Capital One Financial Corporation · NYSE:COF
Capital One Financial — 2004 Debt & Equity Conference
29 slides from Capital One Financial's conference presentation, Nov 4, 2004
Slide 1: 2004 Debt & Equity Conference Business Outlook
2004 Debt & Equity Conference Business Outlook Rich Fairbank November 4, 2004
Slide 2: Forward-looking statements disclaimer
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: This is our ten year anniversary
This is our ten year anniversary Capital One Managed Loans 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004(E) Managed Loans 7.4 10.45 12.8 14.23 17.4 20.24 29.52 45.26 59.75 71.245 75.457 5.049 Growth 41% 23% 11% 23% 16% 46% 54% 32% 19% COF IPO Nov 16, 1994 10-13% $B $78-$81 (E) Q3 YTD
Slide 4: We are generating robust, steady earnings growth
We are generating robust, steady earnings growth 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004(E) eps 0.48 0.64 0.77 0.93 1.32 1.72 2.24 2.91 3.93 4.85 5.45 0.8 EPS EPS Growth 33% 20% 21% 42% 30% 30% 30% 35% 23% 26-32% Q3 YTD
Slide 5: Our ROA has been strong and steady
Rev Mgn Provision Ops Cost Mktg Tax 1994 0.096 0.0812 0.0379 0.0225 0.0146 1995 0.0856 0.0657 0.0325 0.0187 0.012 1996 0.1118 0.0729 0.0345 0.0188 0.0118 1997 0.1349 0.0764 0.0343 0.0197 0.0122 1998 0.1546 0.1051 0.0491 0.0245 0.0153 1999 0.1834 0.1419 0.0611 0.0269 0.0169 2000 0.1945 0.1483 0.0632
Slide 6: Our credit performance is strong
Our credit performance is strong Q1 95 Q2 95 Q3 95 Q4 95 Q1 96 Q2 96 Q3 96 Q4 96 Q1 97 Q2 97 Q3 97 Q4 97 Q1 98 Q2 98 Q3 98 Q4 98 Q1 99 Q2 99 Q3 99 Q4 99 Q1 00 Q2 00 Q3 00 Q4 00 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Charge-offs 0.0188 0.021 0.0235 0
Slide 7: We have a strong capital position
Q1 95 Q2 95 Q3 95 Q4 95 Q1 96 Q2 96 Q3 96 Q4 96 Q1 97 Q2 97 Q3 97 Q4 97 Q1 98 Q2 98 Q3 98 Q4 98 Q1 99 Q2 99 Q3 99 Q4 99 Q1 00 Q2 00 Q3 00 Q4 00 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Capital/Managed 0.0541 0.0508 0.0454 0.0488 0.0531 0.05 0.0491 0.0
Slide 8: US Credit Cards have been the foundation of Capital One profits
US Credit Cards have been the foundation of Capital One profits 1999 2000 2001 2002 2003 2004 (Q3 YTD) Consumer Lending NIAT 515 653 774 1001 1182 1185 Q1-Q3 515 690 774 1001 1181 1185.356286 Q4 U.S. Card NIAT $M Based on internal allocations of consolidated results
Slide 9: The US Card industry is consolidating
The US Card industry is consolidating Citibank 11% MBNA 9% Bank One/First USA 9% Discover 8% Chase Manhattan 7% First Chicago 4% Household 4% Bank of America 3% American Express 3% Capital One 3% Top 10 Share 62% 4th Quarter 1997 % outstandings Source: Nilson and Company Reports 2nd Quarter 2004 % o
Slide 10: Our historical strength is valuable in a maturing card industry
IBS De-averaging Economics Targeted Marketing Testing and Innovation Managing Credit Risk Optimizing Customer Relationships Our historical strength is valuable in a maturing card industry
Slide 11: Our IBS advantages in credit and revenue set us apart
1) Note: Revenue margin equals revenue divided by average managed loans. MBNA is for entire company. Citigroup is for North America Card. JP Morgan, Bank of America, Discover and Capital One US Card data are for domestic credit cards only. Bank of America and JP Morgan include Fleet and Bank One acq
Slide 12: The profitability of our business stands out
Company YTD ROML ROA Capital One 0.0333 0.0363 Bank of America 0.0279 0.0294 Citigroup 0.0276 0.0307 MBNA 0.0224 0.0226 Discover 0.0159 0.0178 Chase 0.0156 0.0129 Return On Managed Loans (Q3 12 Month Trailing) (US Card) (N.A. Card) (Company) (US Card) (US Card) (US Card) The profitability of our bus
Slide 13: Our operating efficiency is improving
Our operating efficiency is improving Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Debt Equity - 2003 0.0242 0.0239 0.024 0.0225 0.0224 0.0212 0.0208 0.0198 0.019 0.0175 0.0175 0.0166 0.0158 0.0165 0.0156 COF 0.1007 0.1015 0.1018 0.0936 0.0901 0.0863 0.0857 0.0748 0.0691 0.0649 0.0698 0.
Slide 14: Value added plays like rewards are an important part of our portfolio
1998 1999 2000 2001 2002 2003 Rewards 0.1 1.27 3.37 5.6 6.5 8.52 Value added plays like rewards are an important part of our portfolio Rewards Managed Outstandings Note: Rewards includes Go Miles, College One, Cash Back, Retail Co-brand Reported in U.S. Card segment $B
Slide 15: We are developing a powerful brand identity
We are developing a powerful brand identity We are developing a powerful brand identity
Slide 16: The card business will continue to be a major source of profit for COF
The card business will continue to be a major source of profit for COF 1999 2000 2001 2002 2003 Consumer Lending NIAT 515 653 774 1001 1182 Q1-Q3 653 774 1001 1181 Q4 515 U.S. Card NIAT $690 $774 $1,001 $1,181 $515 $M Based on internal allocations of consolidated results
Slide 17: The card business will continue to be a major source of profit for COF
The card business will continue to be a major source of profit for COF 1999 2000 2001 2002 2003 2004 YTD Consumer Lending NIAT 515 653 774 1001 1182 1185 Q1-Q3 653 774 1001 1181 1185.356286 Q4 515 U.S. Card NIAT $690 $774 $1,001 $1,181 $515 $1,185 $M Based on internal allocations of consolidated res
Slide 18: We have been diversifying for years
Year 1997 1998 1999 2000 2001 2002 2003 Q1 2004 2004 YTD Auto 0 0.3 0.5 1.2 4 7 8.467 8.8 9.731 International 0.4 1.9 2.4 3 4 5.3 7.6 8.3 9.173 Installment 0.6 0.8 1.2 1.6 2.9 4 5.357 5.7 6.381 Small Business 0.008 0.074 0.397 0.749 1.385 2.457 3.3 3.5 3.8 Installment Loans1 International1 $3.1 $4.5
Slide 19: Our Global Financial Services businesses are delivering profit growth
Our Global Financial Services businesses are delivering profit growth GFS NIAT 2001 2002 2003 2004 YTD International UK Canada Small Business Card Installment Loans Patient Finance $M Based on internal allocations of consolidated results YTD as of Q304
Slide 20: Auto lending is a powerful growth story
Auto lending is a powerful growth story 1999 2000 2001 2002 2003 2004 YTD 2005 2006 2007 Capital One Auto Finance NIAT $99 $10 ($35) ($21) ($23) $139 $M Based on internal allocations of consolidated results YTD as of Q304
Slide 21: With the acquisition of Onyx, we will be 2nd largest non-captive auto lender
With the acquistion of Onyx, we will be 2nd largest non-captive auto lender Share CHASE 0.09 COAF* 0.026 0.008 BANK OF AMERICA 0.031 CITIZENS 0.02 WELLS FARGO 0.019 WFS FINANCIAL 0.017 SUNTRUST BANK 0.016 HSBC / HOUSEHOLD 0.016 AMERICREDIT 0.013 CITIGROUP 0.013 US BANK 0.009 Source: JD Power, Compan
Slide 22: We have the most complete national scale auto lending platform
We have the most complete national scale auto lending platform National Scale Dealer Network Full Credit Spectrum Direct Marketing Brand
Slide 23: Our auto business illustrates how we use acquisitions to diversify
Our auto business illustrates how we use acquisitions of growth platforms to diversify Summit 1998 (Dealer, Non Prime) Threshold Scale Platform Follow on Acquisitions Leverage Capital One to grow Credit Direct marketing Customer base Data Brand PeopleFirst 2001 (Internet, Superprime) Onyx 2005 (Deal
Slide 24: We are growing our deposit base
We are growing our deposit base 1999 2000 2001 2002 2003 2004 YTD 2005 2006 2007 2008 Brokered 0.2 1.1 3.67 6.31 8.05 8.3 9.2 8.5 6.4 0.6 Posting 2.55 5.8 7.58 9.36 12.19 12.5 12 10.7 9.9 10.2 Marketed 1.3 5.9 10.6 15.8 24 UK 0.24 0.83 1.04 1.64 1.7 2.5 3.4 4.4 5.5 3.8 8.4 12.8 17.3 22.4 25.4 Capita
Slide 25: We are developing a powerful brand identity
Source: Directions Research, Brand Marketing Research We are developing a powerful brand identity Brand Awareness (%) August 2004 Total Unaided 100 99 97 96 95 92 92 64 48 47 31 4 24 22 16 3 21 21 37 16
Slide 26: Our brand positioning is on the bull's eye of what consumers care about
Our brand positioning is on the bull's eye of what consumers care about "Great value without the hassle"
Slide 27: We are well positioned to succeed
We are well positioned to succeed Strategically Financially Well positioned in Card Diversified businesses delivering A leading brand Strong revenue margin Strong credit performance Improving operating costs Strong earnings and stable ROA Diversified funding Robust capital
Slide 28: 2005 Guidance
2005 Guidance EPS $6.60 - $7.00 Marketing Similar to annual spend in 2004 Charge-offs Expect 4 - 4.5% with normal seasonal variations ROA ~1.70% with quarterly variability Managed Loans Expect 12-15%
Slide 29: 2004 Debt & Equity Conference Business Outlook
2004 Debt & Equity Conference Business Outlook Rich Fairbank November 4, 2004
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