Capital One Financial Corporation · NYSE:COF
Capital One Financial — Q3 2003 Earnings Presentation
22 slides from Capital One Financial's earnings presentation, Oct 22, 2003
Slide 1: Third Quarter 2003 Results
Third Quarter 2003 Results October 22, 2003
Slide 2: Forward-looking statements notice
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 information contained herein whether
Slide 3: Business Update, Financial Update: Third Quarter 2003
Business Update Financial Update Third Quarter 2003
Slide 4: Third Quarter 2003 Summary
Third Quarter 2003 Summary Earnings of $276.3M or $1.17 EPS Managed outstandings grew $6.5B to $67.3B, with most of that growth in superprime card Revenue margin declined 49bp to 14.36% Charge-offs declined 88bp to 5.44% Delinquencies declined 30bp to 4.65% Allowance declined $20M to $1.57B
Slide 5: Loan and account growth are on track
Loan and account growth are on track 12/31/02 6/30/03 9/30/03 On track for "around 20%" loan growth YTD % Growth Q3vsQ2 Growth Accounts (thousands) 47,369 45,785 46,406 (2%) 621 Loans ($M) 59,747 60,736 67,260 12.6% 6,524
Slide 6: Third quarter growth was led by US Card, but all lines of business are growing
Third quarter growth was led by US Card, but all lines of business are growing US Consumer Lending US Card Installment Loans Total Auto Finance International Total Net Growth in loan balances ($B) $5.2 $0.2 $5.4 $0.6 $0.5 $6.5 Q3 2003 ($1.1) $1.0 ($0.1) $0.4 $0.7 $1.0 1H 2003 YTD Growth 9.3% 30.7% 1
Slide 7: We are continuing to diversify
1997 1998 1999 2000 2001 2002 2003YTD Auto 0.3 0.5 1.2 4 7 8 International 0.4 1.9 2.4 3 4 5.3 6.6 Ils 0.6 0.8 1.2 1.6 2.9 4 5.2 $1.0 $3.0 $4.1 $5.8 $10.9 $16.4 $19.8 Outstandings ($B) Auto Int'l Install- ment Loans We are continuing to diversify
Slide 8: Our diversification investments are paying off
Our diversification investments are paying off Auto Finance International 2000 2001 2002 2003YTD Net Income After Tax ($M) ($21) ($35.4) $10.3 $64.9 ($87.3) ($50.5) ($35.6) $53.2 TOTAL ($108.3) ($85.9) ($25.3) $118.1
Slide 9: Declining revenue margins, mix shift, declining charge-offs
Declining revenue margins Mix Shift Declining charge-offs
Slide 10: Revenue margin is declining as we shift our mix upmarket
Revenue margin is declining as we shift our mix upmarket and diversify assets Q197 Q297 Q397 Q497 Q198 Q298 Q398 Q498 Q199 Q299 Q399 Q499 Q100 Q200 Q300 Q400 Q101 Q201 Q301 Q401 Q102 Q202 Q302 Q402 Q103 Q203 Q303 Revenue Margin 0.1334 0.1316 0.1515 0.1522 0.1607 0.1632 0.165 0.1679 0.1831 0.1953 0.2
Slide 11: Our charge-offs are declining
Col 2 1/1/02 0.0619 2/1/02 0.0619 3/1/02 0.0619 4/1/02 0.0629 5/1/02 0.0629 6/1/02 0.0629 7/1/02 0.0482 0.0496 8/1/02 0.0475 0.0496 9/1/02 0.0529 0.0496 10/1/02 0.0562 0.0621 11/1/02 0.064 0.0621 12/1/02 0.0659 0.0621 1/1/03 0.0653 0.0647 2/1/03 0.0637 0.0647 3/1/03 0.065 0.0647 4/1/03 0.0636 0.0632
Slide 12: Lagged charge-offs have been declining
7/1/02 0.065899665 8/1/02 0.064345691 9/1/02 0.06859387 10/1/02 0.070053015 11/1/02 0.078816561 12/1/02 0.081063372 1/1/03 0.078512048 2/1/03 0.073487328 3/1/03 0.072154978 4/1/03 0.069965765 5/1/03 0.069071038 6/1/03 0.06615744 7/1/03 0.062095095 8/1/03 0.059262884 9/1/03 0.0589 Lagged charge-offs
Slide 13: Our card business has been driving our lower charge-offs
Our card business has been driving our lower charge-offs Q102 Q202 Q302 Q402 Q103 Q203 Q303 Auto 0.0338 0.0284 0.0397 0.0483 0.0491 0.0422 0.051 International 0.0358 0.0391 0.0361 0.0392 0.0428 0.0448 0.0401 Consumer Lending 0.05 0.0546 0.0516 0.0645 0.0712 0.0695 0.0574 Consumer Lending Auto Intern
Slide 14: Delinquencies declined again in the third quarter
Delinquencies declined again in the third quarter COF 1/1/01 0.0534 2/1/01 0.0525 3/1/01 0.0473 4/1/01 0.0479 5/1/01 0.0485 6/1/01 0.0493 7/1/01 0.0511 8/1/01 0.0514 9/1/01 0.052 10/1/01 0.0506 11/1/01 0.0496 12/1/01 0.0495 1/1/02 0.0516 2/1/02 0.0506 3/1/02 0.048 4/1/02 0.0467 5/1/02 0.0461 6/1/02
Slide 15: Business Update, Financial Update: Third Quarter 2003
Business Update Financial Update Third Quarter 2003
Slide 16: Third Quarter Key Financial Items
Third Quarter Key Financial Items
Slide 17: Allowance declined in the third quarter
Allowance declined in the third quarter Reported loans up $3.8B Mix Shift Upmarket Diversified lending Improvement in credit metrics Net effect Impact on Allowance
Slide 18: We adopted FIN in the third quarter, which reduced EPS by $0.06
We adopted FIN 46 in the third quarter, which reduced EPS by $0.06 Office buildings and associated debt related to synthetic lease transactions moved onto the balance sheet The difference in recorded values resulted in an after tax reduction in earnings of $15 million or $0.06 per share
Slide 19: We raised $6 billion in funding during the third quarter
We raised $6 billion in funding during the third quarter quarter quarter Issuance Priced ($ millions) 1) Through September 30, 2003. 2) In U.S. dollar equivalents based on exchange rate as of pricing date (7/7/03 and 9/26/03). 3) Net change in quarterly balances.
Slide 20: Our spreads have improved significantly
Our spreads have improved significantly Source: Unsecured spreads from Bloomberg. Secured spreads are dealer indications. All spreads are as of month-end. BBB Unsec AAA Sec BBB Sec Retail Deposits Jan 149 Feb 149 Mar 167 Apr 184 May 217 Jun 214 Jul 219 Aug 210 Sep 209 Oct 237 Nov 346 Dec 323 Jan 244
Slide 21: Available liquidity versus term debt maturities
2000 2001 2002 Q203 Q3 03 Credit Lines 2.01553 1.46685 1.51449 1.3 1.34969 Liquidity Portfolio 1.933522 3.823129 5.342455 8.6 6.711316 Unused ABS Conduits 3.429024 3.010347 2.7 4.9 6.328057 Our available liquidity is about two and one-half times our term debt maturities over the next twelve months M
Slide 22: Fourth quarter 2003 outlook
Fourth quarter 2003 outlook End 2003 with managed loan growth around 20% Lower revenue margins Seasonal bump in charge-offs likely Upward allowance pressure Still on track for at least $4.55 EPS
Capital One Financial — Q3 2003 Earnings Presentation on 6ix