Capital One Financial Corporation · NYSE:COF
Capital One Financial — Q3 2010 Earnings Presentation
20 slides from Capital One Financial's earnings presentation, Oct 19, 2010
Slide 1: Third Quarter 2010 Results
Exhibit 99.2 Third Quarter 2010 Results October 19, 2010
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: Third quarter 2010 earnings were $803MM or $1.76 per share
Third quarter 2010 earnings were $803MM or $1.76 per share, compared with $608MM, or $1.33 per share in the second quarter Q310 Q210 Change Highlights $MM Net Interest 3,109 3,097 12 • Revenue increased $112MM, or 3% Non Interest Income Income 907 807 100 – 1.5% decline in average loans 4,016 3,904
Slide 4: Our mortgage rep & warranty reserve remains around $850MM
Our mortgage rep & warranty reserve remains around $850MM Original principal of home loans originated and sold to others between 2005 & 20081,2 Total Sold to GSE $3B $3B $4B $1B $11B Significant majority of Sold to monoline reserve wrapped $9B $8B $1B $0 $18B securitizations Sold to unwrapped securi
Slide 5: The pace of loan contraction slowed in the quarter, and funding costs continued to improve
The pace of loan contraction slowed in the quarter, and funding costs continued to improve End of Period Assets1 Asset $B Highlights Cash & Cash • End of period loans down $921MM or ~1% Equivalents Securities • Excluding run-off portfolios, loan balances modestly higher Other • $746MM run-off in Ins
Slide 6: Allowance coverage ratios remain high
Allowance coverage ratios remain high Allowance Allowance as % of Balance Loans $MM Credit Card Commercial Banking Consumer Banking Total Company*: 4.44% 4.67% 4.55% 5.96% 5.35% 4.89% Allowance as % of Commercial Lending Allowance as % of Reported 30+ Non-Performing Loans Delinquencies Domestic Card
Slide 7: Our capacity to absorb risk remains high
Our capacity to absorb risk remains high Tier 1 Capital to Risk Weighted Assets 13.8% 9.8% 10.0% 9.7% 11.2% 9.9% 8.4% 9.6% Other Tier 1 Allowance 6.6% 6.3% 6.1% 5.5% TCE Common TMA($MM) $198 $187 $184 $183 RWA($MM) $116 $120 $124 $124 October 19, 2010 7
Slide 8: The impact on regulatory capital ratios from consolidation will be fully realized in the first quarter of 2011
The impact on regulatory capital ratios from consolidation will be fully realized in the first quarter of 2011 Capital Trajectory using Analyst Net Income Consensus 1 Comments • Tier 1 ratios expected to dip in Q1 2011 due to consolidation impacts: •Final phase in of RWA •Impact of disallowed DTA im
Slide 9: Margins increased in the quarter
Margins increased in the quarter Margins as % of Managed Assets Modest NIM expansion • Lower funding costs with mix shift from wholesale funding Revenue Margin to bank deposits • Small increase in asset yields with higher day count vs. Q2 Revenue Margin increased Net Interest Margin • Lower Rep & Wa
Slide 10: Continuing cyclical improvement and expected seasonal patterns drove credit results
Continuing cyclical improvement and expected seasonal patterns drove credit results in our consumer lending businesses Domestic Credit Card International Credit Card ($54.0B*) ($7.3B*) Net Charge-off Rate Net Charge-off Rate 30+ Delinquency Rate 30+ Delinquency Rate Mortgage Credit ($13.0B*) 30+ Del
Slide 11: Commercial Banking credit metrics remain elevated and choppy, but are showing signs of improvement
Commercial Banking credit metrics remain elevated and choppy, but are showing signs of improvement Total Commercial Lending Total Commercial Banking ($29.5B*) Excluding Small Ticket CRE ($27.7B*) Nonperforming Nonperforming Asset Rate Asset Rate Charge-off Rate Commercial & MultiFamily Real Estate (
Slide 12: Despite elevated uncertainty, we expect near-term trends to be consistent
Despite elevated uncertainty, we expect near-term trends to be consistent with what we’ve articulated for several quarters Elevated Uncertainty Near-Term Trends • Modest and fragile • Expect lower pre- economic recovery provision earnings into 2011 • Mortgage Industry Issues • Expect Pre-Provision •
Slide 13: While loan demand remains weak, we are well positioned for consumer de-leveraging
While loan demand remains weak, we are well positioned for an extended period of consumer de-leveraging • Significant credit benefits from consumer de-leveraging enable attractive and sustainable economics, even with very modest growth • Well positioned to tap broad set of growth opportunities if co
Slide 14: Appendix
Appendix October 19, 2010 14
Slide 15: Loan balances continued to decline but at a slower pace
Loan balances continued to decline but at a slower pace Domestic Commentary Card $B • Expected run off continues in ILs, Mortgages and Installment Small-ticket CRE Loans • Consumer and Commercial demand remains weak Partially offset by: Domestic Card • Lower charge-offs • Pockets of origination grow
Slide 16: Domestic Card profits increased from improving credit
Domestic Card profits increased from improving credit Domestic Highlights Card Q3 2010 Q2 2010 Q3 2009 (in millions) • Revenue margin increased 16bps Earnings - Improving credit drove less suppression in Q3 Net interest income 1,691 1,735 1,797 - Lower late fee revenue from Non-interest income 575 5
Slide 17: International Card net income was stable in Q3 as positive credit trends continued
International Card net income was stable in Q3 as positive credit trends continued International Highlights Card Q3 2010 Q2 2010 Q3 2009 (in million) • Revenue and non-interest expenses were Earnings relatively unchanged in Q3 versus Q2 Net interest income 243 242 227 • Continued improving credit No
Slide 18: Commercial Banking net profits were lower in Q3 driven by a loss on a sale of loans
Commercial Banking net profits were lower in Q3 driven by a loss on a sale of loans and higher provision expense Commercial Highlights (in millions) Banking Earnings Q3 2010 Q2 2010 Q3 2009 • Revenues decreased from Q2 to Q3 Net interest income 325 319 301 - Net Interest Income was higher Non-intere
Slide 19: Consumer Banking net income decreased due to a lower allowance release in Q3
Consumer Banking net income decreased due to a lower allowance release in Q3 compared to the prior quarter Consumer Highlights (in millions) Banking Earnings Q3 2010 Q2 2010 Q3 2009 • Revenue increased in Q3 as Q2 was Net interest income 946 935 848 reduced by an MSR write-down Non-interest income 1
Slide 20: CapitalOne
a CapitalOne
Capital One Financial — Q3 2010 Earnings Presentation on 6ix