Fourth Quarter 2009 Results January 21, 2010 Exhibit 99.2 |
2 January 21, 2010 Forward looking statements website at www.capitalone.com under “Investors”. 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 Capital One from time to time are forward-looking statements, including those that discuss, among other things, strategies, goals, outlook or other non-historical matters; projections, revenues, income, returns, earnings per share or other financial measures for Capital One; future financial and operating results; and Capital One’s plans, objectives, expectations and intentions; and the assumptions that underlie these matters. To the extent that 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 such forward-looking statements, including, among other things: general economic and business conditions in the U.S., the UK, or Capital One’s local markets, including conditions affecting employment levels, interest rates, consumer income and confidence, spending and savings that may affect consumer bankruptcies, defaults, charge-offs and deposit activity; an increase or decrease in credit losses (including increases due to a worsening of general economic conditions in the credit environment); financial, legal, regulatory, tax or accounting changes or actions, including with respect to any litigation matter involving Capital One; increases or decreases in interest rates; the success of Capital One’s marketing efforts in attracting and retaining customers; the ability of the company to continue to securitize its credit cards and consumer loans and to otherwise access the capital markets at attractive rates and terms to capitalize and fund its operations and future growth; with respect to financial and other products, increases or decreases in Capital One’s aggregate loan balances and/or the number of customers and the growth rate and composition thereof, including increases or decreases resulting from factors such as shifting product mix, amount of actual marketing expenses made by Capital One and attrition of loan balances; the amount and rate of deposit growth; Capital One’s ability to control costs; changes in the reputation of or expectations regarding the financial services industry and/or Capital One with respect to practices, products or financial condition; any significant disruption in Capital One’s operations or technology platform; Capital One’s ability to maintain a compliance infrastructure suitable for its size and complexity; the amount of, and rate of growth in, Capital One’s expenses as Capital One’s business develops or changes or as it expands into new market areas; Capital One’s ability to execute on its strategic and operational plans; any significant disruption of, or loss of public confidence in, the United States Mail service affecting our response rates and consumer payments; Capital One’s ability to recruit and retain experienced personnel to assist in the management and operations of new products and services; changes in the labor and employment markets; the risk that cost savings and any other synergies from Capital One’s acquisitions may not be fully realized or may take longer to realize than expected; disruptions from Capital One’s acquisitions negatively impacting Capital One’s ability to maintain relationships with customers, employees or suppliers; competition from providers of products and services that compete with Capital One’s businesses; and other risk factors listed from time to time in reports that Capital One files with the Securities and Exchange Commission (the “SEC”), including, but not limited to, the Annual Report on Form 10-K for the year ended December 31, 2008 and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2009, June 30, 2009 and September 30, 2009. 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, unless otherwise noted. A reconciliation of any non-GAAP financial measures included in this presentation can be found in Capital One’s most recent Form 10-K concerning annual financial results, available on Capital One’s |
3 January 21, 2010 Q409 earnings were $376MM or $0.83 per share; 2009 earnings were $884MM or $0.75 per share Revenue excl. Retained Interest & Suppression Retained Interests Valuation Changes Revenue Suppression Revenue Marketing Expense Operating Expense Restructuring Expense Non-Interest Expense Pre-Provision Earnings (before tax) Net Charge-offs Other Allowance Build (Release) Provision Expense Discontinued Operations, net of tax Total Company (after tax) EPS Available to Common Shareholders Tax Expense 2008 2009 Q409 Pretax Income $MM 32 4,804 55 (490) 4,369 188 1,728 1,948 2,421 2,188 45 (386) 1,847 376 404 (28) $0.90 $0.83 574 170 134 18,984 (225) (1,920) 16,839 1,118 6,147 7,399 9,440 6,424 63 1,561 8,048 (46) 85 (131) $0.14 ($0.21) 582 497 120 19,111 (152) (2,123) 16,836 588 6,709 7,417 9,419 8,421 59 (397) 8,083 884 987 (103) $0.99 $0.75 1,336 349 Q309 26 5,065 37 (517) 4,585 104 1,672 1,802 2,783 2,155 15 31 2,201 393 437 (44) $0.97 $0.88 582 145 Goodwill Impairment - - - 1 2 1 includes ($1.31) impact of dividend and repayment expense of the government’s preferred share investment 2 includes ($0.08) impact of dividend expense of the government’s preferred share investment Operating Earnings (after tax) EPS 811 |
4 January 21, 2010 Allowance coverage ratios continue to reflect historically high loss rates and a cautious outlook Allowance as % of Reported 30+ Delinquencies 9.7% 10.0% 8.2% 1.0% 2.3% 2.7% 3.4% 3.4% 3.5% 0% 2% 4% 6% 8% 10% 12% Q408 Q109 Q209 Q309 Q409 181% 198% 182% 36% 41% 52% 147% 145% 131% 0% 40% 80% 120% 160% 200% 240% Q408 Q109 Q209 Q309 Q409 Allowance as % of Reported Loans Total Company: 4.48% 4.43% 4.44% 4.67% 4.55% Consumer Banking Credit Card Commercial Banking Dom. Card Int’l Card Auto Finance Allowance Balance Q3 '09 Q4 '09 Build/(Release) Credit Card Domestic 2,343 $ 1,927 $ (416) $ International 222 199 (23) Total Credit Card 2,565 $ 2,126 $ (439) $ Consumer Banking Auto 761 $ 665 $ (96) $ Other Consumer Banking 357 411 54 Total Consumer Banking 1,118 $ 1,076 $ (42) $ Commercial Banking 671 $ 786 $ 115 $ Other 160 $ 140 $ (20) $ Total Allowance 4,513 $ 4,127 $ (386) $ Total Reported Loans 96,714 90,619 Commercial Lending Allowance as % of Non-Performing Loans 85% 78% 112% 108% 114% 112% 0% 50% 100% 150% 200% Q408 Q109 Q209 Q309 Q409 Commercial Allowance excluding Small Ticket CRE $MM |
5 January 21, 2010 End of period assets were up despite declining loan balances End of Period Assets $35.5 $27.6 $28.3 $36.3 $37.7 $37.7 $38.8 $7.8 $8.7 $61.9 $64.8 $67.0 $60.3 $8.6 $8.5 $8.1 $8.2 $30.2 $29.4 $29.8 $29.6 $41.8 $40.1 $35.9 $38.2 $26.3 $4.1 $4.8 0 20 40 60 80 100 120 140 160 180 200 220 Q109 Q209 Q309 Q409 Domestic Card Commercial Int’l Card Consumer Securities Other End of Period Liabilities Cash & Cash Equivalents $108.8 $104.1 $101.8 $102.4 $12.7 $13.4 $49.1 $47.5 $45.9 $46.7 $16.3 $18.1 $16.7 $17.1 $6.6 $6.0 $12.3 $12.6 $6.7 $6.4 0 20 40 60 80 100 120 140 160 180 200 220 Q109 Q209 Q309 Q409 Securitization Interest Bearing Deposits Other Borrowings Non-Interest Bearing Deposits $B Other Liabilities |
6 January 21, 2010 8.01% 8.68% 9.87% 9.50% 6.19% 6.91% 5.89% 6.90% 0% 2% 4% 6% 8% 10% 12% 14% 16% Q109 Q209 Q309 Q409 Margins as % of Managed Assets Efficiency Ratio Margins remain relatively stable Revenue Margin Net Interest Margin 43.9% 38.7% 45.3% 46.3% 0% 10% 20% 30% 40% 50% 60% Q109 Q209 Q309 Q409 Weighted Avg Asset Yield 8.34% 8.36% 8.97% 8.83% Cost of Interest Bearing Liabilities 2.75% 2.41% 2.28% 2.16% Total Cost of Funds 2.57% 2.25% 2.12% 2.00% $MM Revenue 3,736 4,147 4,585 4,369 Operating Expense 1,565 1,744 1,672 1,728 Marketing Expense 163 134 104 188 |
7 January 21, 2010 Tangible Common Equity + Allowance to Tangible Managed Assets Tier 1 Capital to Risk Weighted Assets 0% 2% 4% 6% 8% 10% 12% 14% Q109 Q209 Q309 Q409 Our capacity to absorb risk remains high Other Tier 1 Common 11.9% 0% 2% 4% 6% 8% 10% 12% Q109 Q209 Q309 Q409 5.6% 6.2% Allowance TCE 7.8% 8.5% 6.3% 8.4% 13.8% 4.6% 6.9% 9.7% 11.4% 8.5% TARP |
8 January 21, 2010 We are implementing FAS 166/167 at book value in Q1 2010 Assets Liabilities Stockholders’ Equity Loans held for investment 90.6 47.8 138.4 Less: Allowance for loan & lease losses (4.1) (4.3) (8.4) Net loans (HFI) 86.5 43.5 130.0 Accounts receivable from securitizations 7.6 (7.6) -- Other 66.6 2.1 68.7 Total assets 169.4 42.0 211.4 Other 138.8 0.6 139.4 Total Liabilities 142.8 45.1 187.9 Total stockholders’ equity 26.6 (3.1) 23.5 Total liabilities & stockholders’ equity 169.4 42.0 211.4 Securitization liability 4.0 44.5 48.5 Cash and cash equivalents 8.7 4.0 12.7 ($B) Reported 12/31/09 Estimated Adjustments for FAS 166/167 Estimated Opening 1/1/10 |
9 January 21, 2010 Consolidation will impact both the balance sheet and the income statement 0% 2% 4% 6% 8% 10% 12% Q209 Q309 Q409 Q409 Pro-Forma Capital Ratios as of 12/31/09 Tangible Common Equity + Allowance to Tangible Managed Assets Income Statement Impact from Securitized Accounts Previously Treated as Off Balance Sheet 5.6% 6.2% 7.8% 8.5% 6.3% 8.4% 4.8% 9.1% TCE: 6.3% 4.8% Tier 1: 13.8% 9.8% Tier 1 Common: 10.7% 6.7% Total RBC: 17.8% 17.5% Actual Pro-forma upon Consolidation Allowance: I/O Strip & Other Retained Interests: Pre- FAS 166/167 Post- FAS 166/167 • N/A • Upfront gains recognized upon securitization • Changes in expected losses as one input to valuation estimates • Changes in valuation flow through Non Interest Income • Initial build through retained earnings • Subsequent ALLL changes through income statement • No upfront gains; allowance established at loan origination • Changes in expected losses all flow through provision and allowance; typically much larger impact than previous changes in valuation estimates Allowance TCE |
10 January 21, 2010 Net Income (Loss) from Continuing Operations ($MM) Capital One delivered a profit from continuing operations of $403.9 MM in the fourth quarter of 2009 Credit Card Domestic International SUBTOTAL Commercial Banking Consumer Banking Total Company Q408 $ (176.3) (10.9) (187.2) 24.1 (952.7) 1 $ (1,396.3) Other (280.5) Q409 $ 461.0 48.9 509.9 (136.0) (7.7) $ 403.9 37.7 Q309 $ 289.8 1.9 291.7 (127.7) 145.2 $ 437.1 127.9 1 includes $811M goodwill impairment |
11 January 21, 2010 Domestic Card charge-off rate improved modestly in the fourth quarter, while delinquency rate increased 8.39% 9.23% 9.64% 7.08% 9.59% 5.08% 4.78% 4.77% 5.38% 5.78% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Q408 Q109 Q209 Q309 Q409 7.30% 9.32% 9.19% 5.84% 9.52% 6.25% 5.51% 6.69% 6.63% 6.55% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Q408 Q109 Q209 Q309 Q409 Domestic Card Credit International Card Credit Net Charge-off Rate 30+ Delinquency Rate Net Charge-off Rate 30+ Delinquency Rate |
12 January 21, 2010 The Domestic Credit Card business delivered strong and resilient profitability, despite elevated charge-offs 70.9 67.0 64.8 61.9 60.3 68.5 70.4 73.4 75.1 79.7 0 10 20 30 40 50 60 70 80 90 100 Q408 Q109 Q209 Q309 Q409 Int’l Domestic Loans Held for Investment $MM |
13 January 21, 2010 Domestic Card Revenue Margins have been stable in the last 6 years 15.4% 15.5% 15.6% 14.5% 15.7% 15.8% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 2004 2005 2006 2007 2008 2009 Domestic Card Annual Revenue Margin and its Components Revenue Margin |
14 January 21, 2010 Continuing economic deterioration drove another quarter of worsening credit trends in Commercial Banking 2.91% 0.82% 1.42% 0.89% 0.56% 2.52% 2.84% 2.47% 1.41% 1.95% 0% 1% 2% 3% 4% 5% Q408 Q109 Q209 Q309 Q409 Total Commercial Banking ($29.9 B) Non Performing Asset Rate Charge-off Rate Commercial & Multi Family ($13.9 B) 3.02% 0.63% 1.37% 1.16% 0.92% 3.25% 1.21% 2.00% 2.66% 2.15% 0% 1% 2% 3% 4% 5% Middle Market ($10.1 B) Q408 Q109 Q209 Q309 Q409 Non Performing Asset Rate Charge-off Rate 0.45% 0.80% 1.08% 0.81% 2.04% 1.37% 0.89% 1.78% 2.08% 2.33% 0% 1% 2% 3% 4% 5% Q408 Q109 Q209 Q309 Q409 Total Commercial Lending Excluding Small Ticket CRE ($27.5 B) Non Performing Asset Rate Charge-off Rate 0.75% 0.07% 0.56% 0.47% 0.58% 1.09% 0.43% 0.57% 1.25% 1.15% 0% 1% 2% 3% 4% 5% Q408 Q109 Q209 Q309 Q409 Non Performing Asset Rate Charge-off Rate |
15 January 21, 2010 0.43% 0.69% 0.45% 0.46% 0.71% 1.57% 1.91% 0.97% 1.17% 1.26% 0% 1% 2% 3% 4% 5% Q408 Q109 Q209 Q309 Q409 The Mortgage Portfolio and the Auto Finance business were the key drivers of Consumer Banking credit results Net Charge-off Rate 30+ Delinquency Rate Mortgage Credit Auto Credit 7.48% 10.03% 3.65% 4.38% 4.88% 5.67% 4.55% 9.90% 9.52% 8.89% 0% 2% 4% 6% 8% 10% 12% Q408 Q109 Q209 Q309 Q409 Net Charge-off Rate 30+ Delinquency Rate |
16 January 21, 2010 We expect near-term trends to reflect the mechanics of delivering value over the cycle • Loans continue to decline in 2010 driven largely by continuing run off from businesses we’ve stopped originating or repositioned • NIM and Revenue margin for full year 2010 similar to full year 2009 • Domestic card charge-off dollars expected to peak in first quarter 2010 • Potential for significant allowance releases, consistent with decline in loans and moderating charge-off outlook • Allowance release coincides with investments in future growth and returns – Marketing expense begins to ramp toward more normal levels in 2010 – 2010 Operating expense similar to 2009, as ongoing efficiency improvements are offset by investments in infrastructure • Growth and returns lag investments, but are attractive and sustainable over the long-term • Strong and resilient balance sheet to support growth |