Capital One 2007 Annual Report Download - page 10

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changes, and the revenues they generate, will serve us well as credit continues to
normalize and in the event of ongoing consumer credit pressures.
U.S. Card continued to drive efficiency gains, and its run-rate efficiency ratio is now
around 35 percent. We also maintained our long-standing focus on generating strong
risk-adjusted returns. In 2007, our U.S. Card business delivered after-tax returns on
managed loans of 4.2 percent, significantly above industry norms, with a managed
charge-off rate of 4.31 percent.
Innovation remained alive and well in our U.S. Card business as we strove to be
“first in wallet” with all of our customers. During 2007, we continued to focus on
generating upmarket, transactor business. We believe this business provides the
most enduring growth opportunities and customer loyalty in all of credit cards. We
introduced new and compelling rewards offers throughout the year that we expect to
drive future growth.
We continued to empower consumers by providing exceptional value, clarity,
and convenience. For example, in late 2007, we launched Capital One CardLab, a
revolutionary and interactive way to shop for a credit card that enables consumers to
customize their cards conveniently online. Capital One CardLab puts choice and control
in the hands of our customers. They can choose the rewards and product features most
important to them, and even download their photos onto the front of their cards. An
independent survey of credit card offers from all major issuers named the Capital One
CardLab the top new credit card introduction in 2007 based on its appeal and popularity.
In 2007, we also completed the multi-year transformation of our U.S. Card
infrastructure. Our new operating platform is driving innovation and efficiency, resulting
in a 50 percent average reduction in time to market. We expect to realize further
benefits as we fully utilize the capabilities of the platform.
Credit card practices have come under intense scrutiny this year. In this environment,
the choices we have made over many years are paying off. For example, we provide
industry-leading disclosures to our customers and have been an industry advocate for
the improvement of credit card disclosures. Many other issuers have been criticized for
practices such as “universal default” (where issuers increase interest rates because of
customer behavior on other loans or changes to credit bureau scores) and double-cycle
billing. In contrast, Capital One never used universal default or double-cycle billing in
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