Capital One Financial Corp (COF) 2008 Q3 法說會逐字稿

Good day, and welcome to the Capital One third-quarter 2008 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. (Operator Instructions) I would now like to turn the call over to Mr. Jeff Norris, Managing Vice President of Investor Relations. Sir, you may begin.

Thanks very much. Welcome, everyone, to Capital One's third-quarter 2008 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 third-quarter 2008 results. With me today is Mr. Richard Fairbank, Capital One's Chairman and Chief Executive Officer; and Mr. Gary Perlin, Capital One's Chief Financial Officer and Principal Accounting Officer. Rich and Gary will walk you through this presentation. To access a copy of the presentation and the press release, please go to Capital One's website, click on Investors and then click on Quarterly Earnings Release.

Please note 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 material 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 which are accessible at the Capital One website and filed with the SEC. Now I will turn the call over to Mr. Perlin. Gary?

Thanks, Jeff, and good afternoon, everyone. I will start on slide three of the presentation. Capital One earned $1 per share in the third quarter or $1.03 per share from continuing operations, with credit continuing to drive earnings. EPS from continuing operations was down 51% from the year ago quarter, largely as a result of higher provision expense, and down 17% from the second quarter of 2008 with higher provision expense being partially offset by higher revenue.

Credit performance in the third quarter was largely in line with our expectations. Our managed chargeoff rate increased 15 basis points from the second quarter to 4.30%, and the 30 plus delinquency rate increased 35 basis points to 3.99%. These credit metrics reflect both normal seasonal trends as well as continued credit pressure from the weakening economy, which will translate into additional pressure in future quarters.

This led us to add $209 million to our allowance for loan losses and to suppress $445 million of revenue billed but deemed uncollectible. At $3.5 billion, our allowance is now consistent with an outlook for managed losses of $7.2 billion for the next 12 months.

Our balance sheet and funding strength continue to provide stability in these tumultuous times. Despite recent stress in the capital markets, we took the opportunity to raise additional capital through the issuance of approximately $750 million of common stock. This capital raise, coupled with continued capital generation from our businesses, increased our ratio of tangible common equity to tangible managed assets by 29 basis points to 6.47%, comfortably above our target range of 5.5% to 6.0%. This robust capital position not only strengthens Capital One's ability to weather a severe economic downturn, but it also puts us in a position to capitalize on market opportunities.

As a further indication of balance sheet strength, our readily available liquidity stands at $32 billion. We increased our deposits by $6.5 billion to $99 billion in the third quarter, which helped drive an overall decline in funding costs. Our strong balance sheet and the power of our brand allowed us to generate these deposits while pricing significantly below competitors in various deposit channels. I will discuss our balance sheet strength in more detail in a few moments.

Let me start by covering revenue trends on slide four. Our revenue, net interest, and risk adjusted margins all rebounded modestly in the third quarter. The increase in both revenue and net interest margin for the quarter was primarily driven by three factors -- increased early stage delinquencies, seasonal impacts on fee recognition, and an improved cost of funds.

You may recall that second-quarter margins were compressed as lower fees resulted from sharp drop in early stage delinquencies. At the time, we noted that early stage delinquencies were likely depressed by the economic stimulus checks sent during the second quarter. The absence of these checks in the third quarter among other things has caused early delinquencies to rise. As they have risen, so too have the late fees that show up in net interest income.

Also affecting our margins in the quarter was a negative $67 million valuation adjustment to our interest only strip, which now stands at $287 million. This reduction in noninterest income was driven primarily by an increase in expected future losses and to a lesser extent the assumption that recent prime LIBOR spreads persist.

Because the anomalous spreads occurred very late in the quarter, they had very little impact on net interest margin in the third quarter. All told, the prime LIBOR spread lowered our revenue by approximately $25 million in the third quarter, mostly in the strip or noninterest income. If the spread stays at this week's levels, however, it would negatively impact fourth-quarter revenue by around $100 million, mostly in NIM. Obviously if the spread normalizes, the impact could be less.

Moving to slide five, I'll address operating efficiency. Our efficiency ratio in the third quarter improved by 158 basis points to 42.6%. This improvement was driven by our ability to keep overall noninterest expenses flat while achieving 3% growth in managed revenue. As a result of the efficiency actions we have taken over the course of the year, we expect our full-year operating expenses to be around $6.2 billion or some $400 million below our 2007 level. While we expect seasonally higher expenses in the fourth quarter, we continue to expect our efficiency ratio for full year 2008 to remain in the mid 40% range or lower.

Now turning to slide six, I will start a quick discussion on credit performance. Credit in the quarter was largely in line with our expectations. National lending chargeoffs rose 18 basis points to 5.85% and national lending 30 plus delinquencies rose 56 basis points to 5.43%. Local banking chargeoffs rose 12 basis points to 46 basis points while nonperforming loans rose 15 basis points to 96 basis points. These increases are consistent with both seasonality and the weakening economy. Rich will discuss both national lending and local banking credit performance in more detail in a few minutes.

Turning to slide seven, I will discuss how our view of credit is driving the loan loss allowance. As I noted earlier, we added $209 million to our allowance for loan losses in the third quarter, which increases the allowance as a percentage of reported loans for the fifth straight quarter to 3.6%. This allowance build was driven by our expectation that the continued deterioration of US economic indicators we witnessed in the quarter will lead to increasing chargeoffs in the coming quarters.

Our allowance now stands at $3.5 billion, which is consistent with an outlook for $7.2 billion in managed chargeoffs over the next 12 months. This compares to an annualized rate of $6.3 billion in chargeoffs in the third quarter. While the allowance increased as a percentage of total reported loans, in US card and auto as well as at the top of the house, you will note on the chart that allowance as a percentage of reported delinquencies decreased modestly in each of our national lending businesses.

Although the absolute coverage ratio levels remain quite high across our businesses, and modest movements are part of the normal course of business, I would like to take a short moment to explain why this particular metric trended down slightly in the quarter.

For US card, it is important to remember that early stage delinquencies have a higher probability of curing than late stage delinquencies. As the proportion of early stage delinquencies to overall delinquent balances rose in the third quarter, therefore, the ratio of allowance to overall card delinquencies declined somewhat.

In our international businesses, we've scaled back growth and moved the overall mix of reported balances more up market, both of which improve our assumed collectibility and reduce the ratio of allowance to delinquencies in that segment as well.

Finally, in our auto business, the seasoning of our shrinking portfolio and normal third-quarter seasonality caused the coverage ratio to decline. With the $200 million increase to loan losses and the growth in allowance as a percent of reported loans to 3.6%, we are confident in our coverage ratio levels.

I will now cover capital on slide eight. Our tangible common equity ratio increased 29 basis points to 6.47%, comfortably above the high end of our target range of 5.5% to 6.0%. Our regulatory capital ratios continued to be extremely strong as well with our ratio of tier one capital to risk weighted assets rising about 60 basis points to an estimated 11.9%.

Given the volatility and strains in the financial system and global economy, reinforced in recent weeks, we are more committed than ever to supporting our business with a rock solid balance sheet through the recession. While we remain confident that our portfolio will continue to generate sufficient capital to support our business and capital ratios even after paying our dividend, we chose to raise additional common equity in the quarter to further fortify our balance sheet and position Capital One to be able to take advantage of market opportunities created by this difficult environment.

Moving to slide nine, I will address liquidity and funding. We continue to carry substantial amounts of readily available liquidity, despite the fact that we are in a period of slow loan growth and relatively low levels of funding maturities. As always, we do not rely on short term funding such as securities repurchase agreements to finance long term assets. While the addition of deposit franchises has afforded us flexibility to choose funding sources based on price rather than necessity, we have never let ourselves become complacent regarding liquidity risk.

Our liquidity management targets continue to reflect assumptions that our ability to fund in capital markets or brokered deposit departments is impaired for well over a year. We estimate that our current liquidity position is more than sufficient to cover our funding needs well into 2010, even in such a stress scenario. Also, our holding company liquidity would be sufficient to meet all its obligations and pay our current common stock dividend for well over two years without the need for dividends to be upstreamed from our bank subsidiaries.

Our liquidity needs for the next twelve months are modest due to a cautiously growing balance sheet coupled with a small volume of debt maturities. We continue to tighten credit and pull back on loan growth in the current environment, and we have only $8 billion of debt maturities over the next 12 months.

In contrast, our readily available liquidity is $32 billion, or 4 times our debt refinancing needs. Our current liquidity position includes $7 billion in undrawn federal home loan bank capacity, which assumes the maximum haircut. We also have $8 billion in undrawn conduit capacity. These conduits are committed lines with the world's largest and strongest commercial banks. Most of these do not expire until 2010 and 2011. We continue to have success in renewing these facilities early, recently completing extensions of $2 billion in conduits into 2011. Finally, we have $17 billion in unencumbered securities which we can pledge to secure borrowings or sell for cash.

Turning to slide ten, I'll provide a detailed composition of our investment portfolio. As you can see in the chart, our investment portfolio is comprised of highly liquid, low risk instruments. Over 85% of the portfolio is either Agency MBS, which is now explicitly backed by the US government, AAA rated non-Agency MBS, or AAA rated ADS in asset classes we understand very well.

More important than what is in our portfolio though is what is not in our portfolio. We do not own any SIVs, CDOs, or leverage loans. We also do not have exposure to equity, hybrids, or securities backed by option ARMs. We believe that our ample funding and conservative approach to liquidity are essential building blocks to a strong balance sheet and that this approach has put Capital One in a position not only to navigate this storm but to capitalize on financially attractive opportunities when they arise. With that, I will turn it over to Rich. Rich?

Thank you, Gary. I will begin on slide 11. During the third quarter, home prices continued their long decline. Initial jobless claims and the unemployment rate both rose sharply. Consumer confidence trended downward and retail sales growth continued to fall. On top of the continuing economic deterioration, we've witnessed unprecedented stress in capital markets and a sea change in the financial services landscape in a period of just a few weeks. Like all banks, Capital One is navigating through a very challenging and uncertain environment.

Against that backdrop of increasing economic headwinds, Capital One delivered operating profits of $386 million in the quarter. Rising credit losses continue to pressure our profitability, but as a result of our efforts to manage the company through the downturn, we continue to deliver solid operating metrics as Gary has discussed.

There isn't much news in our third-quarter results, especially compared to the unprecedented news in the financial services environment all around us. But we are not complacent. Based on what we're seeing in the world around us, we are significantly increasing the intensity of our efforts to aggressively manage the company for the benefit of our investors and customers throughout this downturn.

I will discuss our US card, auto finance and local banking businesses over the next few slides. But before leaving slide 11, let me make some brief comments on our international business, which is comprised of our credit card businesses in the UK and Canada.

Our international business posted $12 million in net income in the third quarter, a decline from both the second quarter and the prior-year quarter. Loans declined modestly as we continued to tighten and pull back in the UK and as a result of foreign exchange adjustments. Revenue margin and revenues were up modestly and operating expenses declined. The chargeoff rate was essentially flat.

The main driver of the decline in profitability was a significant allowance build in light of growing economic weakness in the UK. The UK economy continues to deteriorate. The UK regulatory environment offers less flexibility with respect to fees and other revenue levers and the entire industry has just been through a period of elevated consumer chargeoffs as UK consumers shifted toward greater use of insolvencies, the UK equivalent of bankruptcies.

We have been cautious in the UK for some time now and we have been shrinking our UK credit card portfolio and exiting other lending businesses in the UK for several quarters. We are maintaining our cautious stance and we continue to watch the situation closely. Just as in the US, we are prepared to manage the UK business aggressively through the downturn.

In contrast to the UK, our Canadian credit card business continues to perform very well, with stable credit performance and solid returns. Finally, we booked a $74 million net loss in the "other" category as compared to a $12 million net loss in the second quarter. The higher net loss resulted from the absence of the one-time gain from the sale of MasterCard stock in the second quarter and the third quarter I/O write down Gary discussed.

I will discuss our US card business on slide 12. Remember, the US card business now includes our legacy US consumer card business plus our installment lending, small business card, and point of sale businesses. Third-quarter net income increased modestly to $345 million, despite continuing economic and cyclical headwinds. We continue to take comprehensive actions to navigate the current downturn. We remain cautious on loan growth. We continue to focus our marketing and originations on the parts of the US card market that we believe provide the best combination of risk adjusted returns and losses through the cycle.

We have closed down inactive accounts and we are implementing targeted line reductions. We are maintaining increased intensity of collections and recovery operations, and we continue to aggressively pursue operating efficiency improvement.

Managed loans grew modestly from the second quarter of 2008. While our tighter underwriting resulted in an expected decline in accounts, managed loans grew as a result of balance billed on our existing accounts. Managed loan growth resulted from strong response to our targeted third-quarter marketing offers, a reduction in balance transfers away from Capital One, and a modest decline in payment rates.

We expect US card managed loans at the end of the year to be slightly higher than year end 2007. We remain cautious on loan growth and very selective in the loans we book. However, it is likely that the expected seasonal balance growth, continuing payment rate trends, and fewer balance transfers away from Capital One will drive some additional balance growth through the end of the year.

Credit performance in the quarter was largely in line with our expectations. The 30 plus delinquency rate increased by 35 basis points in the quarter. The managed chargeoff rate improved by 13 basis points in the quarter, consistent with the low 6% range of expectations we discussed a quarter ago.

We expect chargeoffs to rise to around 7% for the fourth quarter and to the mid 7% range for the first quarter of 2009. These US card chargeoff expectations are included in the loss outlook associated with our allowance. Expected seasonal patterns would result in higher chargeoff levels in the fourth quarter, all else equal. And deteriorating economic conditions are likely to manifest in higher chargeoffs in the fourth quarter and the first quarter of 2009.

Revenue and revenue margin improved from the second quarter of 2008, in line with seasonal patterns we have observed in prior years. In the third quarter, delinquencies and early stage delinquency flow rates increased modestly, which drove an increase in past due fee revenues. The increase in delinquencies and early stage flow rates resulted from expected seasonal patterns, as well as continuing economic pressure on consumers and the abatement of stimulus checks.

Noninterest expense declined on both a year-over-year and sequential quarter basis. This is a result of our continuing operating and process efficiency efforts, as well as our more cautious stance on marketing.

Before leaving the discussion of our US card business, I would like to pull up for a moment and elaborate on our implementation of the OCC minimum payment guidelines and their expected impact on US card results. To be clear, the impacts I'm about to discuss are already reflected in the credit outlook associated with our allowance, but will impact US card chargeoff rates in 2009.

The OCC established minimum payment policies for the credit card industry in 2005. Because the other major card issuers were regulated by the OCC at that time, they implemented the minimum payment policies in 2006, during the best economic and credit environment in recent years. We were not regulated by the OCC at that time. We have now completed our transformation to become a diversified bank, and all of our banking subsidiaries converted to national associations regulated by the OCC. As a result, the OCC is now the primary regulator of our US credit card business, so we are in the process of implementing the OCC minimum payment policies now.

We are the only major issuer making this change now and we're doing so during a period of economic headwinds and rising losses across the credit card industry. Our credit results in 2009 will include the impacts of making this change. That's why I wanted to share our initial assessment of the expected impacts on the minimum payment change. The OCC has specific policies governing credit card minimum payments. These are designed to force modest positive amortization for all card accounts.

We have always been conservative with our minimum payment policies and we have had relatively low rates of negative amortization on our portfolio. Specifically under the new policy, the monthly minimum payment will be set at 1% of principal balance plus all interest assessed in the prior cycle, plus the majority of other fees assessed in the prior cycle, including any past due fees. This compares to our previous policy, which for most accounts is a flat 3% minimum payment.

The new policy will have the effect of increasing the minimum payment for delinquent customers while lowering it for many customers who are current. That will have the effect of accelerating and increasing chargeoffs for some past due customers. We have been conducting a phased conversion of our US card portfolio to OCC minimum payment policies and the full portfolio will be converted by year end.

We have also been running a test cell since June of 2007 to analyze the expected impacts on delinquencies and chargeoffs. We expect that the implementation of this policy will cause delinquencies and roll rates to increase starting in early 2009. Based on our testing, we expect this change to increase the US card chargeoff rate by about 10 basis points in the first quarter of 2009 and by about 50 basis points in subsequent quarters of 2009.

Our testing also indicates that the chargeoff impacts will begin to cure somewhat in 2010 as customers adjust to the new minimum payment policies. I should note that the actual impacts may be higher or lower than what we've seen in the test since the economy continues to weaken.

Our outlook for US card chargeoff rate and our outlook for company-wide chargeoff dollars for the next 12 months both include the expected impact of the change to OCC minimum payments.

Our US card business continues to deliver solid profitability and generate excess capital for the enterprise, despite cyclical credit challenges, and our US card business remains resilient and is well positioned to successfully navigate near-term challenges and deliver solid results through the cycle.

Turning to slide 13, I'll discuss our auto finance business. Our auto finance business posted net income of $14.5 million for the quarter. Third-quarter profits were driven by solid and stable revenue margin and efficiency, as well as lower provision for loan losses as the overall portfolio continues to shrink. These factors more than offset the sharp increase in chargeoffs and delinquencies that are typical during the third quarter.

We took aggressive steps to retrench and reposition our auto business at the beginning of the year. We pulled back on originations and we are shrinking managed loans. We improved the credit characteristics of new originations. We have leveraged pricing opportunities in the face of shrinking competitive supply and we continue to aggressively manage operating costs.

Originations for the second quarter were $1.4 billion, down 56% from the third quarter of 2007. We are on track for auto loan originations for the full year of 2008 to be at least 45% lower than 2007 origination. The total auto loan portfolio shrank by $1.1 billion during the quarter and by $2.8 billion year-to-date.

As we've stepped back from our riskiest segments and focused only on our best dealer customers, the credit characteristics of new originations continued to improve, as evidenced by rising average FICO scores, improving loan to value ratios, and encouraging early delinquency performance of our 2008 origination vintages. We have been able to maintain pricing power and solid revenue margins while improving the credit characteristics of our new originations.

The overall results of our auto finance business are likely to be influenced by sometimes conflicting forces and trends. Expected seasonal increases in chargeoffs will put significant pressure on profitability for the remainder of 2008.

The continuing pressure from the seasoning of 2006 and 2007 vintages and broader cyclical economic challenges are likely to be a drag on results throughout 2009, and the continuing decline in loan balances will impact the optics of our auto business. For example, declining loan balances would reduce the denominator for calculations of metrics like chargeoff rates, delinquency rates, and operating expenses as a percentage of loans. This would put upward pressure on these ratios, making them appear more negative than the actual trends in chargeoffs, delinquency, and operating expense dollars.

On the other hand, the expected improvements in the credit performance and profitability of the 2008 origination vintages are likely to gradually improve auto finance performance over time. We also expect that auto finance performance will be helped by our continuing aggressive actions to improve operating efficiency. And the shrinking loan portfolio will continue to have favorable loan loss allowance impacts.

We will need to see further progress and improvement in overall results, but we believe the aggressive repositioning of the business and our continued actions to navigate the downturn will result in a substantially smaller auto business that can deliver above hurdle at risk adjusted returns over the cycle. We are monitoring the business results closely, especially the performance of new originations, and we will be prepared to take further appropriate actions based on the results and industry conditions we see over the next few quarters.

I will discuss our local banking business on slide 14. In the most turbulent banking environment in more than a generation, our local banking business delivered steady and solid results. On a sequential quarter basis, managed loans grew $400 million as expected runoff of residential mortgage loans partially offset growth in our middle market commercial franchise. Local banking deposits grew by about $800 million in the quarter, despite the expected runoff of public funds.

Our deposit strategies focus on strong customer relationships, new products like our Rewards Checking and our well-known brand. Therefore we achieved third-quarter deposit growth while maintaining pricing discipline and margins.

Profits for the quarter increased to $88 million. Higher revenues and lower provision expense drive the growth in profits. Net interest income increased, resulting from the growth in loans and deposits, combined with stable loan margins and improving deposit margins. Noninterest income improved as compared to the second quarter, during which one-time items temporarily reduced noninterest income.

Chargeoffs and nonperforming loans as a percentage of total loans both increased in the third quarter, consistent with the continuing deterioration in the economy. Despite these increases, the credit quality and trends in our local banking loan portfolio continue to outperform competitors across the country and in our footprint. With the local banking chargeoff rate just 46 basis points, we continue to believe that our local banking loan portfolio is very well positioned and is delivering solid credit performance as compared to other banks.

Credit performance is supported by our favorable mix of loans. We have included additional detail on the composition and credit performance of our local banking loan portfolio in the press release schedules. We have relatively low exposure to construction lending, residential mortgages, and other types of lending that are being hardest hit at this stage of the economic downturn. In our $29 billion commercial loan portfolio, we have less than $3 billion in construction loans, and only about half of that amount is for residential for-sale construction.

In addition to a favorable loan mix, we have the good fortune to have our branch network and banking relationships in states and regions that are holding up well in the current downturn. Texas and Louisiana are bolstered by the energy economy and the fact they were never really part of the boom and bust cycle that is impacting other parts of the Sun Belt. And metro New York has a unique and strong local economy that continues to perform well despite growing pressure from the turmoil on Wall Street. We expect loan growth to remain basically flat for the remainder of 2008 as growth in commercial loans continues to offset the expected runoff of residential mortgages and the small ticket commercial real estate portfolio.

We expect local banking deposit growth to continue in the fourth quarter. We continue to focus on building and maintaining deposit-led relationships with our commercial and small business customers. Our national direct bank continues to post strong deposit growth. And while it is still an early read, we continue to see solid consumer results in our branches following our platform conversion and our brand launch in metro New York.

In our local banking business, we are maintaining competitive but disciplined pricing and driving deposit growth in a turbulent environment. We are building on our brand and our new products to strengthen and grow our consumer business and we're continuing the tradition of providing great customer service to our commercial small business and consumer customers across the franchise.

Slide 15 summarizes our outlook for 2008, which is largely unchanged since last quarter and since our secondary equity offering in September. We continue to expect a modest decline in managed loans, as we remain cautious on loan growth. We also continue to expect double digit growth in deposits. We expect low single digit revenue growth, consistent with low single digit growth in average loans.

Efficiency ratio for the fourth quarter is likely to increase as a result of seasonal increases in operating expenses. However, we continue to expect that full-year efficiency ratio will improve compared to 2007, finishing in the low to mid 40% range. We now expect operating expenses for 2008 to be around $6.2 billion, a reduction of approximately $400 million from 2007 operating expenses.

The outlook for managed loans associated with our allowance for loan losses is approximately $7.2 billion over the next 12 months, as we announced at the time of our secondary equity offering in September. And our expectations for disciplined capital management are unchanged from the second quarter.

Looking ahead to 2009, we don't expect any major changes in the trends we have seen in 2008. We will remain cautious on loan growth, so we expect that managed loans will continue to shrink. We expect to remain bullish on deposit growth and disciplined in our deposit pricing. We expect the revenue growth will largely depend on the trends in loan and deposit volumes. We will continue to aggressively manage costs while investing appropriately in our businesses. We will continue to manage our capital with discipline.

With respect to credit trends, we will continue to provide what we believe to be the most useful window into our credit performance and outlook. On a quarterly basis, we'll share our view of US credit card chargeoff rates for the next six months. Each quarter we will update the overall outlook for managed losses for the next 12 months that's associated with our allowance. And we will continue to report monthly managed chargeoffs for our national lending businesses.

I will conclude tonight on slide 16. Despite increasing economic headwinds, Capital One continues to deliver profits, generate capital and build resilience. As a result we remain well positioned to navigate the current economic cycle. It is the decisions you make in the good times that largely determine how well you weather the bad times. That's why we have been preparing for a significant economic downturn for many years. We have chosen resilient businesses and avoided many of the significant exposures and risks facing other banks.

Residential mortgage and home equity lending is only about 8% of our total managed loans and construction lending comprises less than 2% of our total managed loans. We have no CDOs or SIVs and no exposure to leveraged loans. We have moved decisively to exit businesses that proved to be less resilient, such as the Greenpoint origination business.

We consistently embedded conservatism into all of our underwriting decisions. We've built and fortified our funding and liquidity, and we've completed our transformation from a capital market dependent lender to a diversified bank with close to $1 billion in deposits. All of these moves have put us in a strong position to successfully manage the company through today's near-term challenges.

Of course the decisions you make during the tough times are also critical. We continue to act decisively and aggressively to manage the Company for the benefit of shareholders in the face of these economic headwinds. We have tightened underwriting standards across the board and we have pulled back more sharply in the most challenged housing markets and in the least resilient credit segments.

In our US card business, we have gotten more conservative on credit line assignments. We have closed down inactive accounts and we have begun very selectively to reduce credit lines. We have continued to tweak our underwriting models to recalibrate variables that may be unstable in this environment. We have adopted and adapted our models and approaches as the economic environment has changed and we are intervening judgmentally to tighten even more aggressively than our models would indicate.

We've retrenched and repositioned the auto business. We've dialed back to the highest ground across the business, and in parts of the business, like near-prime auto, we have essentially exited the business. We have maintained our increased focus on collections with earlier entry, higher intensity and new tools.

Even as we have invested in increased collections, we have made great progress on our efforts to reduce our cost structure and improve operating efficiency to enhance our long-term competitive position and build resilience to rising credit costs. We have further strengthened our diversified balance sheet in the quarter. We are maintaining our solid liquidity. We have continued to generate capital organically and we have raised equity capital through a secondary offering from a position of strength.

We have witnessed historic and unprecedented changes in the financial services world around us in recent weeks. For stronger players like Capital One, the sea change in the financial services landscape is creating compelling opportunities to create enduring shareholder value. We are already seeing a wide range of opportunities come our way with pricing and risk adjusted returns that are meaningfully better than what we have seen in the recent past. We have been most interested in deposited oriented local banking opportunities.

We'd only expect to pursue opportunities that are accretive, strategically attractive, supportive of our business model, and consistent with our commitment to balance sheet strength. We believe that such opportunities would clearly create enduring shareholder value.

Because we remain cautious in the current environment and because we are committed to disciplined capital management, we have not yet made the choice to take the offensive, but we believe that compelling opportunities will continue to come to the players that demonstrate the most strength and resistance in the current cycle.

Like all banks, we face increasing cyclical economic headwinds and market uncertainties. We remain well positioned to navigate the near term challenges and to realize value-creating opportunities when the time is right. Now Gary and I will answer your questions. Jeff?

Thanks very much, Rich. We will now start the Q&A session. Remember as a courtesy to other investors and analysts who may wish to ask a question, we'd like you to please limit yourself to one question plus a single follow-up question. If you have any follow-ups after the Q&A session has finished, the Investor Relations team and I will be standing by after the call. Kevin, if you'd start the Q&A session, please?

(Operator Instructions) And we'll go first to Craig Maurer with CLSA.

A quick question on the UK, if you go back a number of years, the discussion around the UK when the consumer originally started to crack in terms of the credit card industry there was that your feeling was that this was an economy that you wanted to bide your time in, that it would provide you with growth similar to what the US went through during the big boom in our credit card -- in the US credit card industry. Considering the regulatory changes there and the obvious changes in the environment, do you still feel the same way about the UK economy?

Craig, I think the UK is a less resilient card business than we have in the US. And I think the challenge there is really the confluence of -- there's an economic downturn in both countries, obviously. I think that the consumer started in a -- certainly the credit card consumer started in a less resilient position going into this particular downturn right now in the UK. And then the very significant limitations that came from the regulatory decisions that were made there -- and in fact, the overhang of the regulatory risk that still exists in the UK.

All that collectively makes that business a less resilient business than our US card business. Now in some ways that's a bit of a tough comparison because I haven't experienced a lending business in my entire career that is as robust and resilient as the US credit card business. But I do want to say it is a whole notch less resilient and more constrained in that sense.

So, what we are doing, Craig, is just really hunkering down and trying to, as conservatively as we can, manage during this downturn. You will notice in fact that we have engineered about a 20% reduction in the size of the portfolio over the last number of quarters. Basically, the standard for new originations is a very high bar, and we are okay with shrinking the business.

We don't, our goal here is to try to -- in many ways is a parallel to auto and some of the other business -- retreat to the highest ground segments and very conservative underwriting and manage costs incredibly aggressively.

We just finished an extensive in many ways transformation of cost structure of the UK card business with our outsourcing execution that we did in the second quarter. So, I think that we are taking the hunker-down strategy, Craig, but you are absolutely right, that this business has less to work with.

Is this a market that might not fit into the long-term plans of Capital One and could you see selling this portfolio?

Well, first of all, selling assets -- this is a marketplace where sometimes you use the word dodge ball, the whole world in delevering and trying to sell assets. Phones are ringing off the hook on that. I don't think that's a practical solution for Capital One at this point.

But what I really want to say is that the right thing to do is to be, is to manage this thing to weather the storm on a surefooted basis and -- on all of our businesses as we get to the other side of this downturn, one thing I think for however bad the downturn is, in most of the businesses, unless you see further intervention on a regulatory and legislative in the middle of these downturns -- in most cases, I think the environment that awaits the people -- the players on the other side of this is one with a lot less competition and probably the very best time in the whole cycle. That's been my experience.

So Craig, I don't want to -- we are very cautious about the UK. That's why we spend a lot of time talking about it. But I think that the practical -- the actions we are taking are the practical thing to do at this point, and I think that what we will do is, is assess where we are as we round the corner of this business.

Next question, please.

We will go next to Scott Valentin with FBR Capital Markets.

Good evening. Thanks for taking my question. Regarding several of the government programs announced recently with the bank charter -- obviously you're available, you can take part in those. Any thoughts on maybe the preferred stock or taking advantage of some of the FDIC deposit insurance or the debt guarantee?

Scott, let me first say I think that the recent government measures you mentioned, I think, are positive and very much needed for the financial marketplace and for the world's economy. So I think we certainly welcome those.

With respect to Capital One, I mean I think the enhanced FDIC insurance -- I realize there's some choices to make vis-a-vis that we will have to go through and analyze that. But enhanced FDIC insurance, I think, is a good thing for all the banks. We have been a bank that has been in a position where we've had customers coming to us because we are viewed as one of the resilient banks as opposed to net outflow the other way. I don't think we are in a position to need it as much, but I think that is a good thing certainly for the banking system.

With respect to the preferred equity and the guaranteed debt program, we are one of those institutions that is truly well capitalized and has plenty of liquidity. So, while we welcome this for the banking system, I think we are going to have to make an assessment about whether this is an appropriate thing for us to participate in. I mean our standard would be since we aren't in real need for it, is just can we put the additional equity or funding to good use? That's a decision we will have to make over time.

Okay. A follow-up if I may. In terms of utilization rates on credit cards, are you seeing any real change there?

Yes. Well, there is a modest change, if we -- let me comment for a second, Scott, about our metrics. The credit card -- we watch as you can imagine -- obsessively watch all the usage patterns and all the credit-related patterns on the credit card portfolio. And there are the core metrics of delinquencies, roll rates, chargeoffs, bankruptcies and recovery rates that are -- those are the hard core credit metrics and we spend most of our time talking about those.

Then you have a whole family of the ancillary metrics that we look at out of curiosity, although we have not found in prior downturns or this one that they tend to be predictive of anything that you don't otherwise just see with respect to the hard core credit metrics.

With that let me comment, while almost all the ancillary metrics have been very, very stable, there has been a slight increase in payment rate and a slight decline in payment rate and a slight corresponding increase in utilization rate. But this is really quite modest. It is about a 1 percentage point increase on average versus a year ago. It is very, very modest. When we looked at the boom and bust markets -- we love to focus on the boom and bust markets to see on steroids the kind of credit effects that go on in the marketplace like this. And we do see in marketplaces like, in that, a bit of a rise in utilization rate.

But again, our view is we will keep an eye on this metric and the corresponding payment rate metric. But I think that it is pretty mild and doesn't add incremental explanatory value to the hard core credit metric.

Next question, please.

We will go next to Richard Shane with Jefferies & Company.

Thanks, guys. In 2009, as you experienced maturities on some of your outstanding debt and migrate how you are going to fund those receivables, should we expect any change in provision policies?

Rick, it is Gary. Happy to take that question. As I said earlier, our maturities over the course of the next year are quite modest, about $8 billion in total throughout all of 2009. Our ABS maturities are just over $5 billion and our unsecured maturities a little over $2 billion. We will go ahead and refinance those to the extent we need to with whatever funding sources are the most attractive at the time.

If it turns out that we are less off balance sheet, there won't be any policy change. The implication, however, would be that we would carry a higher balance in our allowance for assets that are being funded on balance sheet versus off balance sheet and obviously with less variability over time in the I/O strip. It is just going to be a matter of what is the best execution and we will be driven entirely by that.

Okay. Great. Related to that -- it has been helpful, the guidance effectively on chargeoffs on a rolling 12-month basis and then it gives us a good forward look. The challenge with that in terms of -- from our perspective is that it is hard to figure out on a quarter-over-quarter basis if there are changes. Last quarter you indicated that you were provisioning on a level of equivalent to $7 billion for the 12 months ended June 30. Can you just give us an update? Obviously you've said what it will be for September 30th on a 12-month basis; can you just give us the comparable number for June 30th, 2009?

It is still $7 billion.

Terrific. Thanks.

Next question please?

And we'll go next to Bob Napoli with Piper Jaffray.

Thank you. Good afternoon. My first question is maybe a broader question. One of the problems that obviously is in the market today is that everybody is pulling back and tightening and accumulating capital, and -- obviously understand why that has to be done. But as you're looking at asset originations and -- have you raised the bar, and are there assets at attractive risk adjusted returns that if you were more confident about liquidity that you would be dying to make in this environment? Are the opportunities there? And what would turn you to become a little bit more offensive, if in fact those opportunities as high risk adjusted return assets are in the market today?

Bob, it's really a great and frequently debated question about -- as we look at this marketplace. Because it's very clear in all of our markets -- competition is easing in some places, there's more pricing power. We can be more selective, et cetera.

Here is the -- what holds us back has nothing to do with frankly either capital or liquidity at the moment with respect to originations. It really is the elephant in the living room about the economy. From our experience over 20 years of doing this, our haunt is that the assets originated as the economy is getting worse tend to have more adverse selection associated with them than assets at other times.

So if we just look -- just on the face of it, Bob, some of the stuff that comes over the transom in our origination programs looks awfully robust. But what we do, and maybe history will show it is too conservative, but we take whatever data we have seen in the past, we worsen it for our base case and then we overlay on top of that a 40% worsening on top of a worsened base case to assess whether we want to book this business. And it -- by the time we do that, it is just, we find that we don't have that much appetite for origination.

Where I think the asymmetrical benefit is, the asymmetrical benefit is in being in -- putting ourselves in a strong position, capital liquidity and credit, so when the inflection point comes, and it is very clear we are in that best part of the cycle, that we have nothing holding us back.

The one thing I would say, though, everything I said relates to our origination strategy. I think with respect to acquisitions, acquisitions of seasoned businesses, seasoned portfolios or whatever, I think that distressed sales of those in this environment can in fact be exceptionally profitable. So our capital raise and our looking out on the horizon for some significant opportunities is really more related to, at the moment related to some acquisition benefits as opposed to cranking it up on the origination side.

Okay. Thank you. My follow up question is just on the incremental trends in consumer spending. The spending on your cards were flat year-over-year and I just wondered if you could give a little color into what you have seen -- September, October trends year-over-year spending patterns of consumers, how much have they worsened?

Yes. Well, consumer spending, first of all, if you look at -- the right way to look at it on our portfolio is consumer spend is purchases per account, to normalize for all of the other things going on. And per account, our spending is, I think it is four-point-something percent. We can get the numbers for you, but it is just a little bit below the overall growth in purchases that has happened in the industry.

So we can get some data on that. We have -- everything that we have seen recently has been a mirror of what you see out there in the economy. So, I haven't seen the data in the last few days to see if there's -- consistent with some of the things we have heard about out there. But we don't have any -- basically, the window we see into the consumer with respect to spending is almost exactly what you see on the outside and all of the public metrics.

Next question, please.

We will go next to Chris Brendler with Stifel.

Good evening. On the credit side, I think you talked about the increase in real estate delinquencies and through your more normal trends there. How comfortable are you with the outlook for credit layering that the minimum payment change -- I understand that the reserve you've got built. But it just seems like we are just starting to feel the impact of the weakening employment environment. Where do you see chargeoffs peaking in '09 if you had to guess today? And I have a follow-up as well.

First of all, the way we create this outlook is that we talk about consistent with the provision build is we base it on a couple of models. One model is a model built on the last two downturns. Unemployment is the key driver there, and then another model that we've built in real time in this downturn, which not surprisingly, the big driver of credit worsening is changes in home prices.

So in our process we go out and we look at consensus estimates for the macro economic variables and overlay a bunch of -- synthesize and triangulate from a lot of different things. The economic outlook assumed in our allowance build that Gary talked about is unemployment around 7% by mid 2009, and a nationwide peak to trough home price decline of 25%.

Although I don't want to get too literal with that -- we have been reluctant to be so literal, because these models are only as good as the limited datasets that we have. And of course, there are so many interactions and so many new things and new personalities associated with each downturn. So we are not in the peak prediction business.

We don't do a single thing at Capital One that assumes a peak out there and anything getting better. At some point it will, but basically, what we share with you is an outlook of the next 12 months out, but we are managing the company to an underlying assumption that this downturn is going to be extended and long.

Okay. On the auto finance business, I understand the denominators having an impact there, but the year-over-year increase in delinquencies appears to be least uncontained, unabated if not accelerating. I know the denominator has an impact. But would the employment picture, what you are seeing in card, wouldn't that suggest that auto is going to continue to get worse? And are the trusts that are in the auto finance portfolio in danger of any -- reaching any triggers and how could you potentially deal with that? Thanks.

Yes. I mean all of our businesses use similar macroeconomic outlooks. I think there has certainly been striking degradation in the auto finance business over the last couple of years. It is our view in that business that probably about half of the worsening that you have seen in that business is pure economy-based and probably half the collective loosening of industry practices in many ways across the auto finance business. That's kind of unrigorous because it is hard to totally tease them out. So the auto business has had a rough go of it. But all of it has the same economic assumptions underpinning it. Gary, go ahead, you want to answer the trust question?

Sure. Chris, just to say that we are not close on any of the triggers for our outstanding auto ABS. Of course, we haven't issued any for the better part of the year. So you are talking about some reasonably seasoned issues that are out there. Obviously, it is important to keep tracking them, and I am sure with our IR team we can go through any of the individual securities that might be of interest.

Next question, please.

We will go to David Hochstim with Buckingham Research.

Thanks. Could you just talk about what you are seeing in the way of deposit rates and competition in markets? You mentioned I guess a month or so ago you were seeing a lot of upward pressure in some markets from some, I guess liquidity challenged institutions. Has that abated and how much can you grow your local banking deposits?

Okay, David. Yes, it has been pretty breathtaking some of the celestial pricing that we have seen as liquidity pressures have driven some competitors to price extremely aggressively. We saw this much more in New York not surprisingly than we did in the South. And our response has been pretty much to hold our own in pricing while we see the extent of that pricing.

But just to calibrate during early September how bad it got, major competitors were pricing short-term CDs in their branches in New York at rates that in some cases were 100 basis points higher than our national direct bank rates. And during this period we held rates steady and saw somewhat slower growth, but then beginning mid September we saw a sharpen and sustained growth in brokered branch CDs, national direct, basically everything as we saw this phenomenon of the flight to quality.

With respect to the last few weeks, the pricing has eased really quite a bit in New York. And it doesn't mean it won't pick up again tomorrow, but there has been a material easing since a few institutions have been purchased.

And how much growth do you think is realistic per quarter for the local bank?

Well, I think that we are still bullish on the opportunity to grow, although, I want to stress that we are still very margin focused so that the bank -- we don't give the bank big growth targets and so on. We have the luxury of many different sources of liquidity and even on the deposit side, with the National Direct Bank and even broker deposits we have multiple sources where we can do very targeted segment pricing. So, we are very focused on not cannibalizing the great margins that we have in our local banking. That said, we have had, in addition to recent inflows from the movement by consumers to go to their perceived stronger institutions. We have actually -- are now just getting to that thing that we have waited for a long time every since we bought the banks which is to get to the place past integration and infrastructurally where we can start putting some unique Capital One products out there.

So let me just give you just a little example here. First of all, with respect to -- even when we, if I talked about New York here, just in converting to the Capital One brand, we saw a phenomenon that is rarely seen by -- in acquisitions, which is instead of having net runoff, we saw a 25% increase in new account opening for example. Immediately following the conversion to Capital One brand and not -- and before we actually were doing any advertising of it. Then we've done some other marketing campaigns and so on. And then just in coming out recently with our Consumer Rewards checking campaign which is designed to create integrated rewards across credit cards and various things, we have seen another step change in new account openings. So this is early days and maybe next week it will all die down, but we are pretty bullish here, and on a gradual basis, over the next year, you will see more of Capital One getting back to doing good old fashioned marketing which we have been waiting for a long time to do. But we've had still the integration and infrastructural work that proceeded it.

Next question, please.

We will go to Howard Shapiro with Fox-Pitt.

Thank you very much. Gary, I was wondering if you can tell us what you would consider a normalized [TED] spread we could benchmark against as we look at elevated funding spreads, and is there anything you can do in terms of derivatives for the swaps market? I know derivatives are a dirty word, but to mitigate any of that increase in funding costs?

I am going to focus on the second part of the question because I don't know what normal is anymore. All I can tell you is that what we see and what we are prepared for, and perhaps it might be helpful to give you a high level view about the structure of our balance sheet. We have about $37 billion worth of prime based assets. And we have a net LIBOR liability of about $5 billion. Now if you look at all our asset-backs you would see our gross LIBOR exposure is about $40 billion, but we also have $20 billion worth of LIBOR based assets on the balance sheet, so that takes that basis risk away. And then with the balance of the $20 billion, actually $15 billion are subject to swaps. Derivatives are not a dirty word for us. We do have about $15 billion worth of swaps in which we are receiving LIBOR and paying fixed. So net-net, our exposure is significantly less than it would be had we not taken advantage of the swaps market and had we not taken advantage of avoiding the short term funding.

We have turned it out with swaps and that is frankly the best way for us to manage. Unfortunately at this point, I wish tell you I was smart enough and prescient enough to have hedged out the other $5 billion, but I wasn't and it is too late. So now what we need to do is hope that the improvement in the overall market tone and some of the moves the government's taken, not only here but obviously throughout the globe, will help see a little bit more normalization of the TED spread and of LIBOR to prime, which hopefully will reduce the impact that we might otherwise see from these anomalies as I described earlier. So I gave you a sense of what it would be if we don't see any improvement, but hopefully we'll will be able to see it and certainly the lesson learned for the long run is that our focus on managing that balance sheet tightly pays off.

If I could just make sure I understand, so the potential addition of the cost of $100 million in the fourth quarter would be on the higher funding cost vis a vis the $5 billion of LIBOR that's not in swap relationships.

That is correct and there could also in addition to the impact on the net interest margin coming from what you just described, Howard, although that would be the bulk of it. At the end of the quarter, we will have to look and see where we stand, and what that might mean for the following couple of quarters. Because that could also affect the excess spread in the trust. Therefore the I/O position. But you have got it right. The bulk of the exposure we have in this quarter is on the net interest margin.

Next question, please.

We will go next to Bruce Harting with Barclays Capital.

Can you talk a little bit about the runup in the small ticket NTA ratio, yet the chargeoff ratio seems to be pretty stable and maybe a comment on commercial and multifamily real estate as well -- that similar increase in the delinquency rate but the chargeoffs remaining quite low? Thanks.

Bruce, the small ticket commercial -- that's a $2.7 billion business portfolio that came from Greenpoint. It is a portfolio of multi and small size commercial real estate loans originated through a national brokerage network. That, as we have announced in the past, that is entirely in runoff mode. It is basically one of our weakest portfolios. It's had significant increase in nonperforming assets. But the actual -- the NTA increase you see overstates the problem. Historically, we have sold our nonperforming loans in this business fairly quickly. In the last quarter or two, the market for these loans has collapsed below appraised values and, Bruce, we have chosen to hang on to more of these loans. What that is actually caused the nonperformers to rise because we are not selling them and the chargeoffs to fall because we aren't yet recognizing the chargeoffs on the sales.

So, it is a bit of an anomaly at the moment. Amidst all of the noise there, the underlying portfolio performance has stayed about the same. And of course we are fully reflecting expected losses in the allowance. With respect to the multifamily business, I mean we, this continues -- as a general statement, I mean I think that we are with a very watchful eye looking at New York. New York has certainly been fairly resilient in -- but and I think we are very well positioned there. We have seen a little bit of softening, but nothing that is -- would be particularly alarming to us. With respect to the multifamily business, this in past cycles and I think the way it is structured is probably the very, probably strongest and most resilient part of our New York metro portfolio.

We have a watchful eye on that stuff, but we feel good about where we are with respect to our New York real estate portfolio.

Next question, please.

We will go to Brian Foran with Goldman Sachs.

I wanted to put your comments together on capital, and I took three things away from it but make sure I am not misreading what you're saying. Number one, it sounds like you don't need more common equity based on what you see now, but you are open to raising Government preferreds but still evaluating. Two, it doesn't seem like you would really take that capital and recycle it into lending above and beyond what you would do anyway. And third, it seems like maybe you would be open to doing acquisitions with that capital, but sounds more like takeunders or failed bank type transactions as opposed to premium M&A. Is that the right three conclusions to draw?

I mean I think that, I think on the certainly we don't need more common and open to the Government preferred program. That would be -- we have to assess the Government preferred program. Wouldn't recycle it into lending. Yes, in the sense that as we talked about earlier, we are, the binding constraint on our doing more loans isn't having more capital. It is our great caution about the economy. And with respect to the acquisition, I wouldn't, yes -- I mean, the most intriguing opportunity is failed bank fire sales. But I wouldn't say that would be the only thing that we would look at. I would characterize our interest in acquisitions would be just to take advantage potentially -- we'll have to see it when we get there, but to take advantage potentially of dislocation in supply and demand in such a way that there's a one time opportunity to do things you normally wouldn't be able to do. That would be our view. Failed banks would be at the top of that list.

Great. Thank you.

Thank you, Brian.

Next question, please.

We do have time for one final question. Our final question will come from Ken Bruce of Merrill Lynch.

Good evening, gentlemen. I have a question -- Rich, you had mentioned earlier that legislative changes that occurred in the UK that limited pricing flexibility during an economic downturn led to some poor results there, and it looks like you might see something similar occur in the US as it related to legislative as well regulatory changes that may reduce pricing flexibility. I was hoping you might provide us with some update as to how you are looking at those bills as they work through Congress and what response you may have if they were passed close to what they look like today.

Yes, Ken. I mean I think that one of the things we all have to -- one thing that, why we are always so conservative is we look toward downturns is that the risk of the covariance of negative developments, and I think one of the lessons for a lot of institutions is they plan for one thing, but then a family of things come along with it. So we try to be as extra conservative as we can. We certainly -- among the things that we worry the most about is the risk of legislative reactions, maybe overreactions, Ken, to this, in this environment. And so if we -- of course have the Federal Reserve guidelines that are coming out.

We have talked about that and we are fully preparing to go forward with that. We have the, the other risks that are out there related to interchange -- there's occasionally noise about fee levels and practices. And then also bankruptcy changes that could -- while they're focused on the mortgage business could have collateral impact on unsecured lenders. So I don't think we necessarily -- we see the same world you do. Congress is really torqued up right now and I think that we have to be prepared for the possibility that there could be consequences in all of the legislation that comes out that could have collateral impact on the card business. I don't have any particular insight into the imminence of that.

Okay. One of your competitors mentioned today and it wasn't necessarily in response to the legislative changes, but just the evolving dynamic in the industry, part of it cyclical and part of it also structural that really are going to require credit card lenders to increase pricing, whether it be because of these legislative changes or because the funding costs are higher, the spreads are considerably higher in the ABS market, and you have ways to get around that. But it would look like there's going to be possibly a need for some pricing power to be pushed through into the cards sector. And I was just wondering if you are beginning to see that or if it is really just too early for entertaining those types of strategies at this time.

Ken, I think that we certainly have not seen any adaptive reactions the last yet -- but one thing I want to say about the card business, I, the credit card business is the most resilient and most robust lending business by a large margin that I have ever personally experienced. And one of the things about it that is great is it has got a lot of different levers associated with the business and it is a relationship business with a lot of adaptive flexibility. And I think that one thing we have seen over the years is the credit card industry as things happen whether it is legislative thing or actually just pricing by various competitors, the industry has a remarkable ability to adapt. And so what the hard -- there's two things that we have to keep in mine as we think about the impact of any kind of legislative or regulatory effect.

One is what is on the face of it the impact of that effect, and what is the likely industry adaptive reaction. I have a lot of confidence over time in the adaptive strength of this industry and the long-term resilience of the credit card business. That said, I think that it is one of my top concerns about the business is the unpredictable risk associated with legislative changes.

That does conclude our question-and-answer session. I would now like to turn the call back over to Mr. Jeff Norris for additional or closing remarks.

Thanks, Kevin. Thanks, everyone, for joining us on the conference call tonight. Thank you also for your continuing interest in Capital One. The Investor Relations staff will be here this evening to answer any further questions you may have. Have a good evening.

And that does conclude today's call. We do appreciate your participation. You may disconnect at this time.