April 24, 2008 Annual Stockholder Meeting
Forward looking statements Forward-Looking Information Please note that the following materials containing information regarding Capital One s financial performance speak only as of the particular date or dates indicated in these materials. Capital One does not undertake any obligation to update or revise any of the information contained herein whether as a result of new information, future events or otherwise. Certain statements in this presentation and other oral and written statements made by the Company from time to time, are forwardlooking statements, including those that discuss strategies, goals, outlook or other non-historical matters; projections, revenues, income, returns, earnings per share or other financial measures for Capital One and/or discuss the assumptions that underlie these projections, including future financial and operating results, and the company s plans, objectives, expectations and intentions. To the extent that any such information is forward-looking, it is intended to fit within the safe harbor for forward-looking information provided by the Private Securities Litigation Reform Act of 1995. Numerous factors could cause our actual results to differ materially from those described in forward-looking statements, including, among other things: general economic and business conditions in the U.S. and or the UK, including conditions affecting consumer income, spending and repayments, changes in the credit environment in the U.S. and or the UK, including an increase or decrease in credit losses, changes in the interest rate environment; continued intense competition from numerous providers of products and services that compete with our businesses; financial, legal, regulatory or accounting changes or actions; changes in our aggregate accounts or consumer loan balances and the growth rate and composition thereof; the amount of deposit growth; changes in the reputation of the credit card industry and/or the company with respect to practices and products; the risk that Capital One s acquired businesses will not be integrated successfully; the risk that synergies from such acquisitions may not be fully realized or may take longer to realize than expected; disruption from the acquisitions making it more difficult to maintain relationships with customers, employees or suppliers; the risk that the benefits of the Company s restructuring initiative, including cost savings, may not be fully realized; our ability to access the capital markets at attractive rates and terms to fund our operations and future growth; losses associated with new products or services; the company s ability to execute on its strategic and operational plans; any significant disruption in our operations or technology platform; our ability to effectively control our costs; the success of marketing efforts; our ability to recruit and retain experienced management personnel; changes in the labor employment market; general economic conditions in the mortgage industry; and other factors listed from time to time in reports we file with the Securities and Exchange Commission (the SEC ), including, but not limited to, factors set forth under the caption Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2007. You should carefully consider the factors discussed above in evaluating these forward-looking statements. All information in these slides is based on the consolidated results of Capital One Financial Corporation. A reconciliation of any non-gaap financial measures included in this presentation can be found in the Company s most recent Form 10-K concerning annual financial results, available on the Company s website at www.capitalone.com in Investor Relations under About Capital One.
2007 was our first year of earnings decline COF Earnings per Share $9 $8 $7.62 $7 $6 $5 $4 $3 $2 $1 $0.48 $0.64 $0.77 $0.93 $1.32 $1.72 $2.24 $2.91 $3.93 $4.85 $6.21 $6.73 $6.55 Excluding Discontinued Operations $3.97 $0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Our stock price has declined in the face of cyclical headwinds Capital One Stock Price January 1, 2007-April 23, 2008 $90 $80 $70 $60 $50 $40 $45.92 $30 $20 $10 $0 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 Source: Factset
The banking industry has been hit hard 40% Total Shareholder Return January 1, 2007-April 23, 2008 30% 26% 20% 10% 0% -10% 2% 0% -2%-2% -6% -9% -20% -15% -18% -30% -26%-26%-26% -40% -50% -60% -70% -80% -36%-36%-37% -40%-40%-41% -42% -43% -46%-48% -51%-51% -53%-53%-55%-55% -58% -61% -70% -74% -77% -81%-81% -83% -86% -90% -91% -94% -100% Nat City Countrywide Indymac Bear Stearns Northern Trust BNY/Mellon State Street US Bank JPM Chase PNC Goldman Sachs Wells Fargo BB&T M&T Amex B of A Keycorp SunTrust Discover Capital One M&I Comerica Regions Lehman Bros. Zions Fifth Third Merrill Lynch Wachovia Citigroup Fannie Mae Americredit NelNet Huntington Freddie Mac Sallie Mae WaMu Advanta CIT Compucredit Note: Discover began trading on June 14, 2007 Source: Factset
Home prices became clearly unsustainable and the correction may be prolonged Indexed Median House Prices and 60 th Percentile Household Income, 1975-2007 Indexed to 1975 700 600 500 400 60 th Percentile Household Income 300 200 100 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 Source: Census Bureau and Banc of America Securities LLC Estimates (Presentation to GFS SLT Sept. 2007)
Home prices became clearly unsustainable and the correction may be prolonged Indexed Median House Prices and 60 th Percentile Household Income, 1975-2007 Indexed to 1975 700 600 500 400 Median House Prices 60 th Percentile Household Income 300 200 100 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 Source: Census Bureau and Banc of America Securities LLC Estimates (Presentation to GFS SLT Sept. 2007)
Home prices became clearly unsustainable and the correction may be prolonged Indexed Median House Prices and 60 th Percentile Household Income, 1975-2007 Indexed to 1975 700 600 Median House Prices 500 400 60 th Percentile Household Income 300 200 100 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 Source: Census Bureau and Banc of America Securities LLC Estimates (Presentation to GFS SLT Sept. 2007)
We are the nations 13 th largest deposit-taking taking bank Q4 2007 U.S. Deposits ($B) 1. Bank of America Corporation $688.6 2. JPMorgan Chase & Co. $505.6 3. Wachovia Corporation $423.1 4. Wells Fargo & Company $292.8 5. Citigroup, Inc. $265.9 6. Washington Mutual, Inc. $186.7 7. 8. 9. U.S. Bancorp SunTrust Banks, Inc. Citizens $121.1 $113.6 $96.0 10. National City $90.7 11. Regions Financial $86.1 12. HSBC $81.6 13. Capital One $79.3 14. BB&T $78.9 15. PNC $75.3 Note: Based upon total aggregated domestic deposits for parent company Sources: SNL, FDIC
The capital markets have shut down in many sectors $B $1,000 $800 $600 $400 $200 $0 $702 $34 $35 $47 $463 U.S. Issuance of Asset-Backed Securities $874 $48 $48 $35 $69 $64 $65 $559 $555 $32 $5 $0 $1 $42 $103 $62 $71 $84 $51 $66 $66 $91 $108 2004 2005 2006 2007 2008 (Q1 Annualized) $38 $66 $48 $224 Global RMBS Home Equity Q1 Actual $162B $181B $220B $211B $47B $888 $529 $188 Other Student Loans Auto Credit Card Note: Other includes Equipment, floorplan, motorcycle, small business loans, aircraft etc. Source: JP Morgan
Lenders primarily reliant on the capital markets have proven not to be resilient Consumer Lending Monolines Failed First Merchants Search Financial The Money Store Western Fidelity Aegis Reliance National Auto Monaco Eagle Jayhawk National Auto Finance TFC enterprises First Enterprise Mercury Aames Iown Finova Delta Financial The Credit Store NAL Financial Royal Acceptance Commercial Financial Services NextCard DVI New Century Acquired Arcadia Ugly Duckling Beneficial First USA Rock Financial Reliastar Autofinance Group First Fidelity First Investors MS Financial Regional Acceptance Heller Financial GreenTree Household Onyx Providian MBNA WFS Financial Metris First Franklin ResMae Countrywide Remaining Stock Performance Jan. 2007-Present IndyMac -91.3% CompuCredit -81.4% Advanta -78.1% Sallie Mae -66.3% Americredit -55.2% Nelnet -56.0% Discover* -37.5% American Express -26.9% Note: Publicly traded companies with a minimum of $1 billion in market cap in 1998 *Data sine June 2007 IPO; All other stock data are through April 23, 2008 Source: Factset
We have dramatically reduced our need for capital markets funding as we ve grown deposits 100% 90% 80% 70% % of Funding From Deposits 60% 50% 50% 40% 30% 20% 10% 0% 6% 1995 1Q 2008 Notes: Shown as % of Managed Liabilities
Our banking transformation has been recognized by ratings agencies Moody s Holding Company A3 Capital One (2006) Baa1 Capital One (Q4 2005) Baa2 Baa3 Capital One (Q2 1999) Ba1 Capital One (1996)
We have stable and fortified funding $B $35 $30 $25 Readily Available Liquidity* $26.4 $29.4 $30.1 $20 $17.3 $20.4 $15 $10 $5 $0 2004 2005 2006 2007 Q1 2008 Includes unencumbered securities, undrawn committed conduits and undrawn FHLB capacity.
Our Card and Auto Loan charge-offs are increasing 8% Capital One Credit Card Charge-Off Rate 8% Capital One Auto Finance Charge-Off Rate 7% 7% 6% 5.85% 6% 5% 5% 4% 4% 3.98% 3% 3% 2% 2% 1% 1% 0% 0% Q1 2004 Q3 2004 Q1 2005 Q3 2005 Q1 2006 Q3 2006 Q1 2007 Q3 2007 Q1 2008 Q1 2004 Q3 2004 Q1 2005 Q3 2005 Q1 2006 Q3 2006 Q1 2007 Q3 2007 Q1 2008 Note: Data is annualized
Our Local Banking losses are rising, but still at low levels Capital One Bank Charge-Off Rate 2.0% 1.5% 1.0% 0.5% 0.31% 0.0% 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 Note: Data is annualized
Our U.S. Card business is generating solid earnings in the face of significant cyclical headwinds $M $2,500 U.S. Card Net Income $2,116 $2,000 $1,824 $1,609 $1,500 $1,387 $1,181 $1,000 $500 $515 $690 $774 $1,001 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 Note: Reported in U.S. Card segment
Our auto finance business struggled in 2007, we re pulling back dramatically and repositioning the business $M $250 COF Auto Net Income $234 $200 $164 $150 $132 $100 $99 $50 $10 $0 ($50) ($23) ($21) ($35) ($34) 1999 2000 2001 2002 2003 2004 2005 2006 2007
Global Financial Services delivered valuable growth $M $320 GFS Net Income $299 $280 $274 $240 $213 $200 $186 $160 $120 $80 $65 $40 $0 ($40) ($8) 2002 2003 2004 2005 2006 2007
Local Banking has become an anchor tenant $M $250 Local Banking Net Income $200 $192 $150 $100 $127 $145 $112 $50 $43 $43 $46 $46 $0 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007
We have changed our logo
In March we launched the Capital One Bank brand in metro New York
We can leverage our strong brand and very large customer base Total Brand Awareness (%) 1 97 96 96 96 96 91 87 78 1. Citi 2. Bank of America 3. JPM Chase 4. HSBC 5. Capital One 6. Discover 7. American Express 8. Washington Mutual** 9. Wells Fargo 10. Wachovia 11. US Bancorp 12. Countrywide 13. Fifth Third U.S. Customer Accounts* 182 M 132 M 92 M 60 M 44 M 42 M 37 M 24 M 23 M 15 M 14 M 8 M 6 M 1 - Question: When you think about companies or banks that offer financial services products such as checking accounts, various types of savings accounts, credit cards and loans, which ones come to mind? Have you seen or heard of (company)? *Represents most recent company disclosure ranging from YE2005 to YE2006 **Calculated by aggregating the ~11M customers with card accounts, the ~9M households with banking accounts, and the ~4M households with home loans Sources: Millward Brown Financial Services Brand Health Wave 5, January 2008, Company reports, SEC filings 14. Citizens 15. Regions 16. BB&T 17. National City 18. Bank of the West 19. PNC 20. Keycorp 6 M 5 M 5 M 4 M 4 M 3 M 2 M
We have completed a major transformation at Capital One 1990 s 2000 s Today U.S. Card U.S. Card Auto Finance Small Business Installment Loans Home Equity UK/Canada Card U.S. Card Auto Finance Small Business Installment Loans Home Equity UK/Canada Card Mortgage Retail Banking Commercial Banking Credit Card Company Diversified Consumer Lender Diversified Bank
The capital generative power of our portfolio is enhanced by reduced capital need and disciplined capital management $M Annual Excess Tangible Common Equity Generated $2,500 $2,199 $2,000 $1,500 $1,494 $1,607 $1,000 $788 $500 $84 $160 $125 $0 ($500) ($30) ($18) ($219) ($481) ($408) ($1,000) 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Note: Calculated as (Total NIAT NIAT from in-period acquisitions + amortization of intangibles from prior period acquisitions) Low end of TCE Target Range * (Change in Tangible Assets in-period acquired assets)
We significantly raised the dividend Capital One Dividend $2.00 $1.80 $1.60 $1.50 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 $0.11 2007 2008E
Our portfolio continues to generate capital 20.0% 17.4% 2007 Capital Generation (Consumption) as % of Year-End Tangible Common Equity 15.0% 10.0% 5.0% 11.6% 8.5% 7.0% 5.2% 3.8% 0.0% -5.0% -10.0% -2.0% -5.4% -5.4% -15.0% -20.0% -25.0% -16.2% -21.6% -30.0% Capital One JPMorgan Chase U.S. Bancorp SunTrust BB&T Wells Fargo Wachovia Bank of America PNC National City Citigroup New Equity Capital Raised From Outside Sources: $12.8B* $13B $7B* $19B Capital Generation = [Net Income (Dividends Paid + Capital Needed for Y-o-Y On-Balance Sheet Growth @ 5% TCE Rate)] *Wachovia and National City include April announcements ($7B each) Note: Does not include outside capital raising activities in capital generation calculation
Our actions position Capital One to deliver shareholder value over the cycle Entering the Downturn With Strength Decisive Action in the Downturn Positioning for Long-term Trajectory
April 24, 2008 Annual Stockholder Meeting