Welcome to the Capital One First Quarter 2015 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. Thank you. I would now like to turn the call over to Mr. Jeff Norris, Senior Vice President of Global Finance. Sir, you may begin.

Thanks very much, Jennifer, and welcome, everyone to Capital One's first quarter 2014 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 first quarter 2015 results. With me today are Mr. Richard Fairbank, Capital One's Chairman and Chief Executive Officer, and Mr. Steve Crawford, Capital One's Chief Financial Officer. Rich and Steve 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, and 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 entitled Forward-Looking Information in the earnings release presentation and the Risk Factors section in our annual and quarterly reports which are accessible at the Capital One website and filed with the SEC. With that, I'll turn the call over to Steve Crawford.

Thanks, Jeff. For the first quarter Capital One earned $1.2 billion or $2 per share and had an average return on tangible common equity of 15%. On a continuing operations basis we earned $1.97 per share. Net income was up $154 million driven by higher pre-provision earnings and lower provision expense versus the prior quarter. Pre-provision earnings increased by $69 million versus the prior quarter as lower revenue was more than offset by lower marketing and operating expenses. Provision for credit losses decreased on a linked quarter basis driven by a smaller allowance billed and lower charge-offs versus the previous quarter. Turning to slide four, I'll briefly touch on net interest margin. Reported NIM decreased 24 basis points in the first quarter to 6.57%. The quarter-over-quarter decrease was primarily driven by two fewer days to recognize income and temporarily higher cash balances. We don't expect any incremental margin pressure to meet the LCR since we're already above the fully phased in LCR requirements as of March 31, 2015. Turning to slide five, let me cover capital trends. Our common equity Tier 1 capital ratio on a Basel III Standardized basis was 12.5% as of March 31. On a fully phased in basis we estimate this ratio would be approximately 12.1%. We reduced our net share count in the quarter by 5.4 million shares or 1%, primarily reflecting our share buyback actions that began last April. Over the past year we have reduced shares outstanding by 24.9 million or 4%. We entered parallel run for Basel III Advanced Approaches on January 1 and we continue to estimate that we are above our 8% target. We were pleased with our 2015 CCAR results and believe they continue to demonstrate our strong commitment to return capital to shareholders. Our approved submission include a…

Thank you, Rich. We will now start the Q&A session. As a courtesy to other investors and analysts who may wish to ask a question please limit yourself to one question plus a single follow-up. If you have any follow-up questions after the Q&A session, the Investor Relations team will be available after the call. Jennifer, please start the Q&A session.

Thank you. And we'll go first to Ryan Nash from Goldman Sachs. Ryan M. Nash - Goldman Sachs & Co.: Yeah. Hi. Just wanted to follow-up on the update to the efficiency. I think you guys came in at roughly in the middle this quarter. And I was just wondering, Rich, can you give us a little bit more clarity on how we should think about the incremental costs that you need to spend on marketing and how it flows through to loan growth? How long of a lag should we see on growth? And then I'll have a follow-up. Richard D. Fairbank - Chairman, President & Chief Executive Officer: Ryan, our initial guidance on efficiency ratio, we did I guess three quarters ago. We updated it for the dramatic changes in interest rates. And over this period of time, there have been – we have constantly responded to the growth opportunities we see in the marketplace. We've continued to invest to capitalize on those opportunities, and we've continued to refine our forecast, if you will, of what are the actual growth numbers that we think will come in the near term. And kind of the byproduct of all those moving pieces has been – leads to my commentary on the efficiency ratio. I mean, the bottom line is – to grow we need to spend money. We believe this is a very, very important window of opportunity, and we're taking action to capitalize on that and along the way working very hard to manage sort of one minus, the cost of that, and keeping our investors posted along the way. Ryan M. Nash - Goldman Sachs & Co.: Got it. And then just following up on your outlook on credit. You talked about a mid-3%s charge-off with the exit run rate closer to the mid-to-high 3%s. How should we think about the impact on the provision if loan growth is sustained at these levels? Should we expect the provision to track charge-offs and then build for – and then have a subsequent build for loan growth? And then just related to that, Rich, you commented that it continues to increase as we move into 2016. At what point do we actually start to see the charge-offs leveling off?

So let me take the provision. There's obviously two parts of provision. There's a charge-off component and then there's what happens in your allowance. So you have one piece of that already in the charge-off guidance, but that charge-off guidance in and of itself is also a contributor to what's likely to happen to allowances. So let me back up for a second because I know this is a continuing question and just try and give a little bit more help. At the highest level, we build our card allowance, and actually it's not too different anywhere, but let's talk about our card allowance off of three different things: what the loan balance is at the end of the period; what our charge-off forecast would be over the next 12 months; and then there are qualitative factors which really cover the risk that are not captured by models. So if you're really trying to model the allowance in future quarters, you're going to need to make assumptions on all of those, the growth rate and the assumption for loans. And remember if you're not doing a year-over-year growth rate, you've got to think about the seasonality because they can run off in different ways. Next you also would need to however – whenever you want to forecast that for the balances, look at what charge-offs are over the next four quarters after that. And then with regards to our qualitative factors, they've been about 10% to 15% in benign periods but they can vary pretty significantly if you're entering or exiting a credit cycle. So I'm trying to give you a little bit of a picture of why small movements and assumptions can create swings in a quarter which end up being meaningful. And the most impactful of the three…

Next question, please?

Thank you. And we'll go next to Bill Carcache from Nomura.

Thank you. Rich, I was hoping that you could update us with your current thinking on the strategic importance of the international credit card business and perhaps talk about its growth outlook. And maybe tie in reports this quarter that Capital One was cutting its credit card rewards in the U.K. and how that may influence how you're thinking about it. Richard D. Fairbank - Chairman, President & Chief Executive Officer: Okay. Bill, first of all, I want to say that most of you may be aware that in both the UK and in Canada, there have been regulatory-based moves to lower interchange. Neither of our businesses there, particularly our UK business are highly dependent on purchase volume for the economics of the business. So I don't think this will have a big impact on our particular overall economics even though it's an important move in the marketplace. Already a number of issuers have come out in response to the lower interchange rates in the UK and have notified their customers that future rewards will be at a lower rate. I think that's pretty natural in a tight margin business, and the rewards business is a very tight margin business with the interchange and the high payment of reward benefits. That's pretty natural market phenomenon and we already see that going in the UK. Interestingly, there's been some pushback and noise on the consumer side because consumers really do like their rewards and I think we should all take note that even in a country where the rewards rates are lower, there is some pushback there, and I think it's a reminder that in the U.S. consumers who are enjoying higher rates of rewards are pretty vocal for us, for the preservation of these benefits.

Thank you, Rich. That's very helpful. I appreciate that commentary. If I may ask a bit of a high level question on what we're seeing in the partnership business. The view I believe I've heard you express in the past is that you like the partnership business, but that your optimism is somewhat tempered by the fact that contracts come up for renewal every five years or so and the potential exists for outsized profits to get competed away in that process. I know I'm paraphrasing, but that's the sense I've gotten from your commentary. But there are others in this space who are expressing a bit more of an optimistic view on partnership businesses and kind of taking – talking about how the thing that they're most focused on is how their merchant partners are looking for them to help them drive incremental sales growth and they talk about how their pipelines are very strong. And so I guess the question then is what do you think is driving these differences in views that some folks in the partnership business are a little bit more optimistic in their outlook and that's it? Thank you very much. Richard D. Fairbank - Chairman, President & Chief Executive Officer: Yeah. Well, thank you, Bill. First of all, I think in many ways it's all relative and relative to what. So as one who built this company initially on a direct to consumer model one customer at a time, you have seen the long history and current performance of that business, and it a little bit spoils me relative to pretty much everything else in the banking business. And I kind of start from there for my calibration. And frankly, the big difference between – as you said, between the regular direct to…

Thank you.

Next question, please.

Thank you. We'll go next to Sanjay Sakhrani from KBW. Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.: Thank you. I guess I got a question on credit quality again. So the seasoning math was supposed to impact 2015 and I guess now it's not. So what's really driving that better performance? Is it fuel prices or something else? And I have one follow-up after that. Richard D. Fairbank - Chairman, President & Chief Executive Officer: Sanjay, I think in the very near term there is – as we grow, there is some what we call a speedboat effect that growth in the near term sort of has a depressive effect a little bit before it inexorably raises the charge-offs some months down the road, but that's really a small effect. I mean mostly what – essentially what we're talking about here is something that we've seen on not infrequently over, for me, the 20-year history of being in this business, is that from time to time we notice that all our flow rates, our delinquency flow rates move in a similar direction all at one time. And usually when this happens, there's not necessarily an explanation for it. Often we're able to go back later and tie it back to economic data that comes out later and so on. Now this is not a huge effect. I don't want to get carried away. I've seen much bigger effects in other times. But because we have actually gone out to give sort of quarterly guidance, all we're saying is coming in better than the quarterly guidance in the relatively near term relative to when we did it just relates to better than expected flow rates without having a perfect explanation there's probably some general economic effect that is going on.…

Next question, please?

Thank you. We'll go next to Rick Shane from JPMorgan.

Thanks guys. You talked a fair amount about the provision on the credit card side. I'd like to talk a little bit more about the provision on the commercial side, which you'd sort of talked about some of the qualitative factors that drove the increase in provision, but I'd like to relate it back to Steve's comment about how you think about reserve levels. Obviously, this quarter we saw a pickup in provision, pretty substantial without any deterioration in credit. Obviously, that's forward-looking related to what you see going on in the oil patch. I'm curious if there're specific credits within the portfolio that you've already identified as particularly at risk, or is this just a generic reserve related to the qualitative factors Steve talked about?

Yeah. Well, the comments that I was making were really directly off of card. But let me address commercial. As Rich said, that was really driven principally by energy. And if you think about that, it's a little bit of both. It's a little bit of specific credit observations. It's a little bit of trying to get ahead of what we see in the marketplace using our historical experience, developing a scenario and making sure that that's reflected in our provision and allowance as well. Those are the things that are really driving the number in the quarter. One of the things I would say is we're early in the cycle, but we're obviously trying to use the experience we have in energy to forecast what could happen.

Got it. And I'll bootstrap a follow-up question a little bit. Are you seeing anything on the consumer side in the oil patch that has you concerned at this point as well? Richard D. Fairbank - Chairman, President & Chief Executive Officer: No. When we look at geographical segmentations of where there is the greatest oil-related activity in those more local markets, we do see a tick-up in some of the consumer credit metrics that you would expect. Nothing dramatic at this point, but it is visible in the markets that are most highly concentrated with respect to oilfield activity.

Next question, please?

Thank you. And we'll go next to Don Fandetti with Citi.

Yes. Rich, you've been pretty cautious on subprime auto for a while now. It seems like your comments today are perhaps a little more cautious. And what do you think is driving the more aggressive lending, let's say, this quarter? Because it's interesting. Credit looks like it's actually gotten a little better in subprime. And is it the smaller players? Can you talk a bit about that? Richard D. Fairbank - Chairman, President & Chief Executive Officer: Don, there are a lot of different practices people use in the industry and underwriting practices and we all use them on a sloped basis. So it's not like, well, there's a practice; we don't use that one or when do we require this kind of collateral or this kind of information for a particular loan? It is the intersection of the particular practices as it relates to a particular customer and the credit risk of that customer that has moved for some players. And it is not a universal thing. Some players have been more aggressive than others. And we just been around long enough to know the key thing is we very much have a culture around here: people don't live with growth targets at Capital One. We forecast growth when we think it's going to come, but people all know that job one is to raise your hand and flag when you see opportunities, and the most important thing is that we go after resilient business. We are flagging some of – yes, we've ticked up a little bit our commentary on this, although we have been talking for quite a while about it. We talked -- in many ways taken two different perspectives. Partly what we've said over time is just understand coming off a once in a lifetime,…

Yeah. And then what is the percentage mix over your recent card loan growth between existing and new accounts? And do you – in terms of the seasoning, I guess you see more of the seasoning impact on new accounts. Is that a fair assumption? Richard D. Fairbank - Chairman, President & Chief Executive Officer: Yeah. Well, the only seasoning that one would have on existing accounts – well, first of all, existing accounts always, the outstandings ebb and flow with people's spending and borrowing and just general kind of ambient activity. The only big mover on the existing file would be line increases and having been in sort of a brownout period for a couple of years with respect to line increases, as we said, getting back into line increases led to, if you will, sort of a surge of catching up for a second. We're on the slightly higher side of equilibrium probably at the moment, I would say, there. The seasoning of those is a different seasoning dynamic with respect to new business. The line increases tend to – all the economics of line increases have upfront – it's sort of upfront very good things, doesn't cost much to get them. There's no kind of spike of diabolical behaviors or anything. So what you tend to have is – and for a while people use their line to pay any obligations and so on. So what you have there is more of a steady, delayed sort of rise in charge-offs over time with that vintage. That is an important but minority part of the overall growth right now. It's an important minority, shall we say. The majority of the growth is coming from the origination side of the business or from recent originations and the very immediate credit line moves we might make relative to those. But I put that all in the category of originations. The vintage dynamics for that are very different. First of all, all the economics are upfront. You take all your pain. You've got your high cost to originate, the big allowance builds. There's even sort of a – the peak of charge-offs comes pretty early and then moderates over time so that sort of all the good news aspect of that thing happens over time. The majority of our growth is coming on the origination side, but there's a sizeable minority that is on the line increase side. And that's approaching an equilibrium now. It's on the high side of equilibrium.

Next question, please.

Thank you. We'll go next to Moshe Orenbuch from Credit Suisse. Moshe Ari Orenbuch - Credit Suisse Securities (USA) LLC (Broker): Great, thanks. Rich, you talked a little bit about the rewards in the UK coming down a little bit on tight interchange in the market. Could you talk a little bit about your outlook for the U.S. where rewards have generally gotten more aggressive and the like in the prospect of perhaps at some point seeing a higher interest rate environment and whether that will have any impact on the industry? Richard D. Fairbank - Chairman, President & Chief Executive Officer: Sorry, Moshe. Repeat your question... Moshe Ari Orenbuch - Credit Suisse Securities (USA) LLC (Broker): Yeah. Basically, you've had aggressive rewards competition. It's been increasing both on a co-branded and also just even on cash back and mileage type programs. The question is, does that turn around? Does it turn around if interest rates start to move up when profitability on a customer who's basically using the card like a charge card would go down? Richard D. Fairbank - Chairman, President & Chief Executive Officer: Yeah. Well, Moshe, you're talking about a sector that, as long as I've been around it, has been pretty intensely competitive. Now it tends to be lopsided relative to a lot of competition from a small number of players and sort of modest involvement from everybody in the business. This rewards space is – certainly is still very competitive. And the recent manifestation of extra competition there has been, early spend bonuses have continued to rise. That's probably the most noteworthy thing. I think others in general have come out with products that are a little better than what they have for the existing books. So there's a little movement on product value and continued competition on early spend bonuses. So we have our eye on that. And of course the other place for the competition of course is just in the amount of marketing. And people are stepping up the amount of marketing as well. So overall, I would say there has been modest, pretty, pretty modest, now in the overall scheme of things, sort of increase in the intensity of competition there. Now you talk about – so in the context of all of that, as rates go up at some point, I think a sizeable increase in interest rates will probably have a fair amount of impact on that. I wouldn't expect modest interest rate changes to impact that too much. But I know, Steve, you've spent a lot of time thinking about this. What were you going to say...?

Yeah, just with respect to interest rates, three observations. First, when we book new accounts, we fund the balance, what we assume the balance is going to be, going forward. So there's not rate risk as you would say on the existing book. The rewards that we have are obviously that we're accumulating are expensed. And as Rich said, the underwriting that we do on the accounts does assume some stress level in the rate environment, so it's not booked based on current spot rates. So there's a lot of thought into the interest rate risk associated with the business. Moshe Ari Orenbuch - Credit Suisse Securities (USA) LLC (Broker): And just as a follow-up, any update on what you're seeing in your relationship with Costco in Canada? And if not now, when do you think we'd hear about that?

Yeah. We're excited about our new agreement with Costco. This was launched in September of last year. And of course we're the exclusive credit card issuer for the retail brand in Canada. This didn't, by the way, just didn't come with a portfolio acquisition. So this is really one that we're sort of, from scratch, working to build the customers. And as the first – in the first six months since the partnership launched, we're seeing pretty strong demand as Canadian consumers appear to be certainly very willing to take up what is a quite attractive MasterCard product.

Next question, please.

Thank you. We'll go next to Eric Wasserstrom from Guggenheim Securities.

Thanks very much. Steve, if you wouldn't mind, can you just clarify what you meant in your comment about the payout ratio going forward just so I understand it in the context of what Rich concluded with in terms of the payout outlook?

Look, we'd ask you to look more at our actions and our commitment to return capital over the last two years. I don't think you'll ever see us, certainly not in the near term, but my guess is probably ever committing to a payout ratio. The business is just – we'd like to retain the flexibility. And obviously, if opportunities arise or the economy changes, there can be a whole bunch of things that change. In the near term, you saw that this year our test improved a fair amount in terms of how the Fed looked at us, which was good news. And we hope things continue to move in that direction. But we can't be assured that that's the case. The other big uncertainty we've talked about and continue to have going forward is how CCAR and advanced approaches will come together. So there's just a whole bunch of reasons why we don't want people to lock into what we have done over the last two years and just assume that's the minimum going forward.

Got it. So you're really just underscoring the need to maintain capital flexibility in light of competitive conditions and a continuously evolving regulatory environment.

Absolutely.

Great. All right. Thanks very much.

Next question, please.

Thank you. We'll go next to Bob Napoli from William Blair. Bob P. Napoli - William Blair & Co. LLC: Thank you. Just a question on growth and a follow-up on regulation. Just the – Richard, what do you expect, what are your thoughts on the growth rate of your credit card business? You've had very strong growth, accelerating growth, as you said, helped by credit line increases as well as your branded product. Are we done with the credit line increases? Are we going to continue to see an acceleration in that business? And – I mean your spend growth in the U.S. is pretty amazing compared to the industry. And I guess that's credit line-driven as well. So outlook for growth. And are we – which products, and are you near the end of the credit line increases? Richard D. Fairbank - Chairman, President & Chief Executive Officer: Yeah. So, Bob, let me talk about the outstanding growth, to start with. That is being driven somewhat by line increases and also by the success of origination programs on, sort of across the various parts of – across all the parts of the business that we're investing in. So, on the line increases, I guess, my description was, we're on the higher side of equilibrium, but they're sort of approaching an equilibrium level. But we're probably on the bit – on the higher side of equilibrium there. On the spend side, that is – that's driven by – I mean you were kind of right where you're going in a sense. The spend is, yes, partly the success we have in the rewards programs we have, it's also people filling up their lines in a sense, either coming from line increases or a lot of new originations where people…

Next question, please.

Thank you. We'll go next to Betsy Graseck from Morgan Stanley.

Hi. Good evening. Just had a question on some of the new partnerships that you've been announcing. I think you've done some work with innovative companies, like some of the firms out there on the West Coast and wanted to get a sense of how much your technology investment spend has helped you to be a leader and helped you to announce these kind of partnerships early on? I'm talking about what you recently announced with Uber. Richard D. Fairbank - Chairman, President & Chief Executive Officer: Yeah. So well, Betsy, first of all, with respect to external digital parties, there's a lot of manifestations of Capital One's commitment to digital. We've done a number of partnerships. We've done a number of acquisitions like Adaptive Path, Level Money, and things like that. We've done a number, a very large number of recruiting successes, including some pretty high-profile folks that we've brought in. One thing is absolutely clear and it's – and we believed this from the beginning, that every bank is going to need to transform itself. The digital revolution is changing banking on just about every dimension that you can imagine basically. It's changing what it takes to win in payments, in distribution, in marketing, in brand, foundational infrastructure, experience design, if you will, the way information is used. And in the end, that really means the role of talent is central to that kind of transformation. And so in the talent marketplace, in the partnership marketplace, I think these folks, you can't just go out there with a checkbook and say here we are. We're here to bring you into the fold. I think these folks look to see and they come in and kick the tires to say, is this a company that's bolting digital onto the…

That's great. And just a follow-up on that is on – the impact on real-time payments. I know there's obviously a lot of work streams going on at the Fed regarding trying to move the payment system to be real-time settlement. I'm sure you've thought a lot about that and are working on that as well. I'm just wondering what kind of opportunities does that potentially give to you as real-time payments come to fruition. Richard D. Fairbank - Chairman, President & Chief Executive Officer: Well, gosh, there's a lot of dimensions to that particular thing. It is ironic that the banking system is from stem to stern built on a batch basis. So you pretty much look at anything, and from the old direct mail stuff that Capital One and so many of us have done over the years, the whole way clearing works. And so – and really, while there are many, many aspects to the batch nature of this thing, right at the center is this irony that in a world that increasingly is going toward pure electronic payments, there's a massive kind of, oh yeah, lag in the end to make those things fully happen. Most banks – pretty much all of us banks have built middleware layered to, in a sense, simulate real-time, even in the context of a reality that's very much batch-based. I'm not sure that real-time payments will actually transform banking as much as a lot of people think it will. But the reality of when the world moves, if we pull up from real-time payments and clearing technically to the larger point of the world moving to such immediate interactivity and such a mobile world, the really dramatic transformation that's going to happen to banking is it's going to become real-time, far beyond kind of real-time payments. And I think that – I think banks are so, in a way, ill-suited to drive to that destination, yet the world will drive us banks there. I think that you kind of put your finger on something from a broader point of view that I think is at the heart of the whole reinvention of banking that is coming. It's just that for banks to get there, the banking system and for banks individually, there's a lot that that entails. And we're going to need to think more like technology companies and maybe a little less like banks.

Next question, please.

Thank you. And our final question today will come from David Hochstim with Buckingham Research.

Thanks. Just following up on that, what do you think it would cost in time and money to transform the company into a real-time entity? Richard D. Fairbank - Chairman, President & Chief Executive Officer: Capital One?

Yes. Richard D. Fairbank - Chairman, President & Chief Executive Officer: Well, I mean in some ways, I mean it's a lifelong, forever journey. This is not like we're going to say by next year, we're going to be real-time. I'm just saying, so from a journey for me that started 20 years ago and looking at the banking industry and saying in many ways this is really the information business, not necessarily just the traditional banking business. I'm saying the world has – it's very clear at the accelerating rate that the world is moving, the ability to – the dimensions of how information is leveraged, the real-time nature of information and the software revolution that has changed everything, the connected revolution here. Working backwards from that will be a lifelong journey, but I think that the companies that, for all of us, it will be gradual. But as we continue to leverage those opportunities, I think the difference between companies that are really taking advantage of that versus companies that are following the more traditional model, there will – in the end, this is going to translate, I think, into growth opportunities and economic differences and a number of things that are pretty significant. But this is something in a sense that is going to be a lifelong effort for banks like ours.

But you think it will take a long time. Richard D. Fairbank - Chairman, President & Chief Executive Officer: In some sense, it'll probably take forever because the world's going to keep moving that fast. The main thing is that we already see the benefits of some of the things we've been investing in and some, one of the important drivers of some of the growth opportunities we have right now is coming from the digital innovation that we have spent a number of years doing.

Well, thank you very much, everyone, for joining us on the conference call this evening and thank you for your continuing interest in Capital One. Remember the Investor Relations team will be here this evening to answer any further questions you may have. Have a great evening.