Capital One Financial Corporation · NYSE:COF
Capital One Financial — Q4 2008 Earnings Presentation
18 slides from Capital One Financial's earnings presentation, Jan 22, 2009
Slide 1: Fourth quarter 2008 results
Exhibit 99.2 Fourth quarter 2008 results January 22, 2009
Slide 2: Forward looking statements
Forward looking statements 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 informatio
Slide 3: Fourth Quarter 2008 Summary
Fourth Quarter 2008 Summary Q408 2008 $MM EPS $MM EPS Earnings from Continuing Ops (Excluding Goodwill Impairment) $ (585) $ (1.59) 895 $ 2.28 Earnings from Continuing Ops (Including Goodwill Impairment) (1,396) $ (3.67) 85 0.14 Total Company Earnings (1,422) $ (3.74) (46) (0.21) • Declines in EPS d
Slide 4: The worsening economy drove rising delinquency and loss trends across our lending businesses
The worsening economy drove rising delinquency and loss trends across our lending businesses US Card International 10% 10% 9% Managed Net Managed Net 9% Charge-off Rate 8% Charge-off Rate 7.08% 8% 7% 6.26% 5.85% 6.13% 7% 6.07% 5.61% 5.30% 5.90% 5.84% 6% 5.39% 5.45% 4.84% 6% 5% 3.85% 5% 5.51% 3.56% 4
Slide 5: Economic conditions deteriorated rapidly in Q4, driving our outlook for managed credit losses
Economic conditions deteriorated rapidly in Q4, driving our outlook for managed credit losses As of 9/30/08 As of 12/31/08 Next 12 Month Period 10/1/08-9/30/09 1/1/09-12/31/09 Unemployment Rate 6.5% as of 9/30/08 7.2% as of 12/31/08 Unemployment Rate Around 7% by mid 2009 8.7% by end 2009 Assumption
Slide 6: The mix of earning assets has shifted as multiple factors have resulted in flat loan growth
The mix of earning assets has shifted as multiple factors have resulted in flat loan growth 1 Managed Loans (End of Period) Investment Portfolio (End of Period) $B $B $160 $40 $151 $147 $147 $140 Bank $44 $31.0 $45 $45 $120 $30 $27.0 Int’l $25.0 $100 $12 $10 $9 $22.2 $20.0 $19.8 $80 $25 $22 $21 Auto
Slide 7: We achieved significant deposit growth with stable margins
We achieved significant deposit growth with stable margins ($B) Total Company Ending Deposits $108.6 $110 $98.9 $100 $92.4 $87.7 $90 $83.1 $82.8 $80 $70 $60 $50 $40 $30 $20 $10 $0 Q307 Q407 Q108 Q208 Q308 Q408 Local Banking 2.09% 2.05% 1.93% 2.04% 2.18% 2.12% Deposit Margin 7
Slide 8: Chevy Chase is a strategically and financially attractive acquisition
Chevy Chase is a strategically and financially attractive acquisition • A leading local banking franchise in one of the best local markets* – $11.6 billion in deposits – #1 branch share, #1 ATM share, #5 deposit share – Attractive market th • 9 largest MSA by population, with above average populatio
Slide 9: Margins declined as compared to both the sequential quarter and the prior year quarter
Margins declined as compared to both the sequential quarter and the prior year quarter Margins as % of Managed Assets 12% • Credit Impacts Revenue Margin – I/O strip write downs 10% – Increase in uncollectible finance charges & fees 9.48% 9.38% not recognized as revenue 8.65% 8% 7.37% Risk-Adjusted
Slide 10: Efficiency Ratio and operating expenses improved as a result of our continuing cost management actions
Efficiency Ratio and operating expenses improved as a result of our continuing cost management actions Efficiency Ratio 70% 60% 50.7% 50% 47.9% 1 40% 42.6% 30% 20% 10% 0% Q107 Q207 Q307 Q407 Q108 Q208 Q308 Q408 2007 2008 Improvement Efficiency Ratio 47.3% 43.1% 416 bps Non-Interest Expense 2 ($MM) $
Slide 11: We continue to increase allowance coverage ratios in all of our National Lending businesses
We continue to increase allowance coverage ratios in all of our National Lending businesses Allowance as % of Reported Allowance as % of Reported 30+ Loans Delinquencies 200% 10% 182% 9% 8.40% US Card 149% 167% 8% US Card 150% 6.80% 131% 7% 6.60% International 127% International 6% 5.70% 123% 5.60%
Slide 12: We recorded an $811MM non-cash impairment to goodwill in our Auto Finance business in Q408
We recorded an $811MM non-cash impairment to goodwill in our Auto Finance business in Q408 Goodwill ($MM) Local US Card Auto International Total Banking Finance Company Balance at January 1, 2008 $ 6,683 3,761 1,430 956 12,830 Other Adjustments 36 - - (33) 3 Goodwill Impairment - - (811) - (811) Bal
Slide 13: Credit was the big driver of operating earnings
Credit was the big driver of operating earnings $MM unless otherwise noted 2007 2008 YoY $ Inc/(Dec) Revenue excl. I/O Strip & Supression 17,912 18,984 1,073 I/O Strip Valuation Change 14 (225) (239) Revenue Supression* (1,140) (1,920) (780) Revenue 16,786 16,839 54 Marketing 1,348 1,118 (230) Opera
Slide 14: We increased readily available liquidity by $8B in the quarter
We increased readily available liquidity by $8B in the quarter $B Readily Available Liquidity 45 $40B 40 Undrawn FHLB Capacity 35 Q408 Highlights $32B • $8.8B Holding company cash covers 30 Undrawn parent obligations for 3+ years, including Conduit current dividend level 25 20 • $40B of readily avai
Slide 15: The growth in our investment portfolio has been in lower risk assets
The growth in our investment portfolio has been in lower risk assets December 31, 2007 December 31, 2008 $MM Book Value Net Unrealized Gain/(Loss) Book Value Net Unrealized Gain/(Loss) Treasuries/Agencies $ 1,370 16 $ 1,549 61 Agency MBS 11,486 26 21,844 217 Non-Agency MBS 4,411 (11) 3,789 (1,035) A
Slide 16: Our TCE ratio remain strong
Our TCE ratio remain strong Tangible Common Equity to Tangible Managed Assets Ratio 8% 7% 6% Long-Term Target Range Q408 5% 5.57% 4% 3% 2% 1% 0% Q307 Q407 Q108 Q208 Q308 Q408 Capital Ratios Q307 Q407 Q108 Q208 Q308 Q408 TCE/TMA 6.2% 5.8% 6.0% 6.2% 6.5% 5.6% TCE/TMA (Excluding OCI) 6.2% 5.9% 6.1% 6.3
Slide 17: Our strong and transparent managed balance sheet positions us to weather the storm
Our strong and transparent managed balance sheet positions us to weather the storm • Significantly increased allowance coverage ratios • $40B in readily available liquidity • High quality investment portfolio • Healthy capital position 17
Slide 18: Capital One
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