Capital One Financial Corporation · NYSE:COF
Capital One Financial — Merger or Acquisition (February 2024)
27 slides from Capital One Financial's merger presentation, Feb 20, 2024
Slide 1: Investor Presentation
#ᴅʟᴘ_MICRODOT [{'title': 'Data Security Classification', 'text': 'Internal'}]_END Exhibit 99.2 Investor Presentation F ebruary 20, 2024
Slide 2: Forward Looking Statements
Forward Looking Statements Information in this communication, other than statements of historical facts, may constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements about the benef
Slide 3: Important Information About the Transaction and Where to Find It
Important Information About the Transaction and Where to Find It Capital One intends to file a registration statement on Form S-4 with the SEC to register the shares of Capital One’s common stock that will be issued to Discover stockholders in connection with the proposed transaction. The registrati
Slide 4: Capital One's acquisition of Discover has strong strategic rationale
Capital One’s acquisition of Discover has strong strategic rationale ● Combines Capital One’s scale in credit cards and banking with Discover’s vertically integrated global payments network ● Enhances Capital One’s ability to compete with the nation’s largest banks in credit cards and banking ● Leve
Slide 5: The combination delivers compelling financial metrics
The combination delivers compelling financial metrics • 2027E Operating Expense Synergy Opportunity: $1.3B Creates significant • 2027E Marketing Expense Synergy Opportunity: $0.1B synergies • 2027E Network Synergy Opportunity: $1.2B 1 • 2027E Adjusted EPS Accretion : >15% Provides attractive returns
Slide 6: Discover operates an integrated payments and banking business
Discover operates an integrated payments and banking business Payment Services Digital Banking 1 6 Note: 1) Discover announced the intention to sell its Student Loan portfolio in late 2023, with an anticipated sale in 2024. It stopped originations on February 1, 2024.
Slide 7: Acquiring Discover is another big step toward a global payments technology company
Acquiring Discover is another big step forward on our quest to build a global payments technology company 200+ 70 1.8 305 $550 countries million million million+ billion+ and territories merchant global ATMs global in spend across welcome the acceptance offer cash cardholders the network network poi
Slide 8: Owning a network provides the benefits of vertical integration
Owning a network provides the benefits of vertical integration and the ability to directly serve customers across the marketplace ● Deal more directly with merchants ● Create more value for merchants, small businesses, and consumers ● Capture the additional economics from vertical integration ● Bene
Slide 9: This acquisition will strengthen the smallest of the four major payments networks
This acquisition will strengthen the smallest of the four major payments networks Total Network Volume By 2027, we expect to add... U.S. Only, 2023 B $175B+ of Capital One purchase volume 25M+ Capital One cardholders Note: Visa- “Total Volume, All Visa Credit & Debit - US” For the 12 Months Ended De
Slide 10: Discover has built a valuable credit card franchise
Discover has built a valuable credit card franchise Top 2 in J.D. Power U.S. Credit Card Overall Customer Satisfaction Rankings for 17 years running Note: Based on the J.D. Power U.S. Credit Card Satisfaction Study, Overall Customer Satisfaction Index Ranking for Credit Card Issuers; Rankings betwee
Slide 11: Discover will be additive and complementary to Capital One's card offerings
Discover will be additive and complementary to Capital One’s suite of credit card offerings Cash Back Travel Small Business Co-Brand 11 Note: Not comprehensive of all product offerings for Capital One
Slide 12: Together, Discover and Capital One will be well-positioned in credit cards
Together, Discover and Capital One will be well-positioned in credit cards 1 2 Credit Card Purchase Volume Credit Card Loans 2023 2023 B B Note: 1) JPM- “Consumer & Community Banking” (includes SMB), “Card Services - Sales volume excluding commercial card”; AXP- “U.S. Consumer Services” and “Commerc
Slide 13: Discover has built a fast-growing national direct savings bank
Discover has built a fast-growing national direct savings bank Discover Direct to Consumer Deposits B 1 U.S. Only Note: 1) End of period; Total Direct to Consumer Deposits; 2013 - 2018 defined as “Direct to Consumer and Affinity Deposits”; 2019 - 2020 defined as “Direct to Consumer Deposits, also in
Slide 14: Capital One has built a full-service digital bank with nationwide physical access
Capital One has built a full-service digital bank with nationwide physical access National Footprint 259 Branches 55 Cafes in 21 of the top 25 MSAs 16K+ Cash deposit locations 80K+ Fee-free ATMs Note: Branch and cafe count is net of announced closures; Top 25 MSAs with a cafe include: New York (NY),
Slide 15: Capital One's national bank is a compelling brand with industry-leading satisfaction
Capital One’s national bank is a compelling brand and delivers industry-leading customer satisfaction #1 in J.D. Power U.S. National Banking Overall No fees. No minimums. No overdraft fees. Customer Satisfaction Rankings for 4 years running Note: 2020-2023, Based on the J.D. Power U.S. National Bank
Slide 16: We will increase our scale to compete with the nation's largest banks
We will increase our scale to compete with the nation’s largest banks Total Deposits 2023 B (#26) Note: Total deposits, includes brokered; As of 4Q 2023; Discover ranking as of February 16, 2024 according to reported metrics 16 Source: Federal Reserve Y-9C Consolidated Financial Statements for Holdi
Slide 17: Leverage and scale our eleven-year technology transformation
We can leverage and scale our eleven-year technology transformation into a modern technology company ● Transformed our talent ● Transformed how we build software ● Migrated entirely to the cloud ● Modernized our data ecosystem ● Modernized our applications 17
Slide 18: We will enhance our marketing scale and share of voice
We will enhance our marketing scale and share of voice Marketing Expense B 2023 Note: AXP- “Expenses”, “Marketing”; JPM- “Noninterest Expense”, “Marketing”; COF- “Non-interest expense”, “Marketing”; BAC- “Noninterest expense”, “Marketing”; C- “Operating expenses”, “Advertising and marketing”; DFS- “
Slide 19: Together we will continue to build one of America's great places to work
Together we will continue to build one of America’s great places to work #15 #81 12th consecutive year on the list 19 Source: CNNMoney for 2012-2013; Fortune for 2014-2023
Slide 20: Additional deal highlights
Additional deal highlights • Discover to merge into Capital One; 1.0192x fixed exchange ratio and 100% stock consideration Transaction 1 • Implied transaction value of $139.86 per Discover share or $35.3 billion Structure & Pricing • Represents 26.6% premium to Discover share price and 12.3x 2024E c
Slide 21: Key financial assumptions
Key financial assumptions • Consensus estimates for Capital One in 2024/2025 and extrapolated 2026+ • Consensus estimates for Discover in 2024/2025 and extrapolated 2026+, with two adjustments: Standalone Modeled ○ Assumes the exit of student lending in 2024 Forecasts ○ Assumes 2024 charge-offs are
Slide 22: The combined company would generate attractive operating results before synergies
The combined company would generate attractive operating results before synergies 2023 Combined Company Pro Forma Metrics (Actual Results; Excludes Synergies) 1 Revenue Margin 9.1% 2 Adj. Operating Efficiency Ratio 39.6% 3 Adj. Total Efficiency Ratio 49.5% 4 ROTCE 15.9% Note: All figures exclude syn
Slide 23: We conducted thorough due diligence
We conducted thorough due diligence Key Focus Areas ● Card Business ● Compliance / Regulatory ● Non-Card Businesses ● Operations ● Credit ● Human Resources ● Network ● Cyber ● Bank ● Finance / Tax ● Legal ● Technology 23
Slide 24: Significant synergy opportunities were identified, with unmodeled upside
Significant synergy opportunities were identified, with unmodeled upside Modeled Impact Description of Synergy Opportunity (2027E) • 26% of Discover operating expenses (excl. marketing) phased in over three years 1 Expense • 10% of Discover marketing expenses phased in over two years $1.5B • Synergi
Slide 25: The transaction provides strong returns
The transaction provides strong returns Key Performance Metrics 1 2027E Adjusted EPS Accretion >15% 2 2027E Return on Invested Capital 16% 3 IRR >20% Note: Market data as of February 16th, 2024; Metrics reflect 100% stock consideration at a 1.0192x exchange ratio, representing a 26.6% premium to Dis
Slide 26: This transaction creates significant benefits for Discover stakeholders
This transaction creates significant benefits for Discover stakeholders ● Well-positioned bank and payments network of the future ● Accelerates our journey to become a leading digital bank provider ○ Adds operating scale ○ Similar organizational values ○ Shared commitment to outstanding customer ser
Slide 27: Building a unique, diversified global payments platform
Capital One and Discover are building a unique, diversified global payments platform with a flywheel of customers, technology, data, and brand CardBankAuto ShoppingTravel 27
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