Slide 1: Fourth Quarter 2003 Results
1 Capital One Fourth Quarter 2003 Results Fourth Quarter 2003 Results January 21, 2004 1/21/2004
Slide 2: Forward looking statements
2 To the extent any such A materials. Capital One does not undertake any information is forward-looking, it is intended to fit within the safe harbor for forward-looking information “SEC”) , including, but not limited to, factors included in this presentation can be found in the Company’s One.” Capi
Slide 3: Fourth Quarter 2003 Results summary
• 3 • 2004 solid • a profits for 2003 $5.60 One upmarket to Results throughout meaningful relationships $4.85 $5.30 2003 Capital largely capital of of Quarter • EPS Fourth • improved generated 19%, and regulatory guidance One • of 2003 Capital • positions metrics growth liquidity EPS 2003 Credit Div
Slide 4: Improving Credit, Move Upmarket, Diversification
4 Improving Credit Move Upmarket lower charge-off rate (provision) lower operating expense as % of loans lower marketing cost as % of loans Capital One Fourth Quarter 2003 Results Annual ROA relatively stable as lower expenses (as a % of loans) offset lower revenue margin – – – Three trends are cont
Slide 5: Business Update / Financial Update
5 Business Update Capital One Fourth Quarter 2003 Results Financial Update Fourth quarter 2003 1/21/2004
Slide 6: Solid business fundamentals reflected in Q4 financial results
6 Change 3.9% 10.7% (8.2%) 7.9% (3.6%) (5.1%) 1.4% 5.9% 1.6% % 99.2 91.0 (25.9) 73.5 (9.8) (0.06) 632 3,985 (47 bp) (15 bp) 25 (12 bp) (19 bp) 7 bp Results Change $ $ $ $ $ $ $ $ Q303 2,550.0 847.0 316.0 925.8 275.5 1.17 46,406 67,260 14.36% 1.45% 1,570 5.44% 4.65% 8.12% Quarter $ $ $ $ $ $ $ $ Q403
Slide 7: Impact of allowance build on Q4 results
• 7 • an $25MM in 2003 $160-170MM ($130-145MM) of Allowance • resulted quarter on Results • Impact 2003 • fourth Quarter • balances Fourth • the $2.2B One loan in performance Capital up experience allowance build loans credit shift on reported Mix Payment effect • – • Higher allowance Reported Impro
Slide 8: Solid business fundamentals reflected in 2003 financial results
8 Change 5.6% (2.8%) 4.5% 6.4% 26.3% 23.4% (0.7%) 19.2% (7.3%) % Change 543.1 (103.9) 47.8 223.3 236.2 0.92 (331) 11,498 (228 bp) 3 bp ($125) 62 bp (114 bp) 33 bp Results $ $ $ $ $ $ $ 899.6 3.93 47,369 59,747 16.93% 1.49% 1,720 5.24% 5.60% 7.86% 2002 9,695.5 3,658.9 1,070.6 3,515.0 Annual $ $ $ $ $
Slide 9: Sustained earnings power as it diversifies and moves upmarket
9 2001 16.40% (4.17%) (7.15%) (2.60%) (0.94%) 1.54% Assets Average 2002 16.05% (6.06%) (5.82%) (1.77%) (0.91%) 1.49% Managed Total 2003 13.68% (4.75%) (5.00%) (1.49%) (0.90%) 1.52%* of Capital One Fourth Quarter 2003 Results Percentage a As Operating Expense Revenue Provision Marketing Tax Net Incom
Slide 10: Return on assets is steady despite quarterly variability
10 1.52% 2003 Annually - 1.49% 2002 ROA Managed 1.54% 2001 2.0% 1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% 1.45% 1.30% Q403 1.59% Q303 1.77% Q203 1.43% Q103Capital One Fourth Quarter 2003 Results Quarterly Q402 - Q302 1.61% 1.42% ROA 1.39% Q202 1.45% Q102 1.53% Q401 Managed 1.60% Q301 Q201 Re
Slide 11: We raised $5.8 billion in public funding during Q4
11 2003 $5,100 $1,100 $1,375 $981 $2,000 $2,125 $2,000 $500 $5,090 $20,271 Issuance Priced ($ millions) Q4 2003 $1,750 $400 $400—- $1,000 $800—$1,480 $5,830 1 Capital One Fourth Quarter 2003 Results 2 AAA A BBB Prime Non-prime Subordinated bank notes Deposit growth U.S. card securitizations U.K. car
Slide 12: Our spreads improved throughout 2003
12 BBB Secured AAA Secured Nov-03 Senior Bank Notes Swaps Sep-03 to Spreads Jul-03 Funding May-03 Capital One Fourth Quarter 2003 Results Year - 5 Mar-03 COB five-year unsecured funding Jan-03 Our spreads improved throughout 2003 400 350 300 250 200 150 100 50 0 Source: Bloomberg—1/21/2004
Slide 13: Available liquidity is more than 3 times 2004 term debt maturities
13 2009 2008 Maturities 2007 Card Securitization Unsecured Debt 2006 Debt Term 2005 2004 $B 16 14 12 10 8 6 4 2 0 Q403Capital One Fourth Quarter 2003 Results Liquidity Q3 03 Available Untapped Conduit Capacity Cash & Liquid Investments Unsecured Credit Facility Q402 Our available liquidity is more t
Slide 14: Business Update / Financial Update
14 Business Update Capital One Fourth Quarter 2003 Results Financial Update Fourth Quarter 2003 1/21/2004
Slide 15: Loans grew 19% in 2003
15 2003 Growth 13.3% 39.1% 43.5% 34.2% 37.0% 21.1% 19.2% Q403 Growth 4.5% 10.3% 16.5% 2.7% 10.3% 5.7% 5.9% 12/31/02 $40.9 $11.9 $5.3 $4.0 $2.4 $7.0 $59.7 9/30/03 $44.3 $15.0 $6.6 $5.2 $3.0 $8.0 $67.3 12/31/03 $46.3 $16.5 $7.6 $5.4 $3.3 $8.5 $71.2 Capital One Fourth Quarter 2003 Results Loans grew 19
Slide 16: Diversified lending businesses now over a third of outstandings
GFS 16 Small Business Installment Loans International Auto Finance Outstandings $3.3 $5.4 $7.6 $8.5 2003 35% 2002 32% Managed 2001 27% Diversified 2000 22% 1999 22% Capital One Fourth Quarter 2003 Results One’s Capital 1998 18% 1997 7% Diversified lending businesses now account for more than a third
Slide 17: Our diversification investments are paying off
17 2001 ($35.4) ($44.6) ($80.0) 2002 $10.3 ($8.1) $2.2 Net Income After Tax* ($Millions) 2003 $99.3 $64.8 $164.1 Capital One Fourth Quarter 2003 Results Auto Finance Global Financial Services Total Diversification Businesses Our diversification investments are paying off 1/21/2004 *Based on internal
Slide 18: Outlook for segment profit growth remains strong
18 Q103 $308.1 ($6.5) $14.9 Q203 $274.2 $44.0 $25.5 Net Income After Tax* ($Millions) Q303 $276.2 $27.3 $21.0 Capital One Fourth Quarter 2003 Results Q403 $322.7 $34.4 $3.3 US Card Auto Finance Global Financial Services Despite quarterly variability in profits, our outlook for segment profit growth
Slide 19: Charge-offs continue to decline
19 5.57% 5.10% Dec-03 5.30% Nov-03 5.32% Oct-03 5.24% Sep-03 5.75% 5.34% Aug-03 5.44% Rate Jul-03 6.20% off Jun-03 - 6.40% Charge 6.36% May-03 6.32% 6.50% Apr-03 Net 6.37% Mar-03 6.53% Feb-03 6.47% Managed Jan-03 6.59% 6.40% Dec-02 Capital One Fourth Quarter 2003 Results Monthly 5.62% Nov-02 6.21% 5
Slide 20: Lagged charge-offs are holding steady
20 6.42% 6.05% Dec-03 6.02% Nov-03 6.17% Oct-03 Rate 5.89% Sep-03 Off 5.93% Aug-03 - 6.21% 6.01% Charge 6.62% Jul-03 Jun-03 6.91% Net May-03 7.00% 6.84% 7.22% Apr-03 Managed Mar-03 7.35% 7.85% Feb-03 7.46% Lagged Jan-03 8.11% Month 7.88% Dec-02 Capital One Fourth Quarter 2003 Results - Nov-02 9 7.01
Slide 21: Segment charge-offs are stable to improving
21 US Card Auto Global Financial Services Q403 Rate off - Q303 Charge Net Q203 Managed Capital One Fourth Quarter 2003 Results Segment Q103 Segment charge-offs are stable to improving Q402 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 1/21/2004
Slide 22: Delinquencies have steadily declined in 2003
4.46% 22 Dec-03 4.46% Nov-03 4.52% Oct-03 Sep-03 Rate 4.74% 4.65% Aug-03 4.92% Jul-03 4.95% Jun-03 Delinquency May-03 4.82% Day 4.86% Apr-03 30+ Mar-03 $ 4.97% Feb-03 5.56% 5.30% Jan-03Capital One Fourth Quarter 2003 Results Managed Dec-02 5.60% 5.50% Nov-02 Monthly 5.55% Oct-02 Sep-02 5.31% 4.94% A
Slide 23: Auto Finance delinquencies show seasonality and slower growth
23 Auto US Card Global Financial Services Q403 Rate Delinquency Q303 30+ $ Q203 Managed Capital One Fourth Quarter 2003 Results Segment Q103 Auto Finance delinquencies show the effects of seasonality and slower growth in 2003 Q402 8% 7% 6% 5% 4% 3% 2% 1% 0% 1/21/2004
Slide 24: Fourth Quarter 2003 Results summary
• 2004 24 solid • a 2003 profits • for • One upmarket Results throughout meaningful relationships 2003 Capital largely capital Quarter • Fourth • improved generated 19%, and regulatory One positions of liquidity Capital metrics growth • 2003 • Credit Diversification Loan Strong Strengthened • strong
Slide 25: 2004 guidance and outlook
• 25 • lower improving somewhat from variability pressure Results rates diversification 2003 quarterly Quarter allowance and Fourth mid-teens charge-off with One in and ROA, Capital rate 2003 downward upmarket, $5.60, margin stable to growth Q4 move guidance Revenue in $5.30 Loan than Continued cred