Capital One Financial Corporation · NYSE:COF
Capital One Financial — Q1 2008 Earnings Presentation
19 slides from Capital One Financial's earnings presentation, Apr 17, 2008
Slide 1: First quarter 2008 results
Exhibit 99.2 * * * * * First quarter 2008 results * * April 17, 2008
Slide 2: Forward looking statements
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
Slide 3: First quarter 2008 highlights
First quarter 2008 highlights • Diluted EPS of $1.47; EPS from Continuing Operations of $1.70, up 3% over Q107 – Allowance build of $310M – $104M increase to GreenPoint Rep and Warranty reserve – $200M benefit from Visa IPO • Substantial increase in revenue margin year-over-year, coupled with expens
Slide 4: Substantial increase in revenue margin year-over-year largely offset higher credit costs
Substantial increase in revenue margin year-over-year largely offset the adverse impact of higher credit costs Margins Margin Drivers 12% • Year-over-year: US Card pricing and fee Revenue Margin changes drove substantial increase in 10% 10.40% 10.43% revenue margin 9.20% Risk-Adjusted Margin 8% 7.45
Slide 5: We continue to drive efficiency gains
We continue to drive efficiency gains Quarterly Highlights Efficiency Ratio • Reduced headcount by 1,600 in Q108; 60% 5,400 since Q107 50.7% 50% 46.2% • Announced UK and Auto Finance 44.2% 41.6% restructurings 40% 38.6% – Approximately 1000 positions to be eliminated 30% Excluding Visa one-time impa
Slide 6: Credit metrics reflect weakening in the U.S. economy
Credit metrics reflect weakening in the U.S. economy Monthly Managed Monthly Managed Delinquency Net Charge-off Rate and Non-Performing Loan Rate 8% Bankruptcy 8% Filing Spike 7% National Lending 7% Q108: 6% 5.34% 6% 5% National Lending 5% 30+ Delinquency Rate Q108 4% 4% 4.73% 3% 3% 2% 2% Local Bank
Slide 7: Given the deteriorating outlook, we have increased our loan loss allowance
Given the deteriorating outlook for the US economy, we have increased our loan loss allowance Allowance as % of Reported 200% 30+ Delinquencies Quarterly Highlights • Increased loan loss allowance by $310M to $3.3B US Card 153% 165% 150% International • Allowance consistent with managed 129% charge-
Slide 8: Despite credit headwinds, we remain capital generative
Despite credit headwinds, we remain capital generative Tangible Common Equity to 2008 Expectations Tangible Managed Assets Ratio 8% • TCE ratio at or above high-end of 5.5%-6% target range 7% 6% • Expect to continue $0.375 quarterly 5.83% 6.03% dividend 5% 4% • Share buybacks dependent on economic 3
Slide 9: We continue to maintain ample liquidity
We continue to maintain ample liquidity Quarterly Highlights $B Readily Available Liquidity 35 • Liquidity position is 5x next 12 months of capital markets funding plan $30B $29B 30 • Moved Auto Finance to be a subsidiary Undrawn FHLB Capacity of National Bank 25 • $5.7B Holding company cash: 20 Une
Slide 10: Capital One remains highly profitable despite significant cyclical credit headwinds
Capital One remains highly profitable despite significant cyclical credit headwinds Net Income from Continuing Operations ($Millions) Q108 Q407 Q307 Q207 Q107 National Lending US Card $ 491.2 $ 498.7 $ 626.8 $ 592.9 $ 538.5 Auto Finance (82.4) (112.4) (3.8) 38.0 44.4 International 33.3 54.7 47.4 18.
Slide 11: Taking action to strengthen resiliency and sustain returns of our US Card business
We are taking action to strengthen resiliency and sustain the strong financial returns of our US Card business US Card US Card Revenue Margin and Non-Interest Credit Risk Metrics Expenses as a % of Average Loans 7% 20% 17.31% 5.85% 16.42% 16.42% 6% Managed Net Charge-off Rate 14.67% 4.84% 15% 13.92%
Slide 12: We continue to aggressively retrench and reposition our auto business
We continue to aggressively retrench and reposition our auto business for resilience Credit Risk Metrics Auto Loan Originations ($B) 8% $4 $3.6 7% 7.84% Managed 30+ 7.15% $3.3 Delinquency Rate $3.2 $3.0 6% $3.1 6.35% 6.42% $3 6.00% 5% $2.4 4% 4.64% $2 3.98% 4.00% 3% 3.56% 2.85% 2% Managed Net $1 2.2
Slide 13: Bank integration was largely completed in the quarter
Bank integration was largely completed in the quarter Credit Risk Metrics 2% Managed Net Charge-off Rate Non Performing Loans as a % of Loans 1% 0.56% 0.41% 0.27% 0.19% 0.19% 0.28% 0.19% 0.19% 0.31% 0.15% 0% Q107 Q207 Q307 Q407 Q108 • Launched new Capital One logo Deposit and Loan Portfolio ($B) $80
Slide 14: We expect sound operating metrics in 2008, despite continued credit headwinds
We expect sound operating metrics in 2008, despite continued credit headwinds 2008 Outlook Commentary Loan/Deposit Flat loan growth; double-digit Cautious on loan growth; bullish on deposit growth Growth deposit growth Revenue Low-to mid-single digits Revenue margin remains strong Growth Cost Effici
Slide 15: Our actions position Capital One to deliver shareholder value over the cycle
Our actions position Capital One to deliver shareholder value over the cycle Strong Position Decisive Actions • Resilient businesses • Pulled back on loan growth across lending businesses • Conservatism imbedded in underwriting decisions – Tightened underwriting across lending businesses • Banking t
Slide 16: Appendix
Appendix 16
Slide 17: First quarter 2008 balance sheet and return metrics from Continuing Operations
First quarter 2008 balance sheet and return metrics from Continuing Operations Managed Balance Sheet Highlights ($Millions) Q108/Q407 Change Q108 Q407 Q107 $ %/bps Total Deposits $ 87,695 $ 82,761 $ 87,471 $ 4,934 6.0 % Total Managed Loans Held for Investment 148,037 151,362 142,005 (3,325) (2.2) Ta
Slide 18: First quarter 2008 managed income statement
First quarter 2008 managed income statement Managed Income Statement Highlights ($Millions except per share data) Q108/Q407 Change Q108 Q407 Q107 $ %/bps Net Interest Income $ 2,976.8 $ 3,000.5 $ 2,602.5 $ (23.7) (1) % Non-Interest Income 1,606.7 1,566.2 1,294.1 40.5 3 Total Revenue 4,583.5 4,566.7
Slide 19: Charge-offs and allowance for loan losses consistent with $6.7B of charge offs
With the $310M build in Q108, our allowance for loan losses is consistent with $6.7B of managed charge offs for the next 12 months Charge-offs and Allowance for Loan Losses ($Millions) Q108/Q407 Change Q108 Q407 Q107 $ %/bps 1 Managed Net Charge-offs $ 1,482.3 $ 1,296.2 $ 947.3 $ 186.1 14 % Allowanc
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