Capital One 2006 Annual Report Download - page 3

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1
We’re Delivering On Our Strategy
Wetransformed our company this year with the integration of Hibernia and the acquisition
of North Fork. With North Fork, we’ve become the 11th largest bank in America based on
deposits. Wehave a growth platform in one of the best banking markets in the United
States—the greater New York region. And we’ve substantially diversified our company’s
funding and profits.
At Capital One, we’re forging our vision of banking. Wealways try to figure out where
the world is going and then work backwards from that vision to position our company to
win over the long term. Webelieve that the winners in banking in the United States—the
“endgame players”—will be the players who bring together the best of national scale
lending and local scale banking and create advantaged access for customers.
Consumer lending businesses are consolidating nationally, one product at a time. Credit
cards have been at the forefront of the consolidation wave in consumer lending, and other
consumer lending businesses, such as auto finance and home equity, are following the
same path. A few winners will emerge in each of these businesses during critical windows
of consolidation.
Other banking businesses, like consumer deposits, small business and middle-market
commercial banking, remain fiercely local in nature. Success in those businesses is not driven
by national scale. Instead, the banks with scale in their local markets and great local execution
generally win, gaining a disproportionately large share of deposits and customer relationships.
As this transformation of the banking landscape plays out, a handful of banks are breaking
away from the pack to create advantaged customer access. They are creating massive
customer bases with tens of millions of customers and powerful national brands. And they
CHAIRMAN’S LETTER TO SHAREHOLDERS AND FRIENDS
2006 was a defining year for Capital One. We delivered another year of solid results and
made a transformational move in banking with the acquisition of North Fork. Our earnings
per share grew 13% in 2006, with diluted earnings per share of $7.62. We continued to
generate strong asset growth. Managed loans increased 39% to $146.2 billion (including
$31.7 billion of loans from North Fork), with organic loan growth of 10% this year.
We continued to experience strong credit performance in 2006, aided in part by the “pull
forward” effect from the bankruptcy law changes in 2005, with managed charge-offs of 2.84%.
We have a solid and diversified balance sheet, with $85.8 billion of total deposits and strong
liquidity. Capital One’s strength and diversification are being rewarded. We received multiple
ratings upgrades in 2006—two from S&P and one from Moody’s.