Financial Perspectives Gary Perlin February 16, 2006 Exhibit 99.1 |
2 Forward looking statements Forward-Looking Information 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 as a result of new information, future events or otherwise. Certain statements in this presentation and other oral and written statements made by the Company from time to time, are forward-looking statements, including those that discuss strategies, goals, outlook or other non-historical matters; or project revenues, income, returns, earnings per share or other financial measures for Capital One. To the extent any such information is forward-looking, it is intended to fit within the safe harbor for forward-looking information provided by the Private Securities Litigation Reform Act of 1995. Numerous factors could cause our actual results to differ materially from those described in forward-looking statements, including, among other things: continued intense competition from numerous providers of products and services which compete with our businesses; an increase or decrease in credit losses; financial, legal, regulatory or accounting changes or actions; changes in interest rates; general economic conditions affecting consumer income, spending and repayments; changes in our aggregate accounts or consumer loan balances and the growth rate and composition thereof; the amount of deposit growth; changes in the reputation of the credit card industry and/or the company with respect to practices and products; our ability to continue to securitize our credit cards and consumer loans and to otherwise access the capital markets at attractive rates and terms to fund our operations and future growth; our ability to successfully continue to diversify our assets; losses associated with new products or services or expansion internationally; the company’s ability to execute on its strategic and operational plans; any significant disruption in our operations or technology platform; our ability to effectively control our costs; the success of marketing efforts; our ability to execute effective tax planning strategies; our ability to recruit and retain experienced management personnel; the risks that the Hibernia businesses will not be integrated successfully and that the cost savings and other synergies from the transaction may not be fully realized; the long-term impact of the Gulf Coast Hurricanes on the impacted region, including the amount of property and credit losses, the amount of investment, including deposits, in the region, and the pace and magnitude of economic recovery in the region; and other factors listed from time to time in reports we file with the Securities and Exchange Commission (the “SEC”) , including, but not limited to, factors set forth under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2004, and any subsequent quarterly reports on Form 10-Q. You should carefully consider the factors discussed above in evaluating these forward-looking statements. All information in these slides is based on the consolidated results of Capital One Financial Corporation. A reconciliation of any non-GAAP financial measures included in this presentation can be found in the Company’s most recent Form 8-K or Form 10-Q concerning quarterly financial results, available on the Company’s website at www.capitalone.com in Investor Relations under “About Capital One.” . |
3 Capital One has consistently translated great business strategies into financial success Financial discipline informs our strategic choices Strategic choices drive results Results build a solid financial foundation |
4 We continue to apply financial discipline across the business • Focus on long-term economics – NPV investment discipline – Prioritize long-term value over short-term metrics – Measured approach to market entry/exit • Disciplined risk management – Credit risk management at the core – Minimal interest rate risk exposure • Strong, diversified balance sheet – Portfolio of structurally attractive businesses – Resilient funding and liquidity |
5 Our financial results reflect the evolution of our business 1994 - 2002 2003 – Present • High growth • Investing to diversify assets, liabilities, and profits • Building a portfolio of businesses • Average managed ROA ~1.5% • Consuming capital • Moderate, sustainable growth • Diversified assets, liabilities; diversifying profits • Actively managing our portfolio of businesses • Average managed ROA ~1.7% • Generating capital |
6 $0 $20 $40 $60 $80 $100 $120 2001 2002 2003 2004 2005 Managed Outstandings We have diversified assets Global Financial Services $B $45 Auto Loans $60 $71 $80 U.S. Credit Cards $105.5 Hibernia 1 1 Hibernia loans included in “other” category |
7 As a Percentage of Average Managed Assets 2001 2002 2003 2004 2005 Revenue 16.92% 15.79% 13.68% 12.13% 11.59% Less Expense: Provision (4.69%) (5.96%) (4.75%) (3.55%) (3.48%) Operating Expense (7.15%) (5.72%) (5.00%) (4.45%) (4.11%) Marketing (2.60%) (1.74%) (1.49%) (1.49%) (1.31%) Tax (0.94%) (0.90%) (0.90%) (0.91%) (0.97%) Net Income (ROA) 1.54% 1.47% 1.52%* 1.73% 1.72% * Also includes 0.02% cumulative effect of accounting change in 2003 related to FIN 46 Managed annual ROA has remained strong as we have diversified assets |
8 Our strategic choices have produced strong returns 0% 5% 10% 15% 20% 25% 30% 1998 1999 2000 2001 2002 2003 2004 2005 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% 1.80% 2.00% ROE ROA Tangible Capital/ Tangible Assets Ratio¹ 6.30% 6.54% 6.01% 5.98% 7.17% 7.63% 9.24% 7.72% ROE ROA Managed Average Annual Returns 1 1 Tangible Capital Ratio is end of period; ROA & ROE calculations utilize average annual balances |
9 We have diversified funding Total Managed Liabilities and Capital 46% 46% 45% 43% 6% 7% 8% 9% 24% 25% 27% 27% 8% 7% 5% 5% 6% 7% 7% 9% 33% 9% 7% 8% 8% 10% 5% 36% 6% 11% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2001 2002 2003 2004 2005 Off-Balance Sheet Securitizations Auto Securitizations Unsecured Debt Deposits Other Liabilities¹ Capital 1. Includes repos, Fed Funds, trust preferred securities, various payables and other liabilities |
10 Our fortified liquidity position provides funding flexibility and enables growth $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 Q3 05 Q4 05 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 2006 2007 2008 2009 2010 $B $B Available Liquidity Term Debt Maturities Untapped Conduit Capacity Cash and Securities Card Securitization Unsecured Debt Untapped Conduit Capacity Cash and Securities Unsecured Credit Facility AAA Capacity $39.1 $39.1 AAA Capacity $23.6 $28.6 $35.4 $35.4 |
11 Our funding strategy continues to focus on diversified and resilient funding at the lowest cost • Funding choices reflect banking segment results and market conditions – Stronger than anticipated core deposit growth and relatively flat segment loan growth are creating near-term funding cost savings – Longer-term opportunities expected to grow with successful de novo growth strategy • Remain a diverse and programmatic capital markets issuer – Recent ratings upgrades further enhance investor demand – Over $15 billion in ABS issuance in 2005 – 22% of asset-backed investors are new buyers of Capital One paper in 2005 |
12 We maintain minimal interest rate exposure -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% Down 300 bps Down 200 bps Down 100 bps Base Case Up 100 bps Up 200 bps Up 300 bps Instantaneous Interest Rate Shock LIMIT 12/31/05 09/30/05 |
13 -$100 $100 $300 $500 $700 $900 $1,100 $1,300 $1,500 $1,700 $1,900 $2,100 2001 2002 2003 2004 2005 We are diversifying profits U.S. Card Auto GFS Net Income (after tax) $M Impact from Hibernia¹ $642 $899 $1136 $1543 $1809 1) Hibernia was included in the Other category; impact represents net income contributed by Hibernia in Q4 2005 which is $31M. |
14 We’ve built a portfolio of businesses that delivers strong returns today and positions us well for the future GROWTH Low High Generating value today and capital to invest for tomorrow (e.g. U.S. Card, Banking in Louisiana) Delivering growth and returns (e.g. Auto Finance, Small Business, Home Loans) Fix or exit (e.g. France, Insurance Services) Building growth and future value (e.g. Texas de novo branches, GFS “development stage” businesses) |
15 We believe our businesses will continue to deliver strong results US Card Global Financial Services Auto Finance Banking • Strong profitability and returns • Modest loan and revenue growth • Growing profitability • Investments to build future earnings power • Strong revenue growth • Disciplined portfolio management decisions • New segment as of Q106 • Legacy Hibernia businesses – Including: $14.2B Capital One direct channel deposit business – Excluding: auto lending (moved to COAF) • Growing profitability • Investments to build future earnings power • Strong loan and revenue growth |
16 We are well positioned to deliver value to investors Portfolio of Businesses Generates Strong Results Capital Generation Creates Flexibility Stable Annual Performance • Revenue growth • Credit performance • Operating leverage • Return on allocated capital • Invest in future growth and returns • Return to shareholders • Larger and more diversified • Sustainable growth trajectory |
17 Capital One delivers consistently strong returns 2006 Guidance • $7.40-7.80 diluted EPS • 7-9% loan growth • Continued stability in annual ROA 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 EPS EPS Growth Growth 20% 20% 21% 21% 42% 42% 30% 30% 30% 30% 30% 30% 35% 35% 23% 23% 28% 28% 8% 8% ROE ROE 23% 23% 23% 23% 25% 25% 26% 26% 28% 28% 23% 23% 22% 22% 21% 21% 21% 21% 17% 17% Managed Managed ROA ROA 1.18% 1.18% 1.22% 1.22% 1.51% 1.51% 1.69% 1.69% 1.78% 1.78% 1.54% 1.54% 1.47% 1.47% 1.52% 1.52% 1.73% 1.73% 1.72% 1.72% NIAT NIAT Growth Growth 23% 23% 22% 22% 45% 45% 32% 32% 29% 29% 37% 37% 40% 40% 26% 26% 36% 36% 17% 17% |
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