Capital One Financial Corporation (NYSE:COF) Q4 2022 Earnings Call Transcript

Andrew Young: Yes. John, we don’t break out those components in part because some of them are actually related to one another. For instance, how we think about qualitative factors and how we think about our base forecast is tied into one another. And so, that’s why we just wanted to lay out that quarter-over-quarter when you look at consensus estimates for things like unemployment, looking ahead at 2023, from where we were as of the end of the third quarter to where we were at the end of the fourth quarter, looking ahead on some of those metrics, we saw a degree of worsening. And when you couple that with shifting forward one quarter and replacing a much lower loss content in the fourth quarter with continued normalization, as I referenced it heading into 2023, those are factors that go into it. But actually not even really able to break out the component parts because they’re tied with one another with all the assumptions.

John Pancari: Okay. No, I get it. That’s helpful. The normalization point, if I could just ask one more thing on that, was there anything about the normalization? And I appreciate the color you already gave. But is there anything about the normalization that you’re seeing that is kind of faster than expected, or any change like that that necessitated the size of the build this quarter?

Andrew Young: No. And I think Rich touched on some of these in one of his earlier responses, but what we’re seeing in terms of normalization is playing out as we expect. It’s part of why I wanted to highlight the fact that the mechanics of the reserve though only take into account that 12-month model period and revert from there. And so, we’re only allowing for the content — the outstandings content at the end of the quarter as well. So, even if things play out exactly as we expect, we could see allowance build, just like we saw this quarter. It just depends on a whole host of factors.

Jeff Norris: And I think that concludes our Q&A for the evening. Thank you for joining us on the conference call today, and thank you for your continuing interest in Capital One. Investor Relations team will be here later this evening if you have any further questions. Have a good night.

Richard Fairbank: Thank you.

Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for participating, and you may now disconnect.