Capital One reported higher technology-related expenses for the fourth quarter despite reducing its tech workforce as the company “continues to invest in its retail banking business,” Chief Executive Richard Fairbank said during Tuesday’s Q4 earnings call. 

WHY IT MATTERS: The $455 billion bank reported a 9% year-over-year increase in total non-interest expenses to $5 billion driven by investments in the digital capabilities to improve Capital One’s underwriting, marketing and product capabilities, Fairbank said.

“The gradual operating efficiency improvement is what we are continuing to drive for through the leveraging of our tech transformation even as we continue to invest,” he said. “[Capital One will] continue to support the various technology players, who have developed payment innovations, and we continue to develop innovations of our own.” 

THE BIG PICTURE: While the McLean, Va.-based bank spent more money to improve its digital capabilities, it experienced some turbulence in its income figures, signaling that tougher economic times may be ahead, per the earnings release from the company.  

BY THE NUMBERS: Capital One reported for Q4: 

• Net income fell 49% YoY to $1.2 billion; 
• Non-interest income rose 10% YoY to $1.8 billion; and 
• Communications and data processing expenses increased 8% YoY to $352 million. 

NOTEWORTHY: The company cut more than 1,100 tech workers on the Agile Development team in January, according to a Capital One release. Agile development duties will be folded into the company’s “core” IT roles. 

STATE OF PLAY: Capital One is planning for a “modestly worse economic outlook” than it assumed during Q3, Chief Financial Officer Andrew Young said during the call. The sentiment echoes other companies including Goldman Sachs that made similar comments during the Q4 earnings season. 

THE BOTTOM LINE: Despite a bleaker-than-expected economic outlook for 2023 and a reduced workforce, Capital One anticipates the increase in tech-related expenses to be a continuing trend moving forward, Fairbank said during the call. 

“[Capital One will continue] to lean into our opportunities to continue to invest in the tech opportunities that we see and the opportunities to create breakthroughs in the marketplace and continue to transform how we work,” he said. “The gradual operating efficiency improvement is what we are continuing to drive for through the leveraging of our tech transformation even as we continue to invest.” 

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