Capital One 1997 Annual Report Download - page 6

technology, we have created a massive data warehouse (12 trillion
bytes and growing) with consumer financial, demographic and
lifestyle information to help us customize products. In 1997 we
conducted a record number of tests (more than 14,000!) and
invested a record $225 million in marketing. And as our strong
earnings growth shows, the strategy has been highly effective.
Over the last three years, in keeping with our strategy of mass
customization, we have launched a long list of products for con-
sumers across the credit spectrum. We now offer, for example, co-
branded cards, affinity cards, lifestyle cards, college student cards,
fixed- and variable-rate cards, joint-account and secured cards for
consumers with limited or tarnished credit histories, and the low
introductory-rate balance-transfer products we pioneered seven
years ago. In October, we introduced a Mercedes-Benz Capital One
Visa card, which gives us an alliance with one of the world’s most
prestigious brands and increases our access to a highly desirable
group of customers, the 1.2 million Americans who own or lease
Mercedes-Benz automobiles. Capital One’s recent innovations also
include credit cards for consumers in Canada and the United
Kingdom, non-card lending products and cellular phone service.
Launched in 1996, Capital One’s international ventures exceed-
ed expectations for 1997. In December, we committed $50 million
to a new European operations center in Nottingham, England,
which will service our U.K. customers and give Capital One a
springboard to the Continent. We believe our strengths in scientific
testing and mass customization will serve us well in designing
products to meet the distinctive customer needs of each country
we enter.
Capital One prides itself on constant innovation throughout the
Company, and in 1997 our business strategy, technology and opera-
tions received top awards from Beyond Computing magazine and
from Visa. We also ranked number one on ComputerWorld ’s list of
best places to work in the U.S. financial services industry. And
we were pleased that Forbes magazine recognized our momentum
by selecting us for one of the Forbes 500 short lists: the 25
“Champs” of strong growth.
Vast Opportunity for Growth
Having conquered the challenges of 1997, Capital One begins 1998
with excitement and confidence, particularly now that the con-
sumer credit picture is starting to brighten. We have set our sights
on a fourth consecutive year of earnings growth in excess of 20%.
We see vast opportunity for growth. In the United States, cred-
it cards are increasingly the preferred form of consumer payment,
and they are steadily winning market share from other types of
consumer borrowing. Capital One now serves nearly one in ten
U.S. households, and our customers are using their cards for more
and more transactions.
Internationally, we see great potential for Capital One. Many
card markets outside the United States resemble the U.S. market
of a decade ago, when the banking industry offered every cus-
tomer the same product regardless of risk or need. We believe the
strategy of mass customization we have used to build our U.S.
business can be exported with great success, lowering credit costs
for the world’s consumers and creating long-term value for Capital
One stockholders.
The target for 1998: a fourth
consecutive year of earnings growth
and return on equity exceeding 20%.
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