But there is one other effect though, if you -- so if you just take our card losses here, they increased in the quarter 131 basis points. Now the bulk of that increase was the runoff of the HSBC purchasing accounting impacts that was about 83 basis points of impact in the quarter. Most of the remaining impact was driven by normal seasoning. There's a little bit of noise in the various -- that we always have every quarter. But what we see is a very, very stable credit environment and credit performance for Capital One just sort of normalized for these effects I just talked about. The other phenomena, I think, that's going on when you do a cross calibration of our performance versus some of the other players in the card business, I think it's probably more newsworthy is not what's going on with us but what's going on with some of the others. You have a number of competitors who have, I think, kind of altered the mix of how they're pursuing the business. And I think they fall into a couple of camps. Some competitors that are just really focusing on going right after the top of the market and some competitors that have been focused on the prime revolver segment and doing a lot of the heavy activity there in the sort of teaser rate, high-balance revolver segment. In each of those cases, those particular activities can affect their metrics in ways that, I think, again, the more newsworthy things probably what's happening to them. So those that are heading north, so to speak, in the marketplace, I think you can expect a steady decline even in stable environment with respect to their credit metrics. Those that are more intensely following -- pursuing the high-balance revolver segment will have sort of the, what we call the speedboat or denominator effect on their metrics and then ultimately whatever performance comes from those. The big story about Capital One is that we are pretty much doing what we did going -- before the Great Recession, during the Great Recession and now. And there's a real stability to that overlaid on top of a very stable kind of overall credit environment. But I do think, it is -- I do want to set the expectation that our stability of strategy versus some of the other changes will cause a divergence in the credit metrics. And then of course, we've got HSBC joining our portfolio. And now as the credit mark effects subside from that, you're talking about, about a 40- to 60-basis-point just general rise on our portfolio charge-off metrics. Christopher C. Brendler - Stifel, Nicolaus & Co., Inc., Research Division: Can I ask a quick follow-up?

I'm sorry, can I just say one final thing. Of course, we do this -- this is very purposeful how we manage the business, and I think our reward comes on the revenue side. And of course, I think the revenue margins kind of speak for themselves. Yes, go ahead, you have another question. Yes. Christopher C. Brendler - Stifel, Nicolaus & Co., Inc., Research Division: Just a related question, Rich. I think remember back to the CARD Act, I think it was going to level the playing field and would help you gain share. And listening to your comments just now on credit, I'm struck by you don't seem to be gaining share. And if I look at a core year-over-year card number excluding all the noise, I'm getting about 0% growth. The industry is supposedly growing low-single. Discover, in particular, is growing 6% last quarter. Is that because of the same impacts or the same marketing strategy that you're talking about going after the higher balances? How do you feel about Cap One's ability to compete in the credit card market and gain profitable share today?

Yes. I think that -- it's -- we're basically static. Recently, I think we've been static with respect to outstandings share, generally, in the ballpark of static certainly not really gaining share in outstandings. This is -- and you're reason for it is correct, one's performance in outstandings is overwhelmingly driven by the choices one makes about the pursuit of high-balance revolver customers. And that is a marketplace we have tended to be more marginal participants in. And we're certainly not active participants in major parts of that marketplace. So any company's choice with respect to how they deal with high-balance revolvers, the purchase -- the pursuit of them and also the account management activities relative to that is going to swamp everything else. So because we, as kind of a centerpiece of our strategy, have -- are not as comfortable on a risk-adjusted basis with sort of price versus risk levels in that marketplace, we continue to be sort of nibbling around that more around the edges. And that dominates the kind of outstandings performance. Now we don't really operate with objectives about outstandings. We're fine shrinking, we're fine growing. We focus on the creation of net present value. And within that context, we're very, very pleased with what we're generating here is focusing on -- one thing is at the top of the market, the -- some of our products that you see featured on TV and our intense investment in the transactor space has worked great. And we're also very focused on finding customers who -- who's -- who are not intense balance-hungry customers, but who represent great, long-term customers. And that's a been our strategy for years, and I think it's worked very, very well. Now manifestations of this, of course, are that our purchase volume has been growing really at the top of the industry. While people don't generally publish account origination, the statistics, I think, we feel quite good about the account originations that are going on. But we're building kind of business the old-fashioned way. Customers who come on and build their balances slowly over time build their relationship with us over the years. And all the kind of health metrics, the whole level down in terms of our business and the percentage and the way the portfolio works and the lack of intense -- and the reduction in the intense kind of revolving nature of it is something we're very focused on.

And just -- it's Gary, Chris, I just want to add one small reminder to what Rich said in response to one of your comments. Which is if the industry is growing in low-single digits, we have low-single digits amount of runoff in our card business over the next year that we've talked about coming out of HSBC as some of those accounts go away. So in fact, if we end up at flat, we will also effectively have grown in that same sort of low-single digits, just a reminder of that. Thanks.

Next up is Donald Fandetti, Citi.

One of the reasons I recall you buying the HSBC portfolio was for the private label business. And I was curious if you think there could be some deals that could come through that may sort of help you back-fill some of the runoff? And then secondarily, is there any risk to the rev margin? I know the portfolio was pretty concentrated in terms of retailers, in terms of renegotiating those contracts. Has that been done, and can you talk a little bit about that?

Yes. So first of all, about the private label business, we like the private label business. We have watched that business for a year. We mostly stayed on the sidelines because we were uncomfortable with the market clearing prices that the deals were going at. As the market got a lot more sensible in the wake of the Great Recession, obviously you've seen a lot of activity by Capital One. Our focus though is not on being big, although scale really matters, we have the threshold scale here. The key is to get partners that are healthy retailers, partners who have the right reason for doing the partnership business. And the right reason means they're very focused on using that partnership to build their franchise, and that leads to more positive selection. And finally, a contract that really can work for both parties. So we have a very selective strategy. And when we bought HSBC, they had a large number of partners. We were happy that we generally liked the mix of their partners. And I think they had avoided some of the mistakes that some players had in the industry of booking a number of partners that don't work out too well. But we've been able to already re-up with the majority of our major partners in that portfolio. Not all of them, but the majority of them. And we kind of go in one at a time and sitting down with them. But we very much like what has happened so far, and that has been successful. But both with respect to our existing contracts, when they come up for renewal and the pursuit of new ones, we will -- we're going to be all over that. But the key is we're going to be selective and we're going to make sure that we do this on terms that really work. So it's not a volume play, it's really a selective way to, I think, build business in a market that I think we're very well-positioned to capitalize on.

And Rich, in terms of the impact of the partnerships on the revenue margin?

The impact of the partnerships on the revenue margin. The partnerships, certainly, generally lower our revenue margin. Our partnerships, and this is not a comment, by the way, on all private-label partnerships by any means, our partnerships tend to have lower losses and lower revenue margins. So to kind of -- rounding out to your earlier point, as HSBC's higher loss, some of their branded business, things like the old Metris book for example, some of that runs off. That will have a depressing impact on revenue margin as we talked about and tried to give some calibration on last quarter. The net-net effect of partnerships to us is lower revenue, lower losses.

Next up is David Hochstim of Buckingham Research.

[Audio Gap] thing about the other segment, and I guess the other segment and the elimination of the trust-preferreds and the $60 million, is that a onetime benefit, or that's permanent benefit and should we continue to see sort of a $160 million loss in the other segments quarterly? And I have a follow-up before Jeff cuts me off.

Sure, David. First off, let me make sure we're clear on the impact of the calling of the TruPS. There's actually a onetime $60 million charge that will be booked in the first quarter. That's simply the acceleration of the amortization of the issuance costs related to that $3.6 billion of TruPS that we called. So that's going to affect noninterest income in the first quarter. Other than that, we will see the benefit of the reduction in interest cost. The average yield on the TruPS outstanding was about 8.6% on that $3.6 billion. As a result of the lower costs that we will have in terms of interest expense that does not get booked to any of our business segments and therefore shows up in other, I'd expect that to improve modestly, with both a lower funding cost and a larger investment portfolio, which I pointed to. But the other segment also carries a number of other things, especially some of the -- the tax benefits that we get from some of our investments that are booked into businesses and the offset is in other. But so I'd expect to see other kind of coming down, in a sense the treasury P&L coming a lot closer to breakeven because it won't be bearing this high-coupon debt.

Okay. And then just could you share your thoughts about the dividends versus share repurchases. And that -- before the financial crisis, you were talking about a sort of 25% payout, I recall, is that sort of where we're headed again and is that something we could expect in 2013 if you're not returning any of that excess capital through share repurchases? And would we have to wait until 2014 to see share repurchases? Or is that something that could change in 2013 after the first capital plan?

Well, David, we are -- the big elephant in the living room in a sense of Capital One's financial performance is we're generating an enormous amount of capital. And that is a -- the use of and distribution of that is a very central means by which we can create value. So what -- on the CCAR process, our focus was we obviously, given that we did not request share repurchases right off the bat, we've taken a somewhat conservative approach with the Federal Reserve. But we felt the best thing to do was to focus that request on dividends and get to a meaningful level of dividends. David, we're not going to pre- kind of quantify those numbers. But -- and then, beyond that, I think our focus is really going to be on share repurchases. And we believe that -- I don't want to get into specific kind of predictions about what happens in mid-seasonal kind of off-cycle things with the Fed, but I just think that we certainly see a big opportunity to generate a lot of excess capital here and an opportunity to deploy it over time beyond the meaningful dividend really through share repurchases.

Up next is Ken Bruce, Bank of America Merrill Lynch.

Appreciate all the commentary around the margin and I think that's helpful, but I do have one additional question. In the third quarter, you had quantified the franchise enhancements and the impact that, that would have on the revenue margin for U.S. Cards. I think it was, in total, about 50 basis points over the remainder of 2013. And I'm wondering if there are any adjustments to that, or if any of that was accelerated into the fourth quarter or if you could help reconcile just the quarter-over-quarter move in addition to the suppression impact on the margin, please?

Ken, the story is exactly the same as we said before, and then we're still planning to move right along, plus or minus a few basis points here or there, the schedule that we released in the third quarter.

Okay. And then separately on capital, you'd mentioned that the 8% would be achieved here in the not-too-distant future, and you'd alluded to possibly being conservative around how you think about capital. Is there an expectation to have a cushion above the 8%? Or how are you thinking about that?

So we believe that -- no, look, we've taken a conservative view as we talked about with CCAR. And then we've talked about the Basel requirement. I think that the actual operating level of capital that we choose is not going to be driven by a precise number. It's going to be more of a feel thing. I think the term we used in our talking points was, look, you know Capital One, we're going to take a conservative bent. But nonetheless, we think that a central means of value creation is going to be the ability to distribute this capital. So our actual operating levels are really going to be driven by the growth opportunities that we see at the time. They're going to be driven by our view of the -- of the industry out there. It's not loss on us that the banking industry has managed to be pro-cyclical with how they have managed their capital, with some consequences that haven't worked out sometimes as well as expected. But we -- our basic view is a baseline kind of meaningful dividend, and you'll see where that thing goes as we go through the -- how the CCAR process comes out this year. And then the generation of an awful lot of capital, we'll look at the growth opportunities and requirements that we have, the nature of the marketplace, and we expect there will be a significant opportunity to do some share repurchases.

We'll now go to Daniel Furtado, Jefferies. Daniel Furtado - Jefferies & Company, Inc., Research Division: I just had 2 clarifying questions. The first is when you talk about in subsequent iterations of the plan starting to be the source on the share repurchases, you're talking in essence about the '14 CCAR ask and beyond?

Dan, it's Gary. I mean, we're going to follow the process very carefully, look for the opportunities that are there, certainly wouldn't be later than '14. But we get to continually iterate our plan. And as Rich said, having gone from a couple of years of speaking with the Fed about raising capital to support our very compelling acquisitions, we're now switching to where much of the industry was a couple of years ago, which is looking for distribution. We’re going to try and do that stepwise as reasonably fast as we can that's consistent with prudence and appropriate kind of regulatory conversations as well. So we'll see how that goes. But '14 will come, whether other opportunities come or not, we'll have to see. Daniel Furtado - Jefferies & Company, Inc., Research Division: Understood. And then the second question is just more of a mechanical one to help me understand suppression a little bit. If something like recoveries were to decline or delinquencies go up, basically, in essence, negative moves on credit, that would, in turn, the response on suppression would be to suppress more revenue? Or is that the incorrect way to think about that?

Well, that's right, Dan. I mean, again, think of what's happening with suppression. We're dealing with the finance charges and fees, largely finance charges now. And we're going to see patterns that we'll follow in terms of collectibility there that, that will look somewhat like the collectibility that we are assessing with respect to principal that flows through the provisions. So in general direction, certainly, when credit is worse, we're going to be reversing more fees and finance charges, and we may be recovering less. But I think the question that you're really asking is about what might happen to our forward view of those things, which will tend to get captured early in the cycle through our finance charge and fee reserves just as you see during big moves in the credit cycle. You'll see our allowance move earlier and faster than the charge-offs themselves. But again, if we're going to be in a period of much more stable credit than we had seen several years ago, then you should see more stability in the suppression level as well. It also depends on how many fees and finance charges are actually being charged, as Rich said. So that will play into it as well.

Next comes from Bob Napoli, William Blair. Robert P. Napoli - William Blair & Company L.L.C., Research Division: I just wondered what interest level Capital One has in growing other fee-based businesses like prepaid, in particular? I mean, before the -- several years ago, you guys came very close to buying NetSpend, not saying you're revisiting that area. But the prepaid market has been growing pretty dramatically, and is that a business that Capital One should be in or are there any other areas of payments, fee-generated non-asset intensive types of businesses that make sense for Capital One?

Bob, we did spend quite a bit of energy trying to be innovators in the prepaid space some years ago, and we learned a lot about that. I think the market that the prepaid -- that prepaid cards are serving is a growing market. I think we're going to primarily, though, get into that market in a different way. And that's, frankly, through our ING Direct business that is -- has a wonderful business model for folks looking for kind of a pretty simple way to, with good value, generate -- have your banking services. In fact in a business that I know, having lived it, the extraordinary complexity of how banking works. And I think it's just kind of electrifying how ING has created a really simplified way not only to do savings, which is where this all started, but frankly, really to do a checking business as well. So I think we'll be in that business in a slightly different way. And not to say -- and we'll also have prepaid cards as well. I appreciate your question about payments. We're not targeting another whole marketplace for payments, but I do think that's kind of related to the question that was earlier asked about what are we doing in the card business and why are the outstandings not growing that much. The card business is a -- really is, as we're -- the choices we're making in the card business are consistent with the choices we're making all across this company. And that is that we're increasingly focusing on transaction-based businesses. I think that the greatest things in banking, the best relationships, the greatest positive selection and the most enduring franchise building really comes from growing the hard-to-get primary banking relationships. And whether that's the checking account, whether it is -- the checking account, the credit card and especially the transactor credit card on the commercial side, the treasury management product, these are things that require a lot of energy and a fair amount of investment. They don't have glamorous results. But over time, these are, I think, really the key to building a great franchise. And that's why you'll see across Capital One an increasing emphasis on that. And over time, the results, I think, will really show. Robert P. Napoli - William Blair & Company L.L.C., Research Division: And just a follow-up on the Auto Finance business, and 1 month is not a trend. But I mean, your growth slowed down a lot in December or in the quarter. I think you guys did point to a slowdown in growth in Auto Finance. But I mean, car sales seem to be pretty strong. What are your -- what is your feeling on that business? Are you going to continue -- have you pulled back or tightened credit at all? Was there a lot more competition? And I don't know if you could talk about subprime versus prime -- and what's -- if there's a lot of any different -- differences competitively going on in each sector?

So Bob, we love the auto business. We've invested for years in this business. And we, over the past few years, we have continued in fact to really build strong relationships with our best dealers. By the way, I'll add that to the list of sort of building these kind of primary banking relationships where we've really, really kind of focused on the high-quality dealers and building much deeper relationships. But anyway, we have had a confluence in a business we love very much. There've been a confluence of several things that have led to, I think, performance levels that are -- will regress towards the mean at some point. But the confluence of things includes a number of competitors bailing out of the marketplace. It includes credit being very, very strong for the customers and the banks kind of who remained. And corresponding to that, I think, there was strength in pricing. And then, in addition to that, you have the supply and demand dynamics of the auto business, with car manufacturers pulling back, used car prices going to record levels. And all of these things happened at the same time that our business strategy involved continued geographic expansion, more expansion into the prime marketplace filling out our dealer relationships. And so our growth strategy overlaid on kind of a perfect storm in a good way with respect to the auto marketplace. Now all of those things are sort of reaching their kind of -- are going to go toward a more natural equilibrium over time. Competition has come in very significantly in both the prime and the subprime marketplace. Margins are returning more toward normal. They're in fact entirely back to normal, maybe on the slightly tighter side of normal on the -- in the prime marketplace and are certainly approaching normal in the subprime space. Underwriting, which got very tight in this perfect storm in kind of a good way. Underwriting is loosening. And as you know, I mean, we are obsessive about watching those things. Now where it is loosening so far is something that we can live with even if we don't chase it, and that is it is loosening a bit on term, i.e., how -- well, basically how long are the loans for. And it is loosening a bit on FICO, which really more means just you kind of -- more people extending down in the subprime space. It is held pretty firm on loan-to-value. And if it doesn't, you'll see more red flags being raised by Capital One. But so I, what -- the expectations I would like to set for you are that the market is getting back to normal. It is not -- I have a yellow flag on this market but not a red flag I would wave over that. And our own growth strategies are approaching sort of their natural maturation as well. So I think you -- we're going to continue to have a growth play here, a bit moderated and still a very strong business.

Up next is Sameer Gokhale of Janney Capital.

Just a couple of them. Number one, to shift gears a little bit on to the Commercial Banking side of things, Rich, you've talked in the past about national lending scale on the card side. In Auto, I think you'd said, well, you're close to that. Commercial Lending, it seems like your footprint is relatively concentrated geographically in certain regions as I understand it, Northeast and then Texas, Louisiana, some in D.C. What is your outlook there? You've been growing at a nice kind of mid-teens clip, but are acquisitions potentially something you're contemplating in that business, or is that just something you think you can't really scale that up as much? So it's just whatever the organic growth rate is you'll go with that. And then the other unrelated question is on the credit card side. You talked about -- remaining focused on the transactor side of the business because that's really something where your analytics and your targeting can yield some benefits. But in this kind of environment, how about going further down the credit spectrum? I mean, I think 2/3 of your card portfolio is prime, I think 1/3 is subprime. Wouldn't it make sense to target maybe the subprime market to a greater extent if it's less competitive? How do you think about those things?

Okay. Great questions, Sameer. Let me just take your credit card one first for a moment here. So yes, when I -- when you said I was talking about focusing on the transactor part of the segment, I don't want to leave an impression with anyone that we're only focusing on that. The way we look at the business is we look for the micro segments where we believe that we can generate well above hurdle rate returns, and also they have to be consistent with building a franchise in terms of the practices in the business and the way we can deliver to the customer. And that has led us to go from intensely -- intense activity in certain micro segments and absolutely nothing in others. We -- the mix of business that we pursued before the great recession is strikingly just about the same as what we're pursuing now. And on the transactor front, it's been an intense pursuit. On the revolver front, it is really kind of one customer and one micro segment at a time, looking at where -- how does price compared with the -- what we really feel a risk-adjusted -- the stress-based risk of that business is, and we find pockets within revolver. One thing we have said that the really kind of really balance-intensive revolver where -- tend to think things are a little out of equilibrium and pricing versus risk in that segment. Why not do more subprime than we do? I think we make the choices that we do based on choosing the customers in that segment that I think have the -- would fulfill the characteristics I just talked about. There's many, many, many customers out there in subprime that we're not able to deliver a credit product to. But I think that we have found our natural kind of group set of segments, and I think you'll see more stability out of that. Not that we're trying not to innovate, it's just that I think we've learned quite a bit about risk and return, and I think we've found the pockets that work for us.

Oh, in commercial.

Yes, commercial is a -- commercial is generally on the C&I side and it is a kind of a local business. It's all about local presence. And that's why you find most of the C&I players that correspond very, very closely with their branch footprint. That generally applies also to CRE, even though I don't think the linkage actually to a branch footprint is nearly as technically as significant on CRE because it's not a transaction -- there's not as much of a transactional and cash management kind of component to that. But it's still... [Audio Gap] C&I business where you need a lot of scale in order to be in those businesses. And our energy business is an example that came out of our deep experience in that, from high burning down in the South. But we are building a number of verticals in the specialty financial -- specialty banking sector. And those verticals really are -- can be national in scope and they're not really about having a local banking relationship. So we'll end up as the kind of a hybrid of a national and a local player on the commercial side. But I think net-net, overall, there's quite a bit of growth opportunity for Capital One in the near- and longer-term future.

And that will come from Bill Carcache of Nomura.

Rich, I was hoping to just go back to the -- revisit the point that you made about the transaction businesses. And Capital One certainly has enjoyed very strong purchase volume growth, but what's your -- how should we think about the corresponding revenue growth, which has been much slower? When we look at the composition of your revenues, you still have 80% of your revenues coming from spread, and so the growth and the emphasis on the fee-based businesses, I can see that and the attractiveness of that. But in terms of it really moving the needle, I guess what are your thoughts in terms of, to date, are you satisfied with not just the purchase volume growth but the bottom-line revenue growth after factoring in the rewards cost and all that, that it's taken to drive that volume growth? And then going forward, do you expect -- what are your expectations relative to what we've seen so far?

Yes. Well, the -- as you can imagine, the way that we look at that business is, really, the way we look at all our businesses is to take a -- to strategically look at the marketplace, study the competition and the inherent risk and rewards in that space and then take a very disciplined net present value based look at every tranche of business and really make sure that we're getting paid for what we do. So we're not wishing upon a star in this highly competitive top-of-the-market business. We know it's something that you can't go do one little test sell and find it works because you got to be a player in that business. It's about brand, it's about credibility, and it's about building a great customer experience. So we have invested in that space, and we like the financial returns in that space. This is one of these things that it's expensive to build an account and they tend to have a very long lives, and so it's kind of a slower payback business. So you're right, that it's not something that is really grabbing hold of the metrics and moving the needle in a short-term way. But rest assured that we are very disciplined with respect to net present value based, real kind of returns from this kind of investments. Now -- but the other thing that's going on with Capital One is we're mostly doing the same things that we've been doing for years in the card business. And the kind of sub-story beneath it, I suppose, is one that I would call a kind of a bit of a movement to quality, if you will, in terms of just, even away from the top-of-the-market very heavy spenders, just more of a move toward the more long-lasting sort of less-intense revolver based and kind of more of building -- all the building and incenting the customers and the behaviors that really lead to a better franchise over time. And I think that one of the things that has pressured revenue is just that part of that has been letting a little bit of air out of the revenue model as we have moved more and more to try to get to and well beyond where the industry is in terms of really an unassailable set of practices. And also investing to -- customer experience, to make these long-lasting relationships. One thing that has also happened in here, we are at record-low attrition levels at Capital One. They have steadily gone down for years is the direct byproduct of our investment here. But rest assured, we're still very focused on good old lending and making money as well there. And I think the stability of our revenue margin -- funny thing is if you look back, Bill, at our revenue margin before the CARD Act, that thing is so -- even way back then and where it is now, after all the changes, even when we kept, in fact, telling you, "Look, it's going down, it's going down," and it didn't even go down as much as we thought it was. The preparations we made pre-CARD Act over the years to put ourselves in a position that would -- way before we knew the CARD Act was coming, I think certainly helped. And I think the power of our "one customer at a time" information-based strategy has allowed us to generate sustainably strong revenue margins, even while we are continuing to slowly but surely transform our company toward a more transactor base and more industry-leading kind of customer experience company.

And our final question today will come from Mike Taiano of Telsey Advisory Group.

So just one question I had on the pre-provision earnings run rate guidance. So the fourth quarter $2.369 billion, so if you -- I just want to make sure I'm getting it right that you annualize that, but then you have to adjust for the higher expenses in the quarter. So my math seems to equate to about a $10.1 billion annualized pre-provision earnings number, is that seem about right?

Well, Mike, I can't get into specific guidance. We are trying to give you some transparency here. And yes, I would absolutely take into account the comments about the seasonally high noninterest expense, including marketing, and make a small adjustment there. Revenue, although Rich described, that that's going to move up and down in various quarters because of the seasonality in the card business. This quarter tends to be pretty close to average. So I think that should give you the parts and pieces you need to kind of get to a reasonable number. But I think you're looking at it the right way.

Okay. And just one quick follow-up. One of your competitors, actually Chase, had provided disclosure in their earnings about the amount of card acquisition -- or new accounts that they're acquiring online. It was a pretty -- I was surprised, it increased to over 50% from the 30s last year. Are you guys seeing a similar trajectory? And how -- does that have a potentially positive impact on your costs going forward?

Mike, we -- I don't have in front of me the -- our own data on new accounts online. But I -- we are seeing -- there is a very significant shift going on away from the Pony Express, if you will, of direct mail to the new world of online. It is -- in many ways, it's a migration. It depends on the particular customer segment and the product that one is marketing here. But I will say it is striking. If you look at mail volume, mail volume has dropped, I don't have the number right in front of me, but something like 30% to 40% from last year. And I think 2 effects are going on there. I think the card industry underestimated, when it kind of rushed back into the market, underestimated how weak the demand was. And so I think there's a pullback there. But I think it's also a manifestation of the fact that so many of us are finding a growing and very significant part of our business really coming from online. I think that augers incredibly well over time for some of the potential benefits of -- it's not just cost, although that's a key thing. But I think always, we find our customer experience metrics are best along the -- in the online channel. Things like compliance and rigorous highly accurate execution tends to work best in online channels. Capital One is committed to being a leader on -- with respect to this very significant game changing phenomenon.

Okay, well thank you, everyone, for joining us on this conference call today. Thank you for your continuing interest in Capital One. As I said before, the Investor Relations team will be here this evening to answer any further questions you may have. Have a great evening.

And again, ladies and gentlemen, that does conclude today's conference. We would like to thank you all for your participation.