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Capital One expects operating efficiency ratio of 42% by 2021

McLean, Va.-based Capital One Financial Corp. management said on its first-quarter earnings call that between cost savings through technology innovation and revenue from its partnership with Walmart, it expects its operating efficiency ratio to drop to around 42% by 2021.

The bank reported an operating efficiency ratio of 44.53% in its earnings release for the quarter. The ratio excluding adjusting items was 44.18%.

While investments in technology have contributed to the bank's 3% year-over-year increase in noninterest expense, management expects technology to be a main driver of cost savings in the future.

The bank is working to move all applications and data to the public cloud, rather than utilizing data centers. Bank management said it expects to completely exit data centers by the end of 2020.

Moving to the cloud can provide other benefits as well, but Capital One President, Chairman and CEO Richard Fairbank cautioned against setting expectations too high. When asked about efficiency gains in marketing, Fairbank said that data provided by technology changes could improve marketing efficiency, but that cloud-based marketing efforts would be similar to what the bank is already doing.

In addition to savings brought about by improved technology, the bank expects to see the full benefits of its partnership with Walmart in 2021 as well.