Capital One 2003 Annual Report Download - page 21

PART I
Item 1. Business.
Overview
Capital One Financial Corporation (the “Corporation”) is a holding company, incorporated in Delaware on
July 21, 1994, whose subsidiaries market a variety of consumer financial products and services. The
Corporation’s principal subsidiary, Capital One Bank (the “Bank”), a limited-purpose Virginia state chartered
credit card bank, offers credit card products. Capital One, F.S.B. (the “Savings Bank”), a federally chartered
savings bank, offers consumer lending and deposit products, and Capital One Auto Finance, Inc. (“COAF”)
offers automobile and other motor vehicle financing products. Capital One Services, Inc., another subsidiary of
the Corporation, provides various operating, administrative and other services to the Corporation and its
subsidiaries. Unless indicated otherwise, the terms “Company”, “we”, “us”, and “our” refer to the Corporation
and its consolidated subsidiaries.
As of December 31, 2003, we had 47.0 million accounts and $71.2 billion in managed consumer loans
outstanding.We are among the six largest issuers of Visa®and MasterCard®credit cards in the United States
based on managed credit card loans outstanding as of December 31, 2003. Important factors underlying the
growth of our managed credit card loans and accounts include credit card industry dynamics and our business
strategies around building, analyzing and applying results derived from large quantities of data to reduce credit
risk, mass customize products for consumers and improve operational efficiency. We generally have labeled
these strategies our “Information Based Strategy” or “IBS.”
In June 1996, we established the Savings Bank to expand our product offerings and our relationship with our
cardholders. The Savings Bank currently, among other things, takes deposits and offers a variety of credit card
and installment loan products.
We offer credit cards throughout the United States. We also offer credit card products outside of the United
States principally through Capital One Bank (Europe) plc, an indirect subsidiary of the Bank organized and
located in the United Kingdom (the “U.K. Bank”), and a branch of the Bank in Canada.
We offer automobile and other motor vehicle financing products through COAF and its subsidiaries. These
financing products are offered for the purchase of either new or used vehicles or the refinancing of existing motor
vehicle loans. We also offer other secured and unsecured consumer lending products through our subsidiaries
both in the United States and elsewhere.
We use IBS to differentiate among customers based on credit risk, usage and other characteristics and to match
customer characteristics with appropriate product offerings. IBS involves building sophisticated models and
information systems, while employing a well-trained staff and a flexible culture to identify, develop and market
credit card or other products and services to satisfy the demands of a competitive and ever changing marketplace.
By actively testing a wide variety of product and service features, marketing channels and other aspects of
offerings, we design customized solicitations, products and services that are targeted at specific credit customer
segments, thereby enhancing response levels and maximizing returns on investment within given underwriting
parameters.
We build on information derived from our initial sources with continued integrated testing and model
development to improve the quality, performance and profitability of our solicitation and account management
initiatives. We apply IBS to all areas of our business, including solicitations, account management, credit line
management, pricing strategies, usage stimulation, collections, recoveries, and account and balance retention as
well as internal matters such as recruiting and associate performance management.
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