Capital One 2010 Annual Report Download - page 6

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board, tailored phone service by customer segment, and improved our Web site, a benefit to all customers
but especially to those who like to manage their accounts online. The payoffs: customer satisfaction
rose dramatically, and our High Value Servicing team received the International Customer Management
Institute’s (ICMI®) coveted Global Call Center of the Year Award as well as the prestigious Call Center
CertificationSM Program from J.D. Power and Associates.
Our risk operations team has provided assistance to millions of cardholders impacted by the recession.
The team’s dedication to the task is just one example of the extra effort we’ve made to help our customers
and communities through these hard times. We lent a hand because it was the right thing to do for
our customers. It’s the right thing to do for our shareholders, too. The work of our risk operations team
enhanced customer loyalty and helped to retain billions of dollars in loans.
Capital One’s international businesses are performing well, and posted net income of $376 million in 2010.
In the UK, we’ve successfully navigated severe cyclical challenges and completed a successful turnaround
to deliver strong profits. Canada generally fared better than many other parts of the world during the
recession, and our Canadian business continued to deliver steady profitability.
Consumer Banking delivered strong profits,
improving credit, and outstanding growth in low-cost
deposits and high-value customer relationships
Consumer Banking at Capital One includes our Retail Deposits business, our Mortgage portfolio, and our
Auto Finance business. Net income for 2010 was $906 million. Net charge-offs improved significantly
over the course of the year, to 1.98% from 2.85%.
Deposits in our Consumer Banking business increased $8.8 billion, to $83 billion, and we have shifted
the mix away from higher-cost time deposits toward lower-cost liquid savings and checking accounts. The
mix shift, along with disciplined deposit pricing, improved our deposit interest expense by 28 basis points
in 2010, to 1.13%, which lowers our overall funding costs and adds even more strength to the balance
sheet. In the process, we are attracting high-value customers, and as we deepen our relationships with
them, we can grow both loans and revenues.
Although Capital One’s Consumer Banking business inherited troubled mortgages in banking acquisitions,
mortgages now account for only about $12 billion, or 9.6%, of Capital One’s total loans. On the whole, credit
results for the mortgage portfolio have been relatively strong through the downturn, with charge-off rates
below 1% and non-performing asset levels below those of most of our competitors. About $5 billion of these
mortgages were originated by Chevy Chase Bank. We “marked” these loans at the time of the acquisition, so
we believe our credit metrics and income statement are largely insulated from the credit risk of these loans.