Capital One at Goldman Sachs Conference Notes

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Capital One Financial (COF) Presents at Goldman Sachs US Financial Services Brokers Conference

Rich Fairbank — CEO

We have a fairly health consumer right now. Been very responsible

“I think we have a fairly healthy consumer right now. The context of — certainly through the lens of a bank and a huge credit card company I think the striking thing about the consumer is just how responsible the consumer has been, how low credit losses have been, I mean, the losses and the industry losses in credit card are just extraordinary low. ”

Consumer is coming out of a period of tremendous conservatism

“I think we see a consumer coming out of a period of tremendous conservatism after the great recession, stepping out just a little bit. But I think we’re in a good place with respect to consumer.”

The only way to compete at the top of the market is with sustained strategy of investment. Years if not decades

“to compete at the top of the market going after heavy spenders is — there is only one way to do that and that’s with a sustained strategy of investment to make it happen. It just doesn’t work to go in and out. It doesn’t work to try to come up with just, well, here is the cool product, let’s try to do that. And so, if you look at people that have really succeeded here I mean American Express is of course the gold standard here and also JPMorgan Chase has had a lot of success in this business. In each case, we’re talking about years, if not decades, of steady investments in building a brand, doing what it takes to create the quality products, and building the customer base.”

In the private label card business it’s extremely important that you find good partners

“We go in there saying we really like this business, but we want to be makes sure we do it on the right terms; that is starting with looking for partners that are themselves very strong companies. There are lot of companies out there in the world of retailing for example that are as you know really struggling in the digital revolution and everything else, so really picking the strong partners. Secondly, choosing those that are motivated for the right reason with respect to what this partnership is about. There is a huge continuum between whether the partner is trying to use the private-label relationship as a way to build deep customer relationships or as the means of making money. And I have found that that motivation drives just about everything about how partnership works and really affects the attractiveness. We are very focused on going to the right players who really and to work with them to build deep customer relationships.”

I’m not waking up everyday hoping for rates to go up

“I’m not one who everyday wakes up wondering and hoping for rates to go up because I think that while we are asset sensitive like most other banks and the math of higher interest rates will help net interest income and margins. But the bigger question really is what also comes along with that territory. And we do know that when rates go up consumers on variable rate products will have higher debt cost and it is typically something I found when rates go up, origination sometimes is that slows down origination a little bit because the pricing feels higher and consumers themselves haven’t internalized the rising rate. ”

We have tried to build specialties in commercial lending

“We had tried to identify the best specialties in commercial and then go build the specialty as a parallel to how we built the specialty call it the credit card business or our auto business. So, in that context, we like the energy business very much.’