Capital One 2009 Annual Report Download - page 3

bolstering our already strong balance sheet. Despite the recession, our strong balance sheet enabled
us to close the Chevy Chase Bank acquisition, securing a coveted position in one of the nation’s best
banking markets – our hometown of Washington, D.C. And we were well prepared at the end of
the year to bring $47.6 billion of loans back onto our balance sheet under new accounting rules,
while maintaining solid capital ratios.
Rigorous credit risk management also has always been a cornerstone of our business. For over two
decades, we have hardwired severe economic worsening assumptions into our underwriting processes.
In 2009, we continued to dynamically manage credit across our businesses, focusing on originating
the most resilient loans. We managed our asset mix,
replacing lower-quality loans with better-quality
new originations. Loss mitigation remained a top
imperative. We adapted our credit models in real
time, developed sophisticated new analytical
capabilities, tightened underwriting, and ramped up
collections and recoveries. And, in our U.S. Card,
Auto, and Commercial Banking businesses, we
proactively managed pricing, which improved
margins and resilience.
The results delivered by our Card business reflect our
disciplined risk management. While the credit card
businesses of our major competitors cumulatively lost
billions of dollars in 2009, Capital One’s credit card
business delivered almost $1 billion of net income
despite our charge-off rate exceeding 10%. As in prior
years, our credit card business continued to deliver
after-tax returns on managed loans well above our competitors’ returns with credit losses that were
middle of the pack. In other words, our credit card business has remained significantly more profitable
than our peers’ year after year, in good times and bad.
We repositioned our Auto Finance business in 2008, retrenching to focus on the most resilient
customer segments and the best auto dealer relationships. The business rebounded in 2009,
delivering substantial bottom line profits while generating new loans with significantly better credit
characteristics and much higher returns.
We are now the ninth largest bank in the United States, with strong positions in some of the nation’s
best banking markets – top five in the greater New York area; the leader in Louisiana; top five in the
Washington, D.C. metro market (and number one in branches); and top seven in Texas. Our banking
Capital One has branches in many of the nation’s
most vibrant banking markets: New York, New Jersey,
Louisiana, Texas, Maryland, Virginia, and the District
of Columbia.
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