Capital One Financial Corporation (COF) Q1 2012 Earnings Report, Transcript and Summary

Good evening, everyone, and welcome to the Capital One First Quarter 2012 Earnings Conference Call. [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, Lynette. Welcome, everyone, to Capital One's First Quarter 2012 Earnings Conference Call. As usual, we are webcasting live over the Internet. To access the call on the Internet, please log on to Capital One's website at capitalone.com and follow the links from there. In addition to the press release and financials, we've included a presentation summarizing our first quarter 2012 results. With me today are Mr. Richard Fairbank, Capital One's Chairman and Chief Executive Officer; and Mr. Gary Perlin, Capital One's Chief Financial Officer. Rich and Gary will walk you through this presentation. To access a copy of the presentation and the 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 the forward-looking statements. And for more information on these factors, please see the section titled Forward-Looking Information in the earnings release presentation and the Risk Factor section in our annual and quarterly reports, which are accessible at the Capital One website and filed with the SEC. Now I'll turn the call over to Mr. Perlin. Gary?

Thanks, Jeff. And good afternoon to everyone listening to the call. I'll start by providing a few highlights from the quarter on Slide 3. Capital One earned $1.4 billion or $2.72 per share in the first quarter of 2012. Without the impact of a bargain purchase gain related to the ING Direct acquisition, first quarter net income would have been $809 million or $1.56 per share. Earnings from continuing operations, excluding the bargain purchase gain, would have been $911 million or $1.76 per share. Aside from the ING Direct bargain purchase gain, the increase in linked quarter earnings was primarily driven by higher revenue and lower noninterest and provision expenses in our legacy businesses. Higher legacy revenue was driven in part by increased average loan balances and favorable net interest margin. First quarter revenue also includes a $160 million benefit related to our sale of Visa stock and subsequent reserve adjustments and the absence of about $150 million of unique contra-revenue items recorded in the fourth quarter. These benefits were partially offset by a $75 million accrual for upcoming refunds we expect to provide customers in our Domestic Card business, which you'll hear more about from Rich in a moment. Overall, noninterest expenses inclusive of ING Direct-related expenses decreased $114 million quarter-over-quarter. The decrease was due to about $100 million in seasonally lower marketing spend and a modest decrease in legacy operating expenses. All told, run rate legacy operating expenses fell to just over $2.0 billion, and there were no significant onetime expenses in Q1 as there were in the fourth quarter. We recorded mortgage Rep and Warranty expense of $169 million in the quarter, of which $153 million was booked in discontinued operations. The majority of this expense relates to a settlement one of our subsidiaries made with a…

Thanks, Gary. I'll begin tonight on Slide 9. In the first quarter, our Domestic Card business delivered strong profits, improving credit and solid year-over-year growth in loans and purchase volumes. Loans declined seasonally in the quarter. Compared to the first quarter of last year, loans grew about 5%, purchase volumes increased about 15% and our Domestic Card business continue to grow and gain market share in new accounts booked. Revenues and revenue margin declined in the first quarter, driven by a onetime reserve addition related to cross-selling. The reserve is for expected customer refunds associated with instances in which phone salespeople didn't adhere to our scripts and sales policies when cross-selling products to our Credit Card customers. The $75 million accrual drove about 50 basis points of the margin reduction in the quarter. Noninterest expense for the quarter declined, as both marketing and operating expenses were lower than in the fourth quarter. Lower marketing in the first quarter reflects normal quarterly variability and the timing of direct mail and brand marketing. Credit performance improved in the quarter. First quarter delinquency improvements outpaced industry trends, but it's important to recognize that our first quarter improvement is consistent with the fact that our seasonality is more pronounced than the industry's, the mirror image of last quarter's worsening delinquency trends. Looking through this seasonality, we observed modest underlying delinquency improvements, which drove an allowance release in the quarter. All told, the Domestic Card business delivered $515 million in net income in the quarter. We're on track to complete the HSBC U.S. Card business acquisition in the second quarter, and we expect merger-related impacts to have a significant effect on Domestic Card results in the remaining quarters of 2012. We expect second quarter results to reflect the significant build in allowance and finance charge…

Thanks, Rich. We will now start the Q&A session. [Operator Instructions] Lynette, please start the Q&A session.

[Operator Instructions] We will take your first question from Dave Hochstim from Buckingham Research Group.

Wondering, could you just clarify what you said about the Domestic Card revenue margin declining and then expecting higher charge-offs as well? It seems [Audio Gap]. And then just on the $75 million reserve, could you just explain what happened in terms of product sales?

Okay. So David, with respect to the revenue margin, what we are saying is, of course, we have a strong revenue margin at Capital One. We're buying a company that also has a kind of comparable, strong revenue margin. What we're saying is that when we -- as we plan from the time of the announcement of the deals, when we bring on HSBC, that, as you can imagine, thinking of all the work that we've done over the years with respect to our own policies and customer practices, bringing HSBC in line with those will hit a run rate of revenue margin reduction on our portfolio of about 30 basis points to 35 basis points. There is a phasing of those effects, but over the course of the first half of 2013, we will hit that run rate. And that's a sustainable effect from the transition of HSBC into Capital One.

And their charge-offs are higher, so their margins are lower? And when charge-offs are higher...

Yes. Yes. So as you remember, with the various data that's come out as part of this deal and I think if you look on at HSBC, HSBC has just essentially always had a charge-off rate that is a fair amount higher than Capital One's. And so when it comes into Capital One, just the math of the weighted average of those will take over. Our point is that you won't see that for a couple of quarters after HSBC comes on because of the mark that will pretty much take out those charge-offs for a couple of quarters. But what we're saying is after that mark runs its course, there will be a sustainable delta of around 75 basis points effective combined higher charge-offs that comes from just the math of pulling these 2 institutions together. I'm sorry, did I answer -- there's a bunch of 75s. Okay. And the -- I'm so sorry, so the 75 -- you want to ask about the accrual related to the cross-sell, David? Yes. So we have policies and scripts in place to ensure that our sales practices meet our standards. And unfortunately, this didn't happen in some cases with respect to the sale of some cross-sell products at Capital One. So what we're doing is, we are reaching out to all the customers who have purchased these products over the past couple of years and are offering a refund to those customers. And this is a one-time $75 million hit that we're taking for that effect. But it's very important that we make sure that all of our customers have bought the products in the context that we exactly intended when we were selling.

We'll move next to Sanjay Sakhrani with KBW. Sanjay Sakhrani - Keefe, Bruyette, & Woods, Inc., Research Division: I had a couple of questions on just numbers. First, I want to make sure I had all the onetime items in terms of the impacts to continuing ops on legacy Capital One. Are they -- the $150 million Visa gain, the $75 million hit to current reserve build, $19 million hit to Rep and Warranty and $25 million and higher expenses related to the HSBC integration?

All of those items came through continuing ops, Sanjay, that's correct. The only thing I'll mention because the way we have shown them, because of the bargain purchase gain, the hedge lost that was recorded in the quarters of $77 million, which previously was showing up in continuing ops but wasn't called out as an ING expense, although we told you what it was for, it's showing up in the column that says ING impact. So I just want to make sure you know that, that onetime impact is there, but it's showing up in the INGD column. Sanjay Sakhrani - Keefe, Bruyette, & Woods, Inc., Research Division: Okay. Perfect. And then just as far as the impact on ING on a go-forward basis, when looking at Slide 3, are the 2 ongoing impacts kind of the loan premium amortization as well as the CDI amortization? I know that's for half the quarter, but just on an ongoing basis, is that what we have to kind of back out of what the core earnings power of ING is? And could you just talk about how that core earnings power of ING compares today relative to the number you guys provided when you closed the deal of $630 million?

Sure, Sanjay. With respect to your -- the question about what is an ongoing source of expense or impact to revenue, you are correct. The loan premium amortization will continue for several years. It's being recognized on an accelerated schedule. So at this stage, we're running at $40 million, $45 million a full quarter, and that will start to come down, the CDI, obviously, will continue for a substantial period of time. There will be no more transaction-related expenses for ING Direct having to do with the deal, itself, but certainly, there will be integration and other merger-related expenses that will be hitting for a period of time, and we'll call those out for you. So certainly, the bargain purchase gain and the mark-to-market loss, or mark-to-market position on the hedge which is related to that will not recur. So you've got that correct. Certainly, in terms of the view of ING Direct's ongoing impact, what we've really tried to do for you this quarter, Sanjay, is not to suggest what you should think about in terms of ING's ongoing impact. What we really tried to do was to give you a clean view of our first quarter performance net of ING Direct so that you could compare it to our fourth quarter performance, which was obviously before the acquisition. What we've tried to do in terms of an impact of ING Direct in this quarter is to reflect it as it would have operated as a standalone company. In other words, we took into account their Securities portfolio before we combined it with our own. We simply looked at the yields on their assets and their deposits. So it's a good representation of what ING Direct would have done as a standalone company, which isn't materially different from that which we had assumed at the time of the deal. You've just reminded us of that sort of $630 million number. But I wouldn't say it's necessarily a good representation of the value of ING Direct going forward because Capital One will value the deposits of ING Direct more highly than they would have been. And so that, obviously, will be reflected in the Consumer Banking segment. The Securities portfolio and the cash position of ING Direct is showing up in our other category. We're just going to optimize our balance sheet as a whole. So I think the information we've given you should allow you to understand what short-term impact ING Direct has had. I think in order to understand the long-term impact, you really have to kind of go back to our assumptions around the deals, and as Rich said, we feel that -- we feel as good about them today as we did when we announced them.

John Stilmar with SunTrust has your next question.

Rich, just a quick highlight for us on the legacy Capital One business. Top line yield continues to actually move up and defying what other banks are showing at least on the top line yield in terms of the U.S. Card business. What is the real driver there? Is it net card customer profitability in your legacy Capital One business getting better or is it just the migration of Installment Loans becoming a less important part of the business? And if that's the case, can you help us kind of understand what that dynamic might be on the legacy business going forward?

Well, the -- we have just had a lot of strength on the revenue side, and I've embarrassed myself on -- you should be cautious asking me this question because if you remember when I kept predicting this revenue margin to come down and it stubbornly kind of refused to do that. So it demonstrates, though, the power of several things that are going on. I mean, some of the revenue margin strength has been related to credit that has continued to come in a little bit better than expected, and, of course, that's not a sustainable point, and we would expect not to get too much more of those credit effects. But the marketing we're doing over the last few years has been really light in terms of teaser-oriented balance transfer of products. I mean, we're just not really active participants in that particular segment. We have -- our highest yielding parts of our portfolio have had significantly less attrition than we expected also which has contributed. And funding costs are down also, which helps the current revenue margin. So we feel very good about this and, of course, now we bring on HSBC, who I think the earnings power of that enterprise really comes from revenue margin strength. And what excites us is the fact that there we see a lot of opportunities in the way we can manage accounts and hit the ground running with that business. That, I think, will show continued strength in revenue margin. I do want to say, though, that, of course, note, we are pointing downward with respect to revenue margin and we really mean it here relative to this known impact of taking a little bit of the air out with respect to some of HSBC's practices. So that's a very real effect. I think also we should expect the competitive environment, which is gradually heating up. I think that, that impact will clearly, I think, kind of take things down a little bit. And I do want to also say that as we continue to get traction in partnerships, which I'm really bullish about the continued opportunity we have there, that will be great in terms of value creation, but that's a thing that pulls down margin as well.

Chris Brendler from Stifel, Nicolaus has your next question. Christopher Brendler - Stifel, Nicolaus & Co., Inc., Research Division: Just a couple of quick clarifications, if I could. Rich, the discussion around HSBC and the practices and the changing around those practices and the 75 basis points, I believe -- or sorry, 30 basis points of revenue margin pressure doesn't -- I think you would also benefit, as the HSBC loans come on, the revenue margin should go up first and then start to come down as you maintain just to those practices. Is that the case?

I think less so than you might think. I mean relative to attrition and other things, I think that we're not really seeing an updraft before the downdraft. I think that we think things are mostly going to be coming in around where we are, and then from there, you have the phased downdraft effect of our implementation of the things we've been planning to do for a long time. Christopher Brendler - Stifel, Nicolaus & Co., Inc., Research Division: Okay. If I could ask a second question, or a clarification. The bargain purchase gain, I believe, is not taxable, if I'm calculating correctly. And then I'll just ask, my real question would be on interchange. You've had quite a bit of success in the U.S. Card business and growing to purchase volume, another good quarter this quarter, 27% growth, 25% growth, whatever the number is, but interchange revenue seems to be relatively flat. Is that a reflection of the rewards products you're pushing out today or is there other true-ups in the rewards redemption rate that's causing the depressed growth in that interchange, if you could just help me to think about that?

Gary, why don't you do bargain purchase, I'll do interchange.

You're right, Chris. The bargain purchase is not -- it carries no tax burn.

Chris, yes, purchase volume at Capital One has been growing pretty dramatically. I mean, obviously, we've also brought in partnerships and that's added to this effect. But even without the partnerships, we have tended to be leading the league tables of industry growth in the last couple of years with respect to purchase volume growth. Let me talk about interchange here for a minute. First of all, just a comment about the Q1 interchange numbers. The Q1 interchange numbers were relatively weak due to seasonality. That's in fact -- it's pretty consistent for Capital One. So quarter-over-quarter, our purchase volume was down 9% and our interchange was down 7%. But pulling way up on the observation that you talk about that while purchase volume is very strong, the interchange is not growing at as strong a rate. It's important to note that the net interchange disclosures in the press release tables are for the total company, and they include payments to some of our partners and some impacts from other lines of business. So it's difficult to derive truly what's going on with respect to net interchange income from these disclosures. If you were to look at just our Domestic Card business, which would take out the impact of other business lines and the effect of the partnership payments, net interchange has had solid growth throughout 2011 and in the first quarter of 2012. Now that said, our Domestic Card net interchange is not increasing at the same rate as our purchase volume as we continue to shift our portfolio toward rewards customers and move away from some of the balance intensive revolver segment, which has limited rewards cost but lower margin and greater resiliency challenges. So look, we feel great about the rewards customers we're attracting and we think that interchange, although it's growing less quickly than purchase volume, I think is going to be a continuingly strong contributor to the revenue growth of the company.

We'll move next to Brian Foran with Nomura.

My first question on the deal accretions. I guess at the time of the mergers, you had said mid-single-digit accretion to 2013 from ING. And at the time of HSBC, you had said high-teens GAAP and operating EPS accretion to 2013. And consensus was around $6 at the time for both. So with all the kind of things you're talking about, the practice changes at HSBC, et cetera, is the mid-single digit and high-single digits off consensus at that time still a good benchmark to work off of in terms of the top-down accretion, or have any of the things you've now outlined changed your contemplation of how accretive these deals might be?

Brian, it's Gary. I'm happy to take that. And certainly, what you might call a baseline free acquisition trajectory, obviously, will have changed if for no other reason than the interest rate environment. But as far as the deals themselves go, with ING Direct, of course, we've had a beneficial improvement to the upfront capital impact of that transaction, which will cause a bit of amortization of that capital over the next year or so, which obviously will affect reported earnings, but by a relatively small amount which I identified. So that might have a small impact in terms of reported results over the next couple of years. With HSBC, obviously, we haven't closed the transaction. There will be -- I wouldn't be surprised if there were more significant purchase accounting impacts upfront, and therefore, on income over the next year or so. But looking aside from the accounting, the fundamentals of what we see in the HSBC business look good and very much in line with what we saw before we announced the deal and what we put into those numbers, including some of the moves that Rich described. So I think if you put the 2 deals together as we can see them right now, I think we're still in the same ballpark for accretion. But we'll certainly give you a running commentary as it plays out, so you understand what the moving parts and pieces are.

And then my follow-up is Slide 7. Can you explain how this disallowed DTA works? I guess, first, why it's increased the past 2 quarters? Second, when you gave the mid-9s capital guidance for the deal close, would that mid-9s include something in the same ballpark of this $900 million disallowed DTA? And then third, I realized that disallowed DTA recapture can depend on actual earnings, your forecast as you turn the calendar year every January 1. But is there any reason to expect that this $900 million wouldn't be recaptured over some near- to medium-term amount of time?

It's certainly one of my favorite topics, Brian. DTA, as you suggested, has gone up. Although we have not closed on the HSBC transaction, we do contemplate the close of the transaction. It is going to have an upfront negative impact on earnings and that, among other things, can contribute to an increase in the DTA in this quarter. Obviously, as time plays out, the likelihood of recapture is quite high. With respect to the previously stated expectation of the mid-9% range for Tier 1 common at the end of next quarter, as I said, it's more likely to be affected by purchase accounting than it is by our forecast of DTA. But we certainly feel, as of today, that we're in that right ballpark, could be helped. That could go the other way in a very, very short run because of purchase accounting, but if so, that is likely to resolve within a quarter or so.

Up next is Craig Maurer from CLSA. Craig J. Maurer - Credit Agricole Securities (USA) Inc., Research Division: Following up on the earlier question regarding your growth in purchase sales. I want to ask you a question about competition. Bank of America shed roughly $90 billion in card assets since mid-'08. It seems that there are few real winners in this segment. When do you expect the industry itself to start growing again, or are we still going to see just shifts in assets going on for quite a long time? I was just curious.

Craig, I think the industry is just sort of getting back to where -- if you look at the revolving credit numbers, so they are really just -- they've been now just a few months of where the thing is, essentially flat. So my feel for the industry is that its big days of shrinking are over, but it's going to sort of gradually come back to a modest level of growth. I think the real story is, it's kind of to your earlier point, the opportunity or some of the share change dynamics that go on with different players. And we are finding -- I mean, and I think the striking thing is different players are just taking out different positions. And we are finding in all of the segments that we are investing in -- and that's very similar to where we -- the ones we were focusing on before the great recession, by the way -- we are finding that we are steadily gaining share in those segments. We're also finding that the -- as we project the net present value of our originations, if you kind of add it all up, we do sort of a metric of the NPV of everything we're originating in a year, how does that compare with NPV in prior years. The sort of overall value creation from these things is consistent with some of the strong years in the middle of the decade. So we feel very good about this. But I think the story for Card, for Capital One, is going to be not so much a story about growth, although I think it will be a story of share gain, but most importantly it's going to be a share -- a story of earnings power and consistency. And as such, I think that it's going to be an important driver of shareholder value going forward. I want to also say that in terms of competitive levels and pricing, I think the industry is at a kind of a stable point. It's not really going up, it's not really going down. But I think there's a rationality to it at least, even though the competition is fierce. There's a rationality to it that adds to my confidence that this can be a powerful driver of value for Capital One. Craig J. Maurer - Credit Agricole Securities (USA) Inc., Research Division: Just a follow-up, do you think that rationale -- rationality applies to reward spending as well, as we've seen those increase dramatically as everybody seems to be targeting the same group?

Look, I think you have to catch everyone's attention that everywhere you turn, there's another big investment going on by somebody. Particularly MX, Chase and ourselves are going very hard right at that heavy spender part of the marketplace. Look, it is fiercely competitive, and it's -- these are by far the most expensive accounts to book of anything that we originate. The nice thing is with these -- these are wonderful annuities that have low attrition and fabulous return dynamics, and it's really all about therefore the cost to acquire. But what that also means, Craig, is it something where you don't -- one can see -- we can watch it at the time of origination and really understand the investment that we're making right there on the spot. And while it's very competitive, we like the success that we're getting and we're going to continue doing what we're doing, and I think real value is getting created there.

That will come from Don Fandetti from Citigroup.

Yes, Gary, I was wondering if you could, as you look forward to Basel II, if you could talk a little bit about the impact of high-risk weightings on sort of lower credit quality card receivables and what impact that might have on you and if you can quantify it in terms of the RWA inflation?

Sure, Don, and let me answer the second part of that question first. No, we don't have specific estimates for you at this point in time. Remember that we are only going to become a Basel II bank at the end of this year as a result of our acquisition of ING Direct. That makes that a certainty. Therefore, we'll have a 2-year preparation process prior to going parallel in 2015, and obviously, not actually entering Basel II fully until at least 2016. So it's way early to really try and identify what those numbers might be. Obviously, as we asses our own capital trajectory, we need to make some internal views about what the impact is going to be. Certainly, it should, all else being equal, cause our risk-weighted assets to rise. But as we assess our capital trajectory knowing that Basel II, and of course Basel III are in our future, we also take into account the fact that our own robust internal economic capital models at least are on the same -- running along the same principles as Basel II. Obviously, there are a lot of individual parts and pieces that may affect that. And also, running stress tests as we now do also gives us a sense of what we might expect out of the various kinds of assets that we have. So this is going to be an ongoing journey for us. We'll certainly give you insight when we are able to generate it. It will take quite a bit of time. Let me set your expectations there. But even including the expected increase in risk-weighted assets from Basel II, we take that at least general knowledge of what's ahead when we say that we're going to be on the strong capital generation trajectory even between here and there.

Got you. That's helpful. And then lastly, if you could -- has there been any more movement in terms of a potential nomination of an ING member to your board, and if you could just talk a little bit about the lockup of those shares, what your thoughts are?

Yes. So the -- as you know, under ING's ownership stake, they have the right to nominate one member to join our Board of Directors, and we are working through the appointment process now with ING Direct.

As far as the lockup itself, Don, goes just to remind you what you probably already know, which is that lockup is in effect until 90 days after closing, which is going to be on or around May 17.

Moving on to Moshe Orenbuch with Crédit Suisse. Moshe Orenbuch - Crédit Suisse AG, Research Division: The first is, I'm just trying to make sure I understand correctly your guidance for the 35 basis point lower revenue margin and 75 basis point higher credit loss. I mean, given that it probably at that point will be about 1/3 of the receivables, right? So if you're talking about the ING -- I mean, the HSBC portfolio being in the neighborhood of 100 basis point to 120 basis point lower yielding than your portfolio and losses kind of 200-and-some-odd basis points higher, is that correct?

Just in terms of the math, Moshe, it's Gary. Certainly, your estimate on the charge-off is about right. I'll normally trust your math on the revenue side as well. So just math-wise, I think you've got it. Moshe Orenbuch - Crédit Suisse AG, Research Division: Okay, great. And just as a follow-up, the sale, the pro forma has mentioned that you are planning to sell $17 billion of securities from ING. When does or did that happen, and did that include the subinvestment grade, the RMBS securities?

As far as that goes, Moshe, Gary again, on the -- on what came over from ING Direct, by and large, we have not sold anything, any material amount of the ING Securities portfolio. We did sell several billion, between $5 billion and $10 billion worth of securities out of Capital One's portfolio, you'll remember, starting back in Q3 of 2011. And so we haven't really needed to sell any more securities in order to achieve the necessary liquidity for HSBC. As you can see on the slides, we're already about $32 billion in cash at the end of Q1. And with respect to our future expectations, with respect to balance sheet repositioning, we're integrating the investment -- we have integrated the investment portfolios as of day one between ING Direct and Capital One. We've integrated our overall balance sheet management. And from here on out, we will be optimizing to get kind of the best risk return position consistent with our historically prudent credit and market-risk guidelines. With respect to the very specific question, the subinvestment grade, private mortgage-backed securities that were in the ING Direct portfolio as identified when we announced the deal, obviously, those are paid down somewhat. But by and large, those did come along with the acquisition itself. We have not made any moves with respect to that, but as with all of the assets that came over from ING Direct, those were marked to the fair value when they came over.

Ryan Nash from Goldman Sachs.

Hey, Rich, just in terms of the loan growth, I guess down, call it 5.5%, then you recognized there is a lot of seasonality in there. But is there something different in the portfolio that really drove the outsized decrease this quarter? I guess we saw it for everybody in the industry, and is it whether it's just the greater focus on spend you're seeing more volatility imbalances? And also, how much is left in the installment book to run off?

Ryan, the -- we had one accelerator -- we had one amplifier of seasonality that we'll have to get used to going forward, which is the Kohl's portfolio and, of course, now we'll have to watch other partnership portfolios. But definitely, bringing Kohl's on added actually materially more outstanding seasonality between Q4 and Q1. I'd have to go study the seasonality of the other -- of the HSBC partnerships, but we'll find out about that. Gary, do you have the Installment Loan number?

Not off the top of my head. It was several hundred million, but we can certainly get back with a more specific number.

Okay, I'll follow up with Jeff. And just one other clarification. Just in terms of the loan runoff expectation, I didn't get it exactly. Was it that it's going to be $10 billion for -- up through 2Q '13 and then $8 billion after that, was that the amount?

Yes. So it was kind of awkward the way I was describing it because we were trying to be precise on things that started. So when -- basically for the year following when we fully have these, both of these deals on board, which would be there for Q3 through Q2 of the following year. I think what was confusing is I said that Q3 when it's through Q3. But anyway, so for the year, starting Q3 of 2012, the expected runoff would be $10.5 billion and then for the year following that, midyear to midyear again, the year following that, it would be the $8 billion number that I had.

Ryan, Gary again. Let me just give you some realtime updates there. So my intuition was about right. We had about $360 million of runoff in Installment Loans in the fourth quarter. We got about $1.5 billion left of that.

Daniel Furtado from Jefferies. Daniel Furtado - Jefferies & Company, Inc., Research Division: You referenced in the first quarter here the absence of $150 million in unique contra-revenue items that were recorded in 4Q. Can you please speak to those, and will these unique items reappear in the near term?

Dan, the items that were in the fourth quarter that did not recur in the first quarter, the largest of them was a reserve for the U.K. PPI business. We told you that was about $80 million in the fourth quarter. That was a contra-revenue. We also had close to $40 million worth of Rep and Warranty expense in the fourth quarter that hit continuing operations. A lot of it, of course, goes into the disc ops. But your question, of course, is specifically around that. And then there was a very small movement in the ING hedge in the fourth quarter and a few other nits and nats that kind of ended up to about $150 million. By and large, the only one of those that repeated this quarter was a small amount of Rep and Warranty in disc ops, but not large enough to talk about. With respect to the potential for those to show up again in the future, again, the U.K. PPI reserve has grown a couple of times over the last year. That's based on an assumption about consumer behavior over there. We think we obviously have fully reserved for the experience we've seen, and we expect it's conceivable there could be a change but we have no reason to believe that right now.

[Operator Instructions] And your final question will come from Betsy Graseck from Morgan Stanley.

It's easy, asked and answered. I'm good.

Well, in that case, I'd like to thank everybody for joining us on the conference call today, and thank you for your continuing interest in Capital One. The Investor Relations staff will be here this evening to answer any questions you may have. Have a good evening.

And that does conclude today's teleconference. We thank you all for your participation.