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

Thanks very much, Lauren, and welcome, everybody to Capital One's third quarter 2015 earnings conference call. As usual, we are webcasting live over the Internet. To access the call on the Internet, you can 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 third quarter 2015 results. With me this evening are Mr. Rich Fairbank, Capital One's Chairman and Chief Executive Officer; and Mr. Steve Crawford, Capital One's Chief Financial Officer. Rich and Steve are going to walk you through this presentation. To access a copy of the presentation and press release, please go to Capital One's website, click on Investors, and then click on Quarterly Earnings Release. Please note that this presentation may contain forward-looking statements. Information regarding Capital One's financial performance and any forward-looking statements contained in today's discussion and the materials speak only as of the particular date or dates indicated in the materials. Capital One does not undertake any obligation to update or revise any of this information, whether as a result of new information, future events or otherwise. Numerous factors could cause our actual results to differ materially from those described in forward-looking statements and for more information on these factors, please see the section entitled forward-looking information in the earnings release presentation and the risk factors section in our annual and quarterly reports accessible at the Capital One website and filed with the SEC. Now I'll turn the call over to Mr. Crawford. Steve?

Thanks, Jeff. For the third quarter, Capital One earned $1.1 billion or a $1.98 per share, and had a return on average tangible common equity of 14.3%. On a continuing operations basis, we earned a $1.99 per share. Net income was up $251 million versus the prior quarter driven by higher linked-quarter pre-provision earnings and slightly lower provision expense. Pre-provision earnings increased by $375 million versus the prior quarter as we had higher revenue and lower non-interest expenses. As a reminder, we had $188 million of non-recurring operating expenses in the second quarter. Excluding non-recurring expenses, operating expenses were relatively flat versus the prior year. Provision for credit losses decreased 3% on a linked-quarter basis driven by a smaller allowance build. During the quarter, we added $69 million to our UK PPI reserve with $49 million as a contra-revenue and $20 million in operating expense. We have included in an appendix slide in our earnings presentation available on our website, illustrating the impacts from non-recurring items to key line items and ratios in both the quarter and year-to-date. The increase in our UK PPI reserve is driven by proposed new rules announced by the FCA in early October. As always, our 10-Q will provide further details on the factors we consider in estimating our reserve. Excluding the impact from the build in UK PPI reserve, earnings per share in the quarter were $2.10 per share. Turning to net interest margin. As outlined on slide four, reported NIM increased 17 basis points in the third quarter to 6.73%, primarily driven by higher loan yields in domestic card and an additional data day to recognize revenue in the third quarter. We continue to be above the fully phased in LCR requirements as of September 30, 2015. On slide five you can see…

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

Thank you. Our first question comes from Betsy Graseck with Morgan Stanley. Elizabeth Lynn Graseck - Morgan Stanley & Co. LLC: Hi. Good afternoon.

Hi, Betsy. Richard D. Fairbank - Founder, Chairman & Chief Executive Officer: Good afternoon, Betsy. Elizabeth Lynn Graseck - Morgan Stanley & Co. LLC: So just two questions, one a follow-up on what you just indicated that you have sufficient expectation for having some operating leverage in 2016, and that's primarily coming from the savings that the digital investments are making. So is that coming from legacy ops? You'd be able to run them a little bit more efficiently, or is that more from top-line, if you could just talk to those two things? Richard D. Fairbank - Founder, Chairman & Chief Executive Officer: Well, I think it's a – there's no one place to point. If we go back to last quarter, we said we didn't expect much improvement in full year 2016 efficiency ratio, excluding non-recurring items of course, compared to full year 2015. We noted Betsy of course that we were predicting a volatile number 15 months in advance. We also said the investments that will pressure our efficiency ratio would over time contribute to positive operating leverage. And most notably, of course, those are our investment in card growth and our digital investment. We're now three months closer which helps reduce uncertainty somewhat and we have three more months of card revenue growth baking in the oven. We also continue to drive hard for cost savings and we've seen some solid tangible evidence of cost savings arising from our digital investments, and we know these savings will increase over time. And we have identified more contingent cost levers to manage some of the revenue uncertainty. And while we are of course still one and a quarter years away from the end of 2016, we have enough confidence to say that we expect modest improvement in full…

Next question, please.

We'll take our next question from Moshe Orenbuch with Credit Suisse. Moshe Ari Orenbuch - Credit Suisse Securities (USA) LLC (Broker): Great. Rich, could you talk a little bit about kind of the competitive environment in cards? I mean as we've listened to some of the other players that have reported, one of the themes that has come up is that account acquisition hasn't been as much of a challenge as rewards. Can you kind of talk about both of those factors? Richard D. Fairbank - Founder, Chairman & Chief Executive Officer: Yeah. Moshe, my overall comment I would say about the competitive environment is that it's fairly consistent. It's pretty intensely competitive, but overall relatively consistent, again, relative to some of the things that we see in some of the other banking businesses that we're in. But taking the different components of what we're seeing here, starting with balances, just – industry balances as you know Moshe, of course, have been relatively flat for quite a while, but now industry-wide those are certainly moving up. So, industry revolving debt helped steady it about 1% for most of 2012 and 2013, but since July of 2014 it's been over 3% growth and over 4% growth in recent months. And bank card outstandings are up about 4% year-over-year. So the first factor that we see is that there is return to just ambient levels of kind of balance growth in the industry. Pricing has been stable in the segments that we play in. Competition continues to be very intense, especially in rewards but generally stable. The one place that we would flag as where the competition has really increased substantially, and to a point of concern is in the partnership side, the bidding has become very intense in this auction-based market…

Next question, please?

We'll go to Sanjay Sakhrani with KBW. Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.: All right, great. So I got one question on the charge-off rate expectations. So Rich, you mentioned 4% for next year and how losses would peak, I guess, in the first quarter. I mean is that what the trajectory will be into next year? And then we should expect it to moderate thereafter? Richard D. Fairbank - Founder, Chairman & Chief Executive Officer: So, could you just repeat your question one more time, Sanjay? Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.: Sure. Sure. Sure. So, you mentioned how charge-offs would peak in the first quarter, and then you talked about the full year charge-off rate being 4% for 2016. So should we expect a moderation in the loss rate after the first quarter? Richard D. Fairbank - Founder, Chairman & Chief Executive Officer: No. Our point about – there is a seasonal effect. There's two different effects going on. One is the seasonal effect. And if you allow yourself to just say, if everything else were equal, here are the seasonal patterns and I described those several minutes ago, and that has the characteristic of peaking, as you described. Overlaid on top of that is another very important thing, which is the growth math of the acceleration that we have had in our business and that actually picks up steam over time. So, for example, we had pointed to sort of in the second half of 2015 that you will start seeing the net effects of growth. In fact growth – very early on when you start to accelerate growth, the losses actually in a sense have a movement in the other direction because you get a build of a denominator before the numerator picks up steam. But anyway, it's around this time, the third quarter of this year that the growth math is starting to play an increasingly important role. That's why you're now starting to see year-over-year growth in our charge-off numbers. So the guidance for the full year 2016, we're not giving quarterly guidance but it will have seasonal effects and then the increasing growth math effects and they will combine in our view to generate a full year average loss rate of around 4%. Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.: Okay. Great. I guess my follow-up question, maybe for Steve or yourself. When I look at the card yield, year-over-year, you obviously started growing loans at a faster clip. But the yield doesn't seem to be increasing all that much. Is that related to the mix of the types of accounts that you guys are originating or what exactly is driving that because I would have thought you'd see that move up some?

I don't know why the yield would move up, Sanjay, because it's just average relative to the portfolio is. So I'm not sure you'd see a change in yield. I'm sorry if I'm misunderstanding the question. There's not a mix change in the portfolio if that's (30:59)

Sanjay, I think we've lost you. If you want to follow-up with me after the call – feel free to do so. Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.: Cool, thanks.

So now let's go to the next question. Oh! You're still on, Sanjay? Sanjay Sakhrani - Keefe, Bruyette & Woods, Inc.: Yeah, it's all right. It's cool. We'll talk afterwards. Thanks.

Next question then.

We'll take our next question from Ryan Nash with Goldman Sachs. Ryan M. Nash - Goldman Sachs & Co.: Hey good evening, guys. Rich, I know a couple of people have asked credit questions and maybe I'll try to ask it another way. So it sounds like 3Q or 4Q is really the starting point of the pickup in growth math. So assuming we don't see any further accelerations in loan growth, but does that imply that beyond 2016 we will continue to see a ramp in losses just because of the two-year period that you talked about before. And what does that mean for provisions, as we think about 2016? And lastly, does it continue to ramp once we get beyond that? Richard D. Fairbank - Founder, Chairman & Chief Executive Officer: Yeah. There is too many factors that lie between now and the end of 2016 to make a forecast at this point on what's going on in 2017. You do make a very good point though, that we all should remember, that at the end of the day of course as we get into the latter parts of 2016, the allowance build will be driven very much by what's happening with losses and very importantly what's happening with growth at that period of time. But I think that the main point that I wanted to make is just the way growth math works. It's in the first two years after – for any vintage of growth, where the losses are climbing. And then they settle out and actually ultimately go down in any one sort of vintage of growth. So, all of this is the math of some things going and after they – so for example, as we get towards the latter part of 2016 and into 2017, some of the early growth vintages will be starting to settle out and you still have the effects of course of some of the more recent growth that we hope happens over the course of next year, for example. But I think that, keeping in mind, this general effect of what happens over the two-year period following a surge in growth and then understanding it's the blend of all the different vintages and the timing of that, I think that's pretty much how we would guide you at this point. Obviously, collectively, things eventually stabilize in just the math of when accelerated growth happens for a period of time and settles out. Ryan M. Nash - Goldman Sachs & Co.: Got it. Maybe just one quick follow-up for Steve. I think, some of us might think modestly down can mean different things. So can you just help us understand, what you would consider to be modest improvement on efficiency – the range?

Yeah. I think those words were chosen carefully and we're probably not going to go a lot further than the guidance that was given. So I appreciate you trying and we'd like to be more precise, but I don't think particularly at this point more precisions probably in your or in our interest. Next question please.

We'll go to David Ho with Deutsche Bank.

Good afternoon. In the U.S. card business, let's (34:56) see that the card fees rose nicely versus the overall volumes, closing the gap more so than previous quarters. Is that function of maybe dialing back the contra-revenue rewards or is it more a function of better activation and engagement and could we expect this to continue?

Yeah. I'm not really sure where you're coming to that conclusion. So what's bothering you (35:22)?

The domestic card non-interest income was up 7% and higher than previous quarters versus your purchase volume growth of 19%?

Yeah. There's just a bunch of different factors, I think, that can move around on a quarterly basis. I don't think there's anything systemic or trend-wise that we'd point out. I think it's much better to probably look at these things on an annual basis.

Okay. And then on the auto regulatory environment, what's your outlook there, and has that been a part of the reason why you pulled back in subprime? And in terms of what would get you back into that business, given how fragmented the industry is, what industry conditions would you need for you to increase the originations? Richard D. Fairbank - Founder, Chairman & Chief Executive Officer: Yeah. So look, well we very much like the business and we spent 15 years building the capability to underwrite and manage risk in, for example, the subprime auto business. So the flagging that we have done in recent quarters about some of the practices that we see again is causing us to, ultimately effectively slow down the origination growth that we had had. We're still generating good business and we love the business. You mentioned the regulatory word, it is really not – our slow down, if you will, in origination growth is not driven by regulatory considerations. It's really driven by competitive situations, and in subprime most importantly some of the lending practices that we see that where I think more risk is being taken than we are comfortable to take to win a particular piece of business and that's really what we're flagging there.

Next question, please.

We'll take our next question from Don Fandetti with Citi.

Yes. Rich, given your comments on partnership pricing, as you look out to 2016, what are your thoughts on portfolio acquisitions or other purchases. Are you seeing anything that's remotely of interest? You've got a pretty interesting deal on the GE Healthcare portfolio? How do you think about 2016? Richard D. Fairbank - Founder, Chairman & Chief Executive Officer: Well I mean, we've often said about acquisitions that, look, the marketplace is always in flux. And we said that we would continue to be interested particularly in asset purchases and partnership businesses. Those would be the primary areas of focus. The partnerships, in many ways, we've not been the market clearing price on some of the recent partnership biz, and I think our actions and discipline kind of speak for itself. But with respect to asset businesses we're really excited about the unique opportunity. It's very unusual thing to be able to, in an acquisition at an attractive price, get someone that is like the leading and just absolute amazing performers that somebody like GE Healthcare business is. So a lot of planets aligned for us to get that. It is a byproduct of as I've said we watch the marketplace and look for opportunities, but as you can see over the last number of years, we done more looking than we have buying anything. But I think the GE business represents a very special opportunity that arises, but it is a very unique thing. I don't think – I think it is you could probably measure in decades the number of times a business comes along with such a good business and a market leading position where that can be obtained at a reasonable price. So we're happy about that, but that's not an indication that we're moving in the big acquisition mode in the slight.

If I could just clarify one quick thing. You had mentioned softer used car pricing for auto. Is that seasonal, I guess this would be the time you'd see that or are you sort of seeing something beyond seasonality that's noteworthy? Richard D. Fairbank - Founder, Chairman & Chief Executive Officer: First of all we've been talking about auction prices for a long time. And the biggest reason that we put so much focus on is, if you look back in a historical context, we are at record levels in terms of where auction prices are. And they have sustained at record levels for a long period of time. And now there're arguments for that. Cars are lasting longer and there're lot of things about that. But the thing that matters from an underwriting point of view is not how long a car lasts or its value on the other end, it's what its value is relative to what you underwrite, wrote it, expecting it. So I just think in general, there is asymmetrical risk in the auto finance industry when auction prices sustain as they have for a significant number of years at record levels. And probably although we underwrite to a decline in prices, at some point, I think there's just a risk that the industry gets a little too used to that. So that's in general, what we have been flagging here. Now, if you look at the Manheim Index, you could go bowling on that flat index. Our own index that we see in the marketplace that's measured a little bit differently actually has shown recent declines relative to that. But the main thing is not so much what has happened and no it's really not a seasonal point. The main thing is just when we see small effects happening, we just talk a little bit louder to remind everyone that there's asymmetrical risk at the moment with respect to where auction option prices are. But I've been saying for several years and they just keep on being high, but that's what I wanted to flag on that.

Next question, please?

We'll take our next question from Chris Brendler with Stifel. Christopher Brendler - Stifel, Nicolaus & Co., Inc.: Hi. Thanks. Good afternoon. Thanks for taking my question. I just want to ask another time on the U.S. card business non-interest income. I focused on last quarter net interchange revenue growth of only 6% last quarter, again this quarter 6% relatively flat. Steve, I thought you indicated last quarter that, that can bounce around and there's looks like a natural growth rate of interchange when you're growing volume at 19% that'd be a little higher than that. So are there any one-time items that are weighing your interchange growth or this is simply a function of all the high rewards cost products that you're having successfully in the marketplace? Richard D. Fairbank - Founder, Chairman & Chief Executive Officer: I think that in any one quarter – I wouldn't put too much stake or stock in any one quarter with respect to this metric. But I do want to – and probably the best ways to look at that is looking at periods like year-to-date, for example. Interchange revenue for Capital One has been – it's growing at 8%, for example. But just I want to get a little bit behind why there is this disconnect? And it has been going for a few years now and it will continue, although at some point, these numbers will converge. But the difference between the GPCC purchase volume versus the interchange growth rate. And it isn't just – I mean, yeah so we are out with attractive rewards proposition. You can see them advertised on television for example. That is a factor. We are also upgrading rewards products for existing rewards customers. We're also extending rewards products to some existing customers who don't have rewards. And a higher mix of kind of all the originations that happened out there in the marketplace now have rewards than they had before. And really this phenomenon – every player I think is seeing the same phenomenon. There are differences in degrees depending on strategies and how they're – especially the choices people make on do you want to go into your existing portfolio, how much are you going to take some cannibalization impact or not? But I think the main point is we're still having solid growth interchange. It's well below purchase volume. That effect will continue over time. But in the longer run, these things will converge. In the meantime, we feel really good about the economics of reward products and the choices that we're making and the customers that we're originating. Steve, did you want to add anything to that?

No. Richard D. Fairbank - Founder, Chairman & Chief Executive Officer: Okay. Christopher Brendler - Stifel, Nicolaus & Co., Inc.: Okay. Thank you. And I may have some unrelated follow-up. In the UK business, it looks like things fell a little bit sequentially. Can you think about (46:20) update on the UK business and how you are thinking about it and how changes in interchange rates in the UK could potentially impact your marketing and growth strategy there? Richard D. Fairbank - Founder, Chairman & Chief Executive Officer: Yeah. We really like our UK business. It's a tremendous synergy to have that business when we have such a big U.S. business and we have a lot of cross-pollination going both ways and good business ideas going both ways and some of our best ideas actually sometimes come from our UK folks. That UK business isn't just a clone of our U.S. business and the most striking difference, if you look at the two, is sort of the absence in the UK of the big top-of-the-market transactor rewards driven business. So while interchange dropped significantly, our business never was a really top-of-the-market spender, heavy business. So the impact on us is relatively muted from the drop in interchange.

Next question, please?

The next question comes from Bill Carcache with Nomura.

Hi. Good evening, Rich and Steve. Can you tell us what proportion of your portfolio is comprised of your back book versus your front book? And maybe help us understand what a normalized mix level between those books tends to be as you continue to grow? Richard D. Fairbank - Founder, Chairman & Chief Executive Officer: You know, Bill – you didn't just like the eloquence of this great story about how back book performs and front book performs. They are really not – we don't have a thing at Capital One called just the back book's over here and the front book's over here because it's all a state of transition. Everybody starts in the front book over time and then moves into the back book. It is a general descriptive method that we use to say that the metrics that you're seeing on our portfolio are driven way disproportionately by the changes at the margin especially in originations, but also in terms of things like line increases as well. So that the effects are so dramatic, particularly on a highly seasoned portfolio with just incredibly low losses like we have here. That's why we speak in terms of the front book and the back book, but they really – it's more of a method of explaining how the business works and...

Right. But I guess I was kind of...

Phil (sic) [Bill], if I could just say also, a big part of not being able to do what you would like in terms of forecasting it, I think you've heard Rich talk forever about growth being windows of opportunity we see in the market, and we're not planning every year to get a certain amount of growth when it's there and it makes sense we take it. So, that obviously makes it pretty difficult to look into the future and see how the mix is going to change over time, and hopefully it goes without saying that these originations are performing as we expect, and we believe these are going to work out really well for our shareholders over time.

Right. I guess I was just trying to build off of the thought process that you guys described so well surrounding the growth math, and just the idea that you have peak losses somewhere around 18 months to 30 months. So if we just draw a line in the sand at, let's say, 36 months, then anything older than that is past peak losses, and you have declining charge-off rates relating to anything that's older than 36 months and anything younger than that is experiencing arguably rising charge-offs. And then so to the extent that you guys kind of stopped growing post the great recession and more of your book was comprised of the back book that was a larger percentage of your book, but now as you've been growing and kind of stepping on the gas, some of the newer vintages are representing a greater proportion of your overall book, and therefore that's creating some of the growth math headwind. And so I was just looking for a little bit of color around the interplay of those moving parts, but if you can share that, I'd love to – either, if you have some more color you could share on that, that'd be great. Otherwise, I have a follow-up I'd like to ask. Richard D. Fairbank - Founder, Chairman & Chief Executive Officer: Well, actually you did an incredibly good job, probably better than I did of actually explaining the growth math general dynamics. So if you have specific questions, we'll try to answer them, but I think that if you look at Capital One right now, we're in kind of a striking position if you look at our metrics relative to a number of players. First of all, you may remember that in the period preceding this, Capital One was actually near the bottom of the league tables in terms of growth. And we talked all about running off high balance revolvers. We kind of stopped talking all the time about that, but that's a phenomenon so we have had an exceptionally seasoned book. And then, now, as we're sort of on the leading side of the industry with respect to our growth, then you're also going to see our metrics will move in ways that will diverge from competitors, in striking ways and that's why it's really important that we all communicate as clearly as we can about growth math and separating what's the difference between just natural maturation of businesses and customers behaving exactly as we expect versus changes in underlying credit performance or things like that. So at this time, we are diverging from certainly some of the other players with respect to our credit performance. I again want to reiterate that things are coming in very consistent with our own expectations, both on the front book and on the back book.

Next question, please?

Our next question comes from Chris Spahr with CLSA.

Hi. Good afternoon. I noticed that most of the deposit growth has been in the other segment this quarter. Can you explain why that is and maybe if you'd raise the rates to kind of get that the business lines growing?

Yeah. So that's really, our funding needs have been met more by wholesale funding sources including securitization, some brokerage CDs. We've been largely out of wholesale markets following the ING DIRECT acquisition and have been intentionally reestablishing our presence. That's just a market that you want to stay active in. Remember, wholesale funding is also an important part of the LCR calculations. So there're a couple reasons why we, in addition to being in a pretty efficient market, but we believe we're very well positioned to grow our deposits in our bank going forward.

And can you give some guidance on the PPI charge outlook going forward?

I really can't. We had the rules issued by the FCA and there is some specificity in how those actually work. So there's a two-year window for customers actually looking for a relief. And what we did was we took obviously everything that was in that release and used it to come up with our best estimate of reserves, but there are a lot of unknowns with respect to how the final nature of this is going to come in and how customer complaints will come in and obviously we've done our best to estimate that in reserves and to the extent that things change that that will something that we make you aware of. Next question, please?

And for our last question this evening, we'll go to Rick Shane with JPMorgan.

Thanks guys for taking my questions too. Looking at some competitor data and some comments from your peers, it looks like there was a pickup in account growth which you cited the fact that your loan growth has been substantially in excess of your peer group, which everybody's certainly been tracking pretty closely. Curious how much of this is a function of new accounts versus utilization in line limit increases? Richard D. Fairbank - Founder, Chairman & Chief Executive Officer: Rick, we also are enjoying a high level of account growth right now. Not sure I can speak for the other competitors but if you look at when we went from very little growth a couple of years ago, when the growth began, we said that our originations have picked up but also our line increases are going to be a little bit outsized here because we are making up for a period of time when we were not able to do line increases as we are working on a solution to a new regulation that had come out. And so, early on in our growth surge we were a little bit more than normally weighted toward line increases. That has now reached pretty much an equilibrium where the line increases – the majority of our growth – and by the way – well I would say just generally a majority of our growth is coming on the origination side, and important minority of our growth is coming from line increases but it's pretty much at sort of an equilibrium at this point.

Okay, great. Second question, and it's a non-sequitur, but during the quarter you issued some preferred that we potentially would have thought would've appeared in the preferred expense during the quarter, it doesn't seem to. What's the run rate headed into Q4 in terms of preferred expense?

I think that's the semiannual payment. So it's December and June. That's why you don't see it this time around.

Okay, great. Thank you.

Well, thanks everyone for joining us on this conference call today and thank you for your continuing interest in Capital One. Remember, the investor relations team will be here this evening to answer any questions you may have remaining. Have a great evening and thanks. Richard D. Fairbank - Founder, Chairman & Chief Executive Officer: Thank you. Good evening.