capital oneCapital One Financial Corp. Shareholders Meeting Presentation

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capital oneCapital One Financial Corp. Shareholders Meeting Presentation

  1. 1. Annual Stockholder Meeting April 24, 2008
  2. 2. 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 forward- looking 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.” 2008 Annual Shareholder Meeting
  3. 3. 2007 was our first year of earnings decline COF Earnings per Share $9 $7.62 $8 $6.73 $7 $6.55 $6.21 $6 Excluding Discontinued $4.85 $5 Operations $3.93 $4 $3.97 $2.91 $3 $2.24 $1.72 $2 $1.32 $0.77 $0.93 $0.48 $0.64 $1 $0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Annual Shareholder Meeting
  4. 4. 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 $45.92 $40 $30 $20 $10 $0 7 7 8 7 8 7 7 07 7 7 07 08 7 07 8 07 -0 -0 -0 -0 -0 l-0 0 -0 -0 0 0 n- n- p- - - b- n- b- ct pr pr ar ar ay ug ec ov Ju Se Ja Ja Fe Fe Ju O M M A A M D A N 2008 Annual Shareholder Meeting Source: Factset
  5. 5. The banking industry has been hit hard Total Shareholder Return January 1, 2007-April 23, 2008 40% 30% 26% 20% 10% 2% 0% 0% -2% -2% -6% -10% -9% - 15 % -20% - 18 % - 2 6 %2 6 %2 6 % - -30% - -40% - 3 6 %3 6 % 3 7 % - - - 4 0 %4 0 % 4 1% - - -42% -43% -50% -46% -48% - 5 1% 5 1% - - 5 3 %5 3 % - - 5 5 %5 5 % - -60% -58% - 6 1% -70% -70% -74% -80% -77% - 8 1% 8 1% 8 3 % - - -90% -86% - 9 1% -94% -100% T WSC A Ck ry ity Fr tin et cr IT ne eI Fa gr ia dv u St n rp ea c T l L ird We di ton Bs ic e ta o Bx se ls hs ita er M fth ns hm eg a A nie p C co t l li ac s om & U ee t Fi Zio . ac h In ide & H Ne t C N dit M an Y/ ust D rus e lo a n ion an PN s aM a er Ma e & St ma rg di Le R ric n ou C hov un lN rn pu C of W ync an M Su yco ro ap v nt C lO B M m Sa e M ril Th ha e l ac M at e l re ed g JP S B e Fa r w B B Tr ea dy A nT ou at e St M e is iti n K A er C N r m om dm th er or B C ol N G Note: Discover began trading on June 14, 2007 2008 Annual Shareholder Meeting Source: Factset
  6. 6. Home prices became clearly unsustainable and the correction may be prolonged Indexed Median House Prices and 60th Percentile Household Income, 1975-2007 Indexed to 1975 700 600 500 60th Percentile Household Income 400 300 200 100 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) 2008 Annual Shareholder Meeting
  7. 7. Home prices became clearly unsustainable and the correction may be prolonged Indexed Median House Prices and 60th Percentile Household Income, 1975-2007 Indexed to 1975 700 600 500 60th Percentile Household Median Income House Prices 400 300 200 100 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) 2008 Annual Shareholder Meeting
  8. 8. Home prices became clearly unsustainable and the correction may be prolonged Indexed Median House Prices and 60th Percentile Household Income, 1975-2007 Indexed to 1975 700 Median House Prices 600 500 60th Percentile Household Income 400 300 200 100 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) 2008 Annual Shareholder Meeting
  9. 9. We are the nations’ 13th largest deposit-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 U.S. Bancorp 7. $121.1 8. SunTrust Banks, Inc. $113.6 9. Citizens $96.0 10. National City $90.7 $86.1 11. Regions Financial 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 2008 Annual Shareholder Meeting Sources: SNL, FDIC
  10. 10. The capital markets have shut down in many sectors U.S. Issuance of Asset-Backed Securities $B $1,000 $888 $874 $48 $48 $35 $69 $800 $64 $702 $65 $34 $35 $47 $600 $529 Global RMBS $38 $66 $559 $555 $48 $400 Home Equity $463 $224 $188 Other $200 $0 $5 $32 Student Loans $1 $42 Auto $62 $103 $84 $71 Credit Card $108 $66 $91 $66 $51 $0 2004 2005 2006 2007 2008 (Q1 Annualized) Q1 Actual $162B $181B $220B $211B $47B Note: Other includes Equipment, floorplan, motorcycle, small business loans, aircraft etc. Source: JP Morgan 2008 Annual Shareholder Meeting
  11. 11. Lenders primarily reliant on the capital markets have proven not to be resilient Consumer Lending Monolines Failed Acquired Remaining • • First Merchants Arcadia Stock Performance • • Search Financial Ugly Duckling Jan. 2007-Present • • The Money Store Beneficial • Western Fidelity • • First USA IndyMac -91.3% • Aegis • • Rock Financial CompuCredit -81.4% • Reliance • • Reliastar Advanta -78.1% • National Auto • • Autofinance Group Sallie Mae -66.3% • Monaco • • First Fidelity Americredit -55.2% • Eagle • • First Investors Nelnet -56.0% • Jayhawk • • MS Financial Discover* -37.5% • National Auto Finance • • Regional Acceptance American Express -26.9% • TFC enterprises • Heller Financial • First Enterprise • GreenTree • Mercury • Household • Aames • Onyx • Iown • Providian • Finova • • MBNA Delta Financial • • WFS Financial The Credit Store • • Metris NAL Financial • • First Franklin Royal Acceptance • • Commercial Financial Services ResMae • • NextCard Countrywide • DVI • New Century 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 2008 Annual Shareholder Meeting Source: Factset
  12. 12. We have dramatically reduced our need for capital markets funding as we’ve grown deposits % of Funding From Deposits 100% 90% 80% 70% 60% 50% 50% 40% 30% 20% 6% 10% 0% 1995 1Q 2008 Notes: Shown as % of Managed Liabilities 2008 Annual Shareholder Meeting
  13. 13. Our banking transformation has been recognized by ratings agencies Moody’s Holding Company Capital One (2006) A3 Capital One (Q4 2005) Baa1 Baa2 Capital One (Q2 1999) Baa3 Capital One (1996) Ba1 2008 Annual Shareholder Meeting
  14. 14. We have stable and fortified funding Readily Available Liquidity* $B $35 $30.1 $29.4 $30 $26.4 $25 $20.4 $20 $17.3 $15 $10 $5 $0 2004 2005 2006 2007 Q1 2008 Includes unencumbered securities, undrawn committed conduits and undrawn FHLB capacity. 2008 Annual Shareholder Meeting
  15. 15. Our Card and Auto Loan charge-offs are increasing Capital One Auto Finance Capital One Credit Card Charge-Off Rate Charge-Off Rate 8% 8% 7% 7% 5.85% 6% 6% 5% 5% 3.98% 4% 4% 3% 3% 2% 2% 1% 1% 0% 0% 07 08 06 06 07 07 04 05 06 07 08 04 05 04 04 05 05 06 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 1 3 1 3 1 1 1 3 1 3 1 3 1 3 1 3 1 3 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 2008 Annual Shareholder Meeting Note: Data is annualized
  16. 16. 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 2008 Annual Shareholder Meeting Note: Data is annualized
  17. 17. Our U.S. Card business is generating solid earnings in the face of significant cyclical headwinds U.S. Card Net Income $M $2,500 $2,116 $2,000 $1,824 $1,609 $1,500 $1,387 $1,181 $1,001 $1,000 $774 $690 $515 $500 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Annual Shareholder Meeting Note: Reported in U.S. Card segment
  18. 18. Our auto finance business struggled in 2007, we’re pulling back dramatically and repositioning the business COF Auto Net Income $M $250 $234 $200 $164 $150 $132 $99 $100 $50 $10 $0 ($21) ($23) ($34) ($35) ($50) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Annual Shareholder Meeting
  19. 19. Global Financial Services delivered valuable growth GFS Net Income $M $320 $299 $274 $280 $240 $213 $186 $200 $160 $120 $80 $65 $40 $0 ($8) ($40) 2002 2003 2004 2005 2006 2007 2008 Annual Shareholder Meeting
  20. 20. Local Banking has become an anchor tenant Local Banking Net Income $M $250 $192 $200 $145 $150 $127 $112 $100 $46 $46 $43 $43 $50 $0 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 2008 Annual Shareholder Meeting
  21. 21. We have changed our logo 2008 Annual Shareholder Meeting
  22. 22. In March we launched the Capital One Bank brand in metro New York 2008 Annual Shareholder Meeting
  23. 23. We can leverage our strong brand and very large customer base U.S. Customer Accounts* Total Brand 1. Citi 182 M Awareness (%)1 2. Bank of America 132 M 3. JPM Chase 92 M 97 4. HSBC 60 M 96 5. Capital One 44 M 6. Discover 42 M 96 7. American Express 37 M 96 8. Washington Mutual** 24 M 96 9. Wells Fargo 23 M 91 10. Wachovia 15 M 11. US Bancorp 14 M 87 12. Countrywide 8M 78 13. Fifth Third 6M 14. Citizens 6M 1 - Question: “When you think about companies or 15. Regions 5M banks that offer financial services products such as checking accounts, various types of savings accounts, 16. BB&T 5M credit cards and loans, which ones come to mind? Have you seen or heard of (company)?” 17. National City 4M 18. Bank of the West 4M 19. PNC 3M *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, 20. Keycorp 2M and the ~4M households with home loans Sources: Millward Brown Financial Services Brand Health Wave 5, January 2008, Company reports, SEC filings 2008 Annual Shareholder Meeting
  24. 24. We have completed a major transformation at Capital One Today 1990’s 2000’s • U.S. Card • U.S. Card • U.S. Card • Auto Finance • Auto Finance • Small Business • Small Business • Installment Loans • Installment Loans • Home Equity • Home Equity • UK/Canada Card • UK/Canada Card • Mortgage • Retail Banking • Commercial Banking Credit Card Diversified Diversified Bank Company Consumer Lender 2008 Annual Shareholder Meeting
  25. 25. The capital generative power of our portfolio is enhanced by reduced capital need and disciplined capital management Annual Excess Tangible Common Equity Generated $M $2,500 $2,199 $2,000 $1,607 $1,494 $1,500 $1,000 $788 $500 $160 $125 $84 $0 ($18) ($30) ($219) ($500) ($408) ($481) ($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) 2008 Annual Shareholder Meeting
  26. 26. 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 $0.11 $0.20 $0.00 2007 2008E 2008 Annual Shareholder Meeting
  27. 27. Our portfolio continues to generate capital 2007 Capital Generation (Consumption) as % of Year-End Tangible Common Equity 20.0% 17.4% 15.0% 11.6% 8.5% 10.0% 7.0% 5.2% 3.8% 5.0% 0.0% -2.0% -5.0% -5.4% -5.4% -10.0% -15.0% -16.2% -20.0% -21.6% -25.0% -30.0% Capital JPMorgan U.S. SunTrust BB&T Wells Wachovia Bank of PNC National Citigroup One Chase Bancorp Fargo America City New Equity Capital $7B* $19B $13B $12.8B* Raised From Outside Sources: 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 2008 Annual Shareholder Meeting
  28. 28. Our actions position Capital One to deliver shareholder value over the cycle Entering the Positioning for Decisive Action in Downturn With Long-term the Downturn Strength Trajectory 2008 Annual Shareholder Meeting
  29. 29. Annual Stockholder Meeting April 24, 2008

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