Capital One Financial Corporation · NYSE:COF
Capital One Financial — Q2 2008 Earnings Presentation
17 slides from Capital One Financial's earnings presentation, Jul 17, 2008
Slide 1: Second quarter 2008 results
Exhibit 99.2 Second quarter 2008 results July 17, 2008
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: Second quarter 2008 highlights
Second quarter 2008 highlights • Diluted EPS of $1.21; EPS from Continuing Operations of $1.24 – Continuing Operations EPS down $0.72 from Q207, and down $0.46 from Q108 – Higher provision expense drove decline from prior year – Lower revenue drove decline from prior quarter – Non-interest expense d
Slide 4: Margins declined in the quarter
Margins declined in the quarter Margins as % of Managed Assets 12% Revenue Margin 10.43% 10% 9.12% 9.20% Risk-Adjusted Margin 8% 7.06% 6.97% 6.22% 6% 6.78% 6.15% Net Interest Margin 5.70% 4% 2% 0% Q107 Q207 Q307 Q407 Q108 Q208 4
Slide 5: Revenue margin declined from Q1 highs due to a variety of factors
Revenue margin declined from Q1 highs due to a variety of factors Estimate Revenue Margin Driver d Impact Comments Q1 to Q2 Factors which drove Q1 margin higher Interest Rates (30 bp) Timing benefit from 200bp Q1 drop in rates Seasonality (15 bp) Higher fees and lower suppression in Q1 One-time item
Slide 6: We continue to drive efficiency gains
We continue to drive efficiency gains Q208 Summary Efficiency Ratio • Operating expenses down $45M from 60% Q108, adjusted for $91M legal reserve 50.7% release in Q108 50% 44.2% 41.6% • Marketing down $10M from Q108, due to 40% cautious view of loan growth 30% Excluding Visa • Lower revenue drove in
Slide 7: Credit performance is largely in-line with expectations
Credit performance is largely in-line with expectations Monthly Managed Net Charge-off Rate 8% Q208: Bankruptcy 5.67% 6% Filing Spike National Lending 4% 2% Local Banking Q208: 0.34% 0% 8% Monthly Managed Delinquency and Non-PerformingLoan Rate National Lending Q208 6% 30+ Delinquency Rate 4.87% 4%
Slide 8: We have increased loan-loss allowance coverage ratios in-line with indications of a weaker US economy
We have increased loan-loss allowance coverage ratios in-line with indications of a weaker US economy National Lending Segment Allowance as % of Reported 30+ 200% Delinquencies Quarterly Highlights • Observed delinquency trends and 172% 165% US Card portfolio contraction reduced base 155% allowance
Slide 9: Despite economic headwinds, we remain capital generative
Despite economic headwinds, we remain capital generative Tangible Common Equity to Tangible Managed Assets Ratio 8% • Continue $0.375 quarterly dividend 6.80% 7% 6.18% • Share buybacks unlikely until 6% economic outlook improves 6.03% 5% • Expect TCE ratio to remain above 4% target range of 5.5%-6.0
Slide 10: We continue to maintain ample liquidity
We continue to maintain ample liquidity Quarterly Highlights $B Readily Available Liquidity • Liquidity of 5x next 12 months of capital markets funding plan 35 $33B 12-Month Forward Capital Markets Issuance Plan 30 Undrawn FHLB • $5.5B Holding Company cash covers Capacity parent obligations for over
Slide 11: Capital One delivered an operating profit of $463M despite significant cyclical credit headwinds
Capital One delivered an operating profit of $463M despite significant cyclical credit headwinds Net Income from Continuing Operations ($Millions) Q208 Q108 Q407 Q307 Q207 National Lending US Card $ 340.4 $ 491.1 $ 498.7 $ 626.8 $ 592.9 Auto Finance 33.6 (82.4) (112.4) (3.8) 38.0 International 33.7
Slide 12: Our US Card business continues to deliver profits and generate capital
Our US Card business continues to deliver profits and generate capital despite a deteriorating economic environment US Card US Card Revenue Margin and Non-Interest Credit Risk Metrics Expenses as a % of Average Loans 7% 20% Managed Net 6.26% 17.31% Charge-off Rate 5.85% 16.42% 16.42% 6% 14.67% 14.96
Slide 13: We continue to aggressively retrench and reposition our auto business for resilience
We continue to aggressively retrench and reposition our auto business for resilience Credit Risk Metrics Auto Loan Originations 8% and Managed Loans ($B) $4.0 7.84% 7.62% 7% $3.6 $3.5 7.15% $3.3 $3.2 6% 6.42% $3.0 $3.0 6.00% Managed 30+ 5% Delinquency Rate $2.5 $2.4 4% 4.64% $2.0 4.00% 3.98% 3.84% 3
Slide 14: Our banking team is focused on aggressively managing credit exposures, growing deposits
Our banking team is focused on aggressively managing credit exposures, growing deposits, and investing for the long-term Deposit and Loan Portfolio ($B) Credit Risk Metrics $80 $74.3 $72.8 $73.1 $73.4 $74.2 2% $70 $60 Deposits $50 $44.0 $44.2 $44.3 $41.9 $42.2 Managed Net $40 1% Charge-off Rate 0.81
Slide 15: We expect sound operating metrics in 2008, despite continued credit headwinds
We expect sound operating metrics in 2008, despite continued credit headwinds 2008 Outlook Commentary Loan/Deposit Low single-digit decline in ending loans Flat growth in average loans Growth Double-digit growth in ending deposits High single-digit growth in average deposits Revenue Low-to-mid singl
Slide 16: Despite continuing economic headwinds, Capital One remains well positioned to deliver value through the cycle
Despite continuing economic headwinds, Capital One remains well positioned to deliver value through the cycle Strong Position Decisive Actions • Resilient businesses • Pulled back on loan growth across lending businesses • Conservatism imbedded in underwriting decisions – Tightened underwriting acro
Slide 17: Cc. italOne
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